3 UK shares I would buy and hold for the long term

Our writer believes these three UK shares have the market position and potential growth drivers to fuel long-term gains in his retirement portfolio.

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I’m currently hunting for some high-quality UK shares that I can add to my retirement portfolio. Quite simply, I want to invest in companies with a strong brand name and market-leading position in industries poised for long-term growth.

I’ve outlined below three well-known companies that I’m looking to potentially add to my retirement portfolio in the coming months.

Shelling out for the energy transition

Shell (LSE: SHEL) is well-known for its petroleum business but is also an emerging market leader in the broader energy sector.

The energy transition will take time and not be without its challenges. That means governments may need flexible solutions and credible partners to deliver on ambitious goals. Shell looks as well placed as any company to me.

Shell is investing $10-15bn on low-carbon energy solutions between 2023 and 2025 as it continues to push heavily into this space. There’s also a wealth of engineering talent that the company has at its disposal.

While those are big positives, regulatory and political risks — as well as a potential reduction in long-term demand for oil — are a few of those uncertainties surrounding the energy giant.

This is one that I’m waiting for a strong entry point in the near term. I think we could see a share price drop driven by ongoing geopolitical tensions, which will provide a great entry point for my buy-and-hold strategy.

Defence sector on the rise?

BAE Systems (LSE: BA.) benefits from steady demand driven by its long-term contracts in defence, aerospace, and security.

There are a couple of things I really like about this defence firm. For one thing, I like the company’s robust order book and the earnings visibility it can provide.

The company is forecasting sales to grow by 10-12% this year from £25.3bn in FY23. Underlying operating profit growth is even better, forecast to climb 11-13% higher from £2.7bn last year.

Escalating global conflicts have fuelled demand for enhanced national security and defence capabilities. I think BAE Systems, as a leading provider, could benefit from further deglobalisation and rising regional tensions.

All of that said, clearly there are potential downsides. Governments are looking to cut spending amid soaring debt bills, and BAE is heavily reliant on government contracts. That means it is exposed to both political and budgetary cycles, which could impact future earnings.

BAE is one I’d like to dip my toe in the water when I get some spare cash, and see if this can become a nice little retirement nest egg in the future.

Good old-fashioned retailer

As the UK’s leading retailer, Tesco (LSE: TSCO) is one that makes my buy-and-hold wish list.

The retail sector is highly competitive and sensitive to economic downturns. After all, being a consumer-facing business is tough. Changing habits and discretionary spending cuts can expose the likes of Tesco to earnings volatility.

However, the retailer has proven itself through Covid-19 and recent inflationary episodes, which I think is valuable as a long-term portfolio diversifier. The company also currently holds a 27.6% share of the UK’s grocery market – 12% more than the second-largest, Sainsbury’s.

While potentially a more cyclical pick, I do like Tesco for the long term. The retailer is one that I’d like to fund from my next share sale and hopefully turn those pounds into more for future me!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool UK has recommended BAE Systems, J Sainsbury Plc, and Tesco 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.

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