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Have £10k to invest? I’d buy this FTSE 100 stock for a Stocks and Shares ISA

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Via Yahoo Finance

News of a General Election on 12 December means the outlook for Brexit has once again become uncertain. Will Prime Minister Johnson’s EU deal go through, or will we end up with something completely different?

Investing in such circumstances can be nerve-wracking. But with cash interest rates so low, I believe it makes sense to stay in the market. Here, I’m going to look at two stocks I’d buy for my Stocks and Shares ISA, regardless of the political situation.

A FTSE 100 tech success

Sage Group (LSE: SGE) made its reputation selling accounting software to businesses. Persuading customers to shift to equivalent online subscription services has been hard work, but recent results suggest the company has been successful.

During the first nine months of the year, group revenue rose by 5.9% to £1,417m. But recurring revenue rose by 10.6% to £1,183m, and subscription revenue rose by 28.3% to £752m.

These numbers tell me two things. Firstly, more than 80% of the group’s revenue is recurring. For me, as an investor, that’s very attractive. It means the company has very good visibility of future cash flows. This allows management to plan spending and shareholder returns with a high degree of confidence.

The second thing that jumps out from these numbers is that subscription services now account for more than half of Sage’s total sales. That suggests the group’s online offering has gained wide acceptance with new and existing customers.

Why I’d buy SGE stock

The Sage share price has doubled over the last five years. Trading on 24 times 2019 forecast earnings, this stock isn’t cheap. But profit margins are high, at nearly 24%. Cash generation is good and a high proportion of recurring revenue means that earnings should be reliable.

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The stock’s 2.4% dividend yield is comfortably covered by earnings, which are expected to rise by nearly 8% next year. I believe this is a quality stock you can safely buy and tuck away for the next decade.

This FTSE 250 stock is up 35% this year

Another tech stock I like is FTSE 250 IT services firm Computacenter (LSE: CCC). Its share price is up by about 35% so far this year and has risen by 80% over the last three years.

The company is run by long-time boss Mike Norris (CEO since 1994). He’s overseen the group’s growth into a FTSE 250 firm with annual sales of more than £5bn.

This growth has been achieved without sacrificing the group’s financial strength or stability. Computacenter has a track record of strong cash generation and carries very little debt. Shareholders have enjoyed a number of special dividends in recent years, adding to the attractive returns provided by the stock’s growth.

Stable performance in uncertain conditions

In a trading update today, the firm reported sales growth in the UK, Germany and France during the third quarter of the year. Admittedly, “uncertain economic conditions” are affecting some customers. But management said this is “more than compensated” by the wider digital shift being seen across the market.

I see Computacenter as a well-run business in a sector that’s enjoying structural growth. The shares trade on about 15 times earnings and offer a 2.7% yield. Given this group’s high-quality track record, I think this could be a reasonable entry level for a long-term investment.

More reading

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. 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.

Motley Fool UK 2019

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