I would be happy to buy and hold only a handful of UK shares for 10 years or more.
In order to meet my strict criteria for buy-and-hold investments, a company must have a definitive competitive advantage, a strong track record of producing returns for investors, and a robust balance sheet. If a company lacks any one of these qualities, it will not make it into my portfolio.
With that in mind, here are two UK shares I would buy today that I would be happy to hold for the next decade at least.
UK shares to buy
The first company on my list is luxury fashion house Burberry (LSE: BRBY). I think this is one of the highest quality businesses listed on the London market. It has a debt-free, cash-rich balance sheet, internationally recognised brand, large profit margins, and a track record of returning cash to investors. The stock currently yields 3%.
The company’s sought-after brand is its main competitive advantage. The strength of this brand, which has been developed over the past few decades, enables the business to command a substantial operating profit margin of 24%.
As well as the company’s fundamental strengths, I am also excited about the outlook for the luxury industry in general. The demand for luxury goods and services is growing, and the industry has suffered limited disruption from the pandemic.
Against this backdrop, I think the corporation has tremendous potential. As long as it continues to design products consumers want to buy, it seems likely they will continue to pay high-end prices.
The biggest challenge the company faces is maintaining the fashion edge that keeps customers wanting more. Brand recognition is currently Burberry’s key advantage.
However, if the group’s style falls out of favour, sales could take a hit. This is something I will be keeping an eye on as we advance.
Great Portland Estates (LSE: GPOR) is another company I would be happy to own for the next decade. I already own shares in the real estate investment trust (REIT) and would not hesitate to buy more at current prices. The stock currently supports a dividend yield of 1.8%.
Great Portland has some similarities to Burberry. The company owns a portfolio of unique retail and office properties in the West End of London. It is one of the only UK shares to offer exposure to this market. It also has a strong balance sheet and a great track record of buying properties at discounted prices and increasing their value.
Where Burberry produces luxury fashion items, Great Portland buys luxury properties. The pandemic had an impact on central London property prices, but there are signs prices are rebounding. Despite this disruption, I think demand will remain robust over the next 10-20 years.
One challenge the group could face is higher interest rates. This will make it more expensive to borrow money to buy property. Therefore, higher rates could have an impact on transaction volumes and prices in the London market.
Still, the company has been through cycles like this before. So it should know how to deal with these headwinds.