However, if I had to pick two property stocks to buy and hold forever, they wouldn’t be familiar FTSE 100 names. Indeed, you may never have heard of my two picks. This is not because they’re tiny little companies — one has a market cap of over £1bn and the other is £480m — but more because they issue only absolutely essential RNSs and eschew paying brokers to publish ‘research notes’ and other PR puffery.

Instead, these two companies, which are family-controlled, go quietly about their task of increasing the value of shareholders’ equity, paying dividends and managing the businesses through economic cycles. They’ve been doing it successfully for decades. In fact, I’d say their pedigrees are such that they can be more rightly described as ‘blue-chip’ than some FTSE 100 firms.

Big discount

Daejan (LSE: DJAN) shares are up over 3% at around £64 after the company released its annual results today. These showed its total portfolio of commercial, industrial and residential properties valued at £2.26bn, up from £2.01bn last year. Its UK portfolio accounted for £1.66bn of the valuation and its US eastern seaboard portfolio accounted for £0.6bn.

Meanwhile, equity shareholders’ funds at the year-end stood at £101.61 a share, so the shares are currently trading at a 37% discount. This gives a wide margin of safety for investors looking to buy a slice of this business for the long term.

The company announced a 5.4% increase in the full-year dividend to 98p a share, supported by net cash from operating activities (rental income, less costs, interest and tax) of 116.5p. The current yield isn’t high at 1.5% but with the company conservatively-run to avoid boom-and-bust (the dividend was maintained through the financial crisis), investors could be enjoying a very nice income in 10, 20, 30 years’ time.

Hidden value

Long-term thinking is also the name of the game with Mountview Estates (LSE: MTVW), which reported its annual results last month.

The company buys residential properties with regulated and life tenancies at a discount to notional vacant-possession value and sells them years, or decades, later when they become vacant. Thus, it profits from both the long-term rise in the value of the property and the vacant-possession premium.

Mountview reported equity shareholders’ funds at its latest year-end of £86.25 a share. With the shares currently trading at £118 they appear expensive at first sight. However, there is hidden value in the property. This is because its residential properties are held on the books “at the lower of cost and estimated net realisable value.”

One analysis of the true value of the properties would imply equity shareholders’ funds of over £200 a share, putting the shares at a 41% discount.

On the dividend front, Mountview announced an unchanged payout of 300p a share for its latest year, supported by net cash from operating activities of 575p. The lack of an increase in the dividend is somewhat disappointing, but it does follow increases of 9% last year and 37.5% the year before. Also, the running yield of 2.5% is a decent starting point for a long-term investor.

The post 2 stocks I’d buy and hold forever appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of Mountview Estates. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Profit from uncertainty

Daejan Holdings (LSE: DJAN) started life as an investor in coffee and rubber plantations in the Dutch East Indies, but these days its activities are restricted to property investing — with approximately 70% of its business in the UK and the remaining 30% in the USA.

And that business seems to be doing fine, as the company has just announced a 10.6% rise in pre-tax profit for the six months to 30 September to £65.1m, with earnings per share up 33% to 376p. Equity holder’s funds per share amounted to £95.58, so the shares are trading at a significant discount to that at £56.30 apiece.

Daejan certainly isn’t an investment without risk. As chairman BSE Freshwater pointed out, it’s still too soon to know the full effects of Brexit on the sector, and the USA is facing “the uncertainty of a new and largely unknown President whose impact on the USA economy and the property sector cannot be foreseen at this stage“.

The firm announced a 35p interim dividend, and a full-year forecast yield of 1.6% doesn’t exactly make this a cash cow for income investors, but the shares do look cheap on fundamentals right now. The price has more than doubled over the past five years, but it’s down 15% since a December 2015 peak — although the sharp dip immediately after the EU referendum rebounded very quickly and there’s been no overall effect from that momentous event.

If first-half results are repeated, we’ll be looking at a full-year P/E multiple of 14-15, and that looks pretty average on the face of it. But with the firm’s property portfolio valuation looking so strong, I’m sure there’s some emotion-led undervaluation there.

Investment trust

An alternative way to get into the property market is via an investment trust. I like investment trusts, as there’s no conflict between earning cash for customers and maximizing profits for shareholders — because they’re one and the same.

F&C Commercial Property Trust (LSE: FCPT) has been paying a solid dividend of 6p per share for several years now, and at the end of 2015 that yielded a healthy 4.5%. The same 6p again this year would provide 4.3% on today’s 138p share price.

One of the advantages of an investment trust, which some other pooled vehicles do not enjoy, is the ability to hold back earnings in strong years to maintain regular income for investors. The last three years of earnings have come in well ahead of dividends, so that cash stream looks safe enough to me.

The shares are on a low P/E of around seven, although asset value is a key metric when it comes to valuing an investment trust. At the halfway stage last year, F&C reported a net asset value per share of 134.1p, so the shares are currently trading at a slight premium to that. But that excess isn’t even enough to cover one year’s dividend, and if earnings remain strong and that dividend payment of 6p per year is kept up, then that would seem like an attractive valuation to me.

