BT shares? I think there are much better UK stocks for the long term
BT (LSE: BT.A) shares continue to be a popular investment. Quite often, they’re among the most bought stocks on Hargreaves Lansdown. But I think there are better UK stocks to consider as buy-and-holds. Here’s why.
Britons love BT
I can see why UK investors like this stock. For starters, BT is a well established FTSE 100 company that has been around for ages (the British Telecom brand was introduced in 1980). So investors are very familiar with it.
The stock also looks quite cheap. Today (22 November), BT sports a forward-looking price-to-earnings (P/E) ratio of just 8.3.
Additionally, there’s a 5% dividend yield. For a lot of investors, this combination of low valuation and decent yield is probably quite attractive.
Poor long-term returns
One thing I pay attention to however, is a stock’s long-term track record in terms of shareholder returns. And BT has a miserable record here.
Take a look at the performance table below. This shows the share price return over five, 10, and 20 years.
| Time | Share price return |
| 5 years | -21% |
| 10 years | -61% |
| 20 years | -24% |
I’m sure readers will agree, those performance figures are not great.
Now, dividends have boosted returns along the way. So, long-term investors may have done okay once these are factored in.
And there have been periods when traders could have made a lot of money buying and selling the shares. For example, between 2009 and 2015, the shares jumped about 490%.
But as a long-term investment, BT shares have not been very effective. As a result of low revenue growth and a weak balance sheet, the shares have underperformed in a big way.
I’ll point out that there’s always a chance that BT’s operating performance could pick up, boosting its share price. However, I’ve found that past performance does tend to be a good predictor of future returns (winners tend to keep winning while losers tend to keep losing).
Given the poor track record, I’m not tempted to invest.
Top UK stocks
So, are there other stocks that appeal to me as they have strong track records when it comes to generating wealth for investors?
Well, check out construction equipment rental company Ashtead. I’ve put its share price performance figures in the table below.
| Time | Share price return |
| 5 years | 172% |
| 10 years | 487% |
| 20 years | 8,370% |
Another good example is hotel operator InterContinental Hotels. Here are its long-term share price returns:
| Time | Share price return |
| 5 years | 108% |
| 10 years | 180% |
| 20 years | 1,300% |
These are the kinds of stocks I buy for my own portfolio. Both of these companies are genuine winners.
Of course, there’s no guarantee that future returns from these shares will be strong. Both companies face risks that could derail their upward trajectories.
Ashtead, for example, could be hurt by an economic downturn. InterContinental Hotels, meanwhile, could suffer from a shift away from travel spending.
Both businesses have the potential to generate strong growth in the years ahead, however. So I’m optimistic as a long-term investor and believe the shares are worth considering for a long-term portfolio today.
Readers looking for more examples of high-quality UK stocks can find plenty right here at The Motley Fool.
The post BT shares? I think there are much better UK stocks for the long term appeared first on The Motley Fool UK.
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More reading
- Where could the BT share price go in the next 12 months? Check out the latest forecasts
- Should I buy dirt-cheap BT shares after the recent pullback?
- As BT’s share price drops 8%, should I buy more?
- Here’s the forecast for BT with the share price at 140p and the dividend yield at 5.7%
- As the BT share price slumps on H1 results, should I buy for big dividends?
Edward Sheldon has positions in Ashtead Group Plc and InterContinental Hotels Group Plc. The Motley Fool UK has recommended Ashtead Group Plc, Hargreaves Lansdown, and InterContinental Hotels Group Plc. 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.
