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Two attractive growth stocks I’d buy and hold for 10 years!

by xyonent
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It’s not easy to find growth stocks that offer high levels of income today and great potential for the future.

But I think I discovered two things. Michelle Marsh Brick Holdings (LSE: MBH) and Spectris (LSE: SXS).

Here are some reasons why I would buy both stocks and hold them for the long term:

Bricks and Mortar

The name gives away what Michelmersh Brick Holdings does: bricks aren’t the most exciting thing, but they’re essential to many aspects of everyday life.

The share price has been up and down over the past 12 months, mainly due to economic issues, and in this period the share price has fallen 2% from 97p at the same time last year to 95p currently.

For me, economic issues are the biggest risk to the company’s growth targets, revenue and profits. For example, rising inflation and interest rates could reduce demand for bricks for infrastructure and home construction. This is something I will be focusing on.

On the other hand, the good news for Michelle Marsh is the country’s growing population, housing demand outstripping supply, and the need for infrastructure development – all of which is expected to lead to increased demand, which in turn will translate into higher income and returns in the coming years.

Not only is the growth potential attractive, but the current investment case is also very attractive. The stock offers a 4.7% dividend yield, which is FTSE 100 The average is 3.9%. However, I understand that dividends are not guaranteed.

Additionally, with a price-to-earnings ratio of just 9, the stock looks like great value to me.

What’s even more exciting to me is that Michelmersh manufactures their own bricks at their own landfill site in Telford – this is important as having control over the manufacturing process can potentially improve profit margins and profit levels.

Testing and Software

Another common but important industry is equipment testing and software. FTSE 250 Incumbent Spectris does.

Spectris shares have not performed well over the past 12 months, falling 19% from 3,529p at this time last year to 2,908p currently.

A big reason for this is the economic slowdown in China, which is hurting demand and revenue. In fact, the profit warning in Spectris’ recent earnings report has not done anything to dampen sentiment. In addition to this, the slowdown in electric vehicle (EV) sales is also hurting sentiment. These are the cyclical and external risks that could hurt the company, and these are the ones I’m keeping an eye on.

Conversely, the investment case and future prospects look good to me. First, the lower share price means you can buy it cheaper than before. The price-to-earnings ratio is 15x, significantly lower than the five-year average of 21x.

Second, Spectris currently offers a 2.8% dividend yield, but I’d be more interested in a long-standing track record of dividend growth, which speaks to the company’s focus on shareholder value.

From a growth perspective, I believe the company’s future is bright given its global presence and market position, as well as its ability to serve a multitude of applications in the increasingly digital world in which we live.

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