When I am looking for UK shares to buy for my portfolio, I concentrate on looking for companies that have long -term potential. I am looking for businesses that I can acquire and hold in my portfolio for the next decade or more.
Unfortunately, these businesses are few and far between. They need to exhibit a robust competitive advantage and balance sheet to pass my strict tests.
That does not mean these businesses are impossible to find. Here is a list of UK shares that I would be happy to buy for my portfolio today and hold for the next decade. They all exhibit the qualities I am looking for in individual investments.
UK shares with management ownership
As well as the qualities outlined above, I also want to include stocks in my portfolio where management has skin in the game.
Two examples are financing group S&U and Associated British Foods. At both of these companies, the founders, or their descendants, continue to own a significant interest in the enterprise.
I believe this fosters long-term thinking, as these shareholders are likely to stick around for many years. ABF and S&U also have competitive advantages. ABF’s is its size and scale in the UK food and clothing market through its ownership of the value brand Primark. Meanwhile, S&U’s advantage is its conservative underwriting policy for new financing agreements.
I would add both of these UK shares to my portfolio for these reasons. A risk of investing in corporations with significant management ownership is that this means these shareholders could have too much influence on the firms. As such, the companies may not always act in the best interests of minority shareholders.
Shares to buy for growth
Two other UK shares that I also believe offer exceptional competitive advantages are Auto Trader and Rio Tinto.
These are very different businesses. Auto Trader owns and operates one of the most recognisable websites in the country. It is the first port of call for customers looking for new and used vehicles. This is the company’s competitive advantage.
Meanwhile, Rio is one of the world’s largest iron ore producers. Its size and scale mean that costs are lower than the industry average, an advantage that looks set to stay. On top of this, the group has a cash-rich, debt-free balance sheet.
Risks the companies may have to deal with as we advance include competition and inflation, which could increase their costs and reduce profits.
Despite these headwinds, I am optimistic that both businesses can exert their competitive advantages to continue to grow in the years ahead. Of course, I will be keeping an eye on the risks outlined above as well. Nevertheless, I believe these are some of the best shares to buy for the next decade. As the economy rebounds, they should be able to reap the rewards of the recovery.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods, Auto Trader, and S & U. 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.