The post Will Daejan Holdings plc buck the property trend as profits rise? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Looking ahead, Booker is on track to meet full-year expectations and remains a financially sound business with a strong net cash position. Although Booker is expected to increase its earnings by 13% this year and a further 10% next year, its current valuation appears to price this in. For example, Booker trades on a price-to-earnings growth (PEG) ratio of 1.7 and while this isn’t sky-high, given the continued decline in LFL sales being experienced it seems to offer little in terms of a margin of safety. Therefore, 20% gains seem unlikely over the medium term.

On-going issues

Also reporting today was budget airline easyJet (LSE: EZJ). Its passenger statistics for June show that it continues to deliver improving figures but is still suffering from a significant number of cancellations. For example, easyJet’s passenger numbers rose by 5.8% versus June 2015, with the load factor increasing from 92.7% to 94.1%. However, 852 flights were cancelled versus 487 in June 2015, mainly as a result of French air traffic control strikes.

Further strikes could lie ahead and cause additional disruption for easyJet. Therefore, its share price could continue to come under pressure following its 41% fall since the turn of the year. However, despite this risk and the potential fallout from Brexit, easyJet seems to be worth buying right now. It has a wide margin of safety, as indicated by its PEG ratio of 0.7. Therefore, for long-term investors who can cope with above average volatility and uncertainty, gains of substantially more than 20% are on the cards.

Falling profit

Meanwhile, Daejan Holdings (LSE: DJAN) has also reported today. The property investment company recorded a fall in pre-tax profit in its most recent financial year due to valuation gains made on investment property being lower than in the previous year. In fact, pre-tax profit fell from £278m in 2015 to £173m in 2016, but encouragingly for its investors, Daejan was able to report a rise in total rental income during the same period.

Furthermore, Daejan increased dividends per share for the year to 93p from 88p in the previous year. This puts it on a yield of 1.9%, which is still disappointing even though Daejan’s share price has fallen by 13% since the EU referendum. And due to uncertainty being high and the outlook for property being rather downbeat, there may be better opportunities elsewhere to generate a return of over 20%.

The post Are Booker Group plc, easyJet plc and Daejan Holdings plc set to rise by 20%+ after today’s updates? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of easyJet. The Motley Fool UK has recommended Booker. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With uncertainty being high among investors and the outlook for the FTSE 100 being uncertain for the remainder of 2016 due to the EU referendum and US election, National Grid is likely to hold great appeal for nervous investors moving forward. And with its shares having a low beta of just 0.6, it’s likely to offer less volatility in future months.

Although National Grid’s price-to-earnings (P/E) ratio of 15.7 may appear to be rather high compared to the wider index, for a utility with relatively low risk it seems to be highly appealing. In fact, an upward rerating may be on the cards – especially since National Grid yields 4.5% and is likely to raise dividends at a higher rate than inflation over the medium-to-long term.

Overpriced shares?

While National Grid has beaten the FTSE 100 year-to-date, shares in real estate investment trust (REIT) Derwent London (LSE: DLN) have underperformed the wider index by 8%. A key reason for that is uncertainty surrounding the UK property market, with Derwent’s focus on London being particularly negative in this regard. That’s because after years of rises, there’s a real fear among investors that London property prices have overheated and are now due a pullback.

Furthermore, with the UK economy also having an uncertain future due in part to the potential for a Brexit, Derwent’s share price could continue to disappoint in the near term. Looking further ahead, Derwent’s P/E ratio of 43 indicates that its shares are rather overpriced – even though Derwent’s bottom line is due to rise by 8% this year and by a further 16% next year. Therefore, while it may have a bright long-term future, Derwent could struggle to beat the FTSE 100 this year.

The London issue

Meanwhile, shares in commercial and residential property investment company Daejan (LSE: DJAN) have fallen by 11% since the turn of the year. That’s due to the same reason as Derwent, with Daejan being focused on the Greater London area and having significant residential assets. While this has been a positive in recent years due to London house price growth, in future it could be a problem.

However, with Daejan trading on a price-to-book (P/B) ratio of only 0.7, it seems to offer excellent long-term value for money. Certainly, there’s scope for its net asset value to fall if house prices fall, but there seems to be a wide margin of safety on offer, which makes it a sound long-term buy. But in terms of outperforming the FTSE 100 in 2016, this seems more uncertain as investor sentiment may remain weak in the coming months.

The post Are National Grid plc, Derwent London plc and Daejan Holdings plc on track to beat the FTSE 100 in 2016? appeared first on The Twelfth Magpie.

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• Down 15%! Is National Grid’s share price really a bargain right now?
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• Are National Grid shares entering a new valuation era in the FTSE 100?

Peter Stephens owns shares of National Grid. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.