As a long-term investor, my ideal holding time for shares is years and years. After all, if I buy into a company I think has excellent prospects at an attractive price, why would I be in a rush to sell? I already own some British shares I would happily hold for a lifetime – ‘in principle’.
I emphasise that because even for a long-term investor, the time may come to sell down all or part of a holding. Maybe because cash is needed. Maybe a soaring share price has meant that one share now occupies too large a part of a portfolio, reducing diversification. Maybe the commercial environment has changed. Or maybe the business still looks strong but a soaring share price since purchase means it feels prudent to take some profits off the table.
Billionaire investor Warren Buffett recently sold a large part (though far from all) of his biggest holding, Apple. I do not know why, though he hardly seems in obvious need of cash. But the sale does show that even someone who says his favourite holding period is “forever” may not actually hold shares that long.
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With that caveat, here are two British shares I would gladly hold for a lifetime, if conditions were right for me to do so.
Diageo
The first is actually a company Buffett owned shares in many years ago when it sold under the name of its famous stout Guinness. Now known as Diageo (LSE: DGE), the business is the force behind major brands from Johnnie Walker to Baileys as well as the black stuff.
Lately, things have not gone as well as hoped. Sales patterns in Latin America are showing signs of weakening demand and there is a risk that could be the case in many other markets over coming months. On top of that, many younger consumers are teetotal. Diageo shares are down 28% in five years.
That puts them on what I see as a reasonable valuation and I have been buying lately. Like another Buffett hold, Coca-Cola, Diageo is a Dividend Aristocrat and has raised its payout annually for over three decades. It owns iconic brands that give it strong pricing power.
Sales are wobbling, but I expect them to remain substantial and likely grow over time.
Judges Scientific
If a massive £55bn market capitalisation makes Diageo a well-known FTSE 100, one company smaller business that still flies under many investors’ radar is Judges Scientific (LSE: JDG), with a market-cap of under £700m.
The scientific instrument maker has a lot of the attributes Buffett looks for when choosing shares to buy. It operates in an area where quality is paramount, giving it pricing power. Demand for precision measurement tools is likely to endure over the long term.
By buying up small makers at attractive prices, Judges has built a profitable business with a fast-growing dividend. One risk is its success inspiring copycats, pushing up the price of future acquisitions.
But if I owned this British share, would I hold it for a lifetime? Yes – if the price did not get too far ahead of what I saw as the intrinsic value.
The current price-to-earnings ratio of 71 looks high to me. At a much lower valuation though, I would be happy to buy this share and hold for decades.
