Saving for the future can be a headache, and it is often a struggle to find an investment or savings product, that achieves a decent return with little risk.
For many investors buying shares is a great way to achieve above average returns for a given amount of risk. However, with so many stocks to choose from, deciding where to put your hard earned cash is a daunting task for many.
So, here are three companies that I believe have all the qualities of a great long-term buy and forget investment.
Home comforts
The first pick is Unilever (LSE: ULVR) (NYSE: UL.US). Unilever’s portfolio of consumer brands contains everything from Bovril to PG tips, Persil and Brylcreem to name but a few and the company’s products are in nearly every household around the UK.
What’s more, the essential nature of these products mean that customers continue to return over and over again to re-buy, giving Unilever plenty of repeat business and making the company defensive by nature — not subject to wider economic trends.
In addition, Unilever is currently going through a transition as management sell off non-core, low margin and low growth food brands, while diverting funds towards the company’s line of home care products. This side of the business is actually growing much faster; organic sales of home care products expanded 8% during 2013.
Still, Unilever’s current valuation may seem a bit rich for some as the company trades at a forward P/E of 19.9. However, Unliever’s international peers Procter & Gamble and Colgate-Palmolive currently trade at a forward P/E 18 and 20 respectively.
Health is important
My second long-term pick is GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US),one of the world’s leading pharmaceutical companies, with an exclusive portfolio of treatments.
As the world’s population expands, more cash is going to be spent curing illness and Glaxo is in a prime position to benefit, although, unfortunately, Glaxo has been subject to a number of bribery allegations during the past few months and this has worried investors.
Nevertheless, Glaxo’s R&D boffins have brought a total of seven new drugs to market within the past 16 months and the company’s management has just signed a game-changing deal with Swiss drugs producer Novartis.
Specifically, the deal with Novartis will see the consumer divisions of Glaxo and Novartis merge, creating a ‘world-leading’ consumer healthcare business with £6.5bn in revenue in 2013. Moreover, Glaxo is acquiring Novartis’ vaccines business for an initial cash consideration of $5.25bn and Novartis is acquiring Glaxo’s oncology portfolio for $14.5bn.
As a result of this deal, Glaxo is returning £4bn to investors.
Second to none
My third and final pick is Imperial Tobacco Group (LSE: IMT).
While some investors may find tobacco investing unpalatable, the fact remains that when it comes to shareholder returns, tobacco companies have no comparable peers.
Indeed, during the past ten years, while the sales of cigarettes have slumped, Imperial’s shares have risen 100%, or 10% per annum, outperforming the FTSE 100 by 50% over the period, excluding dividends.
Imperial is some-what of a recovery play. In particular, the company is struggling with falling sales volumes within Europe as the economic climate forces consumers to switch to cheaper products. However, the firm is meeting this challenge by cutting costs, targeting annualized cost savings of £300m and divesting other assets, including some European distribution businesses.
Imperial trades at a P/E of 12.1 and the company’s projected yield for 2014 is 5.0%.
