Two high-growth large-caps I’d buy to retire on

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When buying stocks with a retirement investment horizon in mind, it helps to identify long-term themes that will propel revenue growth over time. With that in mind, here are two stocks that I believe have considerable long-term potential.

G4S

With heightened levels of geopolitical risk having become the new normal in the last decade, one sector that should benefit is security, and security specialist G4S (LSE: GFS) looks well-placed to capitalise on this theme.

G4S is a global integrated security company, employing nearly 600,000 people across 100 countries and six continents. The firm provides security solutions to industries including financial services, tourism, oil & gas and governments.  

It hasn’t been plain sailing for it in recent years as the company failed to deliver adequate security at the London 2012 Olympics, and was then named ‘worst company of the year’ at the 2013 Public Eye awards. However, in late 2013, it commenced a ‘transformation’ strategy and it appears to be paying off.

Half-yearly results released this morning showed revenue growth of 6.2%, while earnings per share rose a healthy 7.8% to 8.3p. The company’s sales pipeline stood at £7bn, and the productivity programme is forecast to generate £90m-£100m of efficiencies by 2020. Chief executive Ashley Almanza said: “We continued to make substantial progress with G4S’s transformation and this provides increased confidence in the Group’s prospects.”

The shares have pulled back 5% today on the results however, but that’s not entirely surprising after a 35% share price rise since the start of 2017. On consensus estimates, G4S currently trades on a forward P/E ratio of 17.1, and sports a forward yield of 3.1%. These metrics looks attractive in my view.

Prudential

Insurer Prudential (LSE: PRU) strikes me as the perfect kind of stock to hold for the long term. The company is the largest insurer in the FTSE 100, with a market capitalisation of £49bn, and currently serves over 24m customers across the UK, the US and Asia.

Prudential aims to capture three long-term opportunities across its key geographical markets. This includes meeting the savings and retirements needs of an ageing British population, providing asset accumulation and retirement income products to US baby boomers, and serving the protection and investment needs of the growing middle class in Asia.  

It’s the last opportunity that excites me the most, as the potential in Asia is nothing short of astronomical, in my opinion. Life insurance and mutual fund penetration remains low in this region, yet with the wealth of individuals across Asia rising at an unprecedented rate, Prudential, with 30% of its earnings coming from this area, should benefit.  

The insurer also looks like an excellent dividend play, having increased its dividend every year since 2004. While the current yield of 2.3% is lower than that of Legal & General Group (5.3%) and Aviva (4.4%), Prudential’s payout has been increased by over 70% in the last five years, and City analysts expect growth of 8% this year and next.

On a forward P/E ratio of 13.6, the stock doesn’t look expensive, although after surging 40% over the last nine months, it may be wise to wait for a pullback. The insurer reports half-year results tomorrow, and I’ll be following the company’s progress closely.

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Edward Sheldon owns shares in Legal & General Group and Aviva. The Motley Fool UK has no position in any of the shares mentioned. 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.

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