When I’m investing with my Stocks and Shares ISA, I look to buy companies with a view to holding them for the long haul. This way I can resist the temptation to overtrade, not to mention give my portfolio time to absorb short-term market volatility.
Investing guru Warren Buffett‘s advice “to only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” is something I take extremely seriously. With this in mind, here are two FTSE 100 shares I’m comfortable to cling on to for the next decade.
Barratt Redrow
Housebuilders like Barratt Redrow (LSE:BTRW) have terrific growth potential as Britain’s population rapidly grows. Responding to the country’s desperate need for new homes, the government’s loosening planning rules to support the creation of 300,000 new homes a year through to 2029.
Steady population increases mean newbuild homes will remain in high demand long after the 2020s draw to a close. The Office for National Statistics (ONS) believes long-term inward migration will average 340,000 a year from 2028.
Following the merger of Barratt Developments and Redrow last year, this enlarged FTSE 100 company has the scale (and the cost synergies) to fully exploit this opportunity. It plans to build 22,000 new homes every year over the medium term. That’s up from the 16,800-17,200 properties it expects to construct this year.
In the near term, Barratt Redrow’s sales remain vulnerable as the UK economy struggles for significant growth. However, the resilience of homebuyer demand despite tough conditions gives me cause for optimism.
Latest ONS data also showed the average UK house price rose 6.4% in the year to March, to £271,00. This was faster than the 5.5% increase recorded during the 12 months to February.
Rio Tinto
Mining stocks like Rio Tinto (LSE:RIO) have delivered disappointing returns in recent times. With China’s spluttering economy and trade tensions impacting metal prices, this FTSE 100 company has not only slumped in value, but it’s also steadily slashed dividends.
Yet this underperformance hasn’t dulled my enthusiasm for the stock. I’m confident that it will rebound as key supply issues emerge in core markets, driving profits sharply higher as commodity prices improve.
Take copper, for example. The International Energy Agency (IEA) has predicted that “declining ore grades, rising project costs and a sharp slowdown in new resource discoveries” will mean red metal supplies lag the amount required by a whopping 30% by 2035.
Copper’s a major market for Rio Tinto, and one in which it’s growing exposure through acquisitions and project expansions (like that of Oyu Tolgoi in Mongolia). Several other of the company’s key commodities also face hefty material shortfalls like lithium and aluminium.
The price outlook for iron ore is more uncertain. However, I feel trends like ongoing emerging market urbanisation and renewed infrastructure spending in the US and Europe will support prices.
Besides, a strong outlook across Rio’s other markets underlines the benefit of investing in diversified miners like this.
