As the last dash to fill this year’s ISA allowance approaches, and investors start to think about allocating their 2015 allowance, I’ll take a look at three stocks that I believe are worthy of inclusion in any investor’s portfolio: National Grid (LSE: NG), Unilever (LSE: ULVR) and Hargreaves Lansdown (LSE: HL).
What can one say about this ‘boring’ company? Well, exciting doesn’t always make you rich, as any story-stock chaser will tell you. National Grid owns and operates vital infrastructure in the United Kingdom and the United States of America. It charges utility companies a fee to use its network of pipes and power lines — quite a moat, in my view. Whilst this infrastructure requires substantial investment, both currently and in future years, there is substantial protection from the regulator — prices are reviewed and set — offering the company excellent visibility going forward. The chart below is a sight to behold, if you also factor in dividends, then you would have doubled your money over the last five years… not bad for boring!
This is simply a company that you can hold in your portfolio over the long term and watch the dividends roll in. I don’t think that it will set the world on fire, but it will keeps the lights on — literally!
From Clover to Cif to a nice cup of PG Tips — a quick look through my kitchen, laundry and fridge shows that it would be harder not to find one of this company’s brands. This FTSE 100 mega cap sells its goods across 180 countries to more than two billion people: that’s some operation, and one that Unilever does well. Whilst trading at a lofty sounding forward price to earnings ratio of almost 22, we are paying for quality here as well as the potential for gradual growth over the long term.
As the global consumer starts to benefit from the lower oil price, I would expect to see sales increase. Additionally, if oil prices stay lower for longer, this would also help the company to manage input costs. As the company continues to invest in its brands, we should see it maintain its pricing power, as consumers tend to pay up for the quality that they have come to associate with their favourite products. A quick glimpse at the charts shows the shares easily beating the FTSE 100 over the last five years: I expect this to be repeated over the next five.
Anyone who bought and held onto Hargreaves Lansdown five years ago will be sitting on handsome gains now — the chart below says it all. But why would I be suggesting a company that currently trades on a forward P/E of almost 31?
To be fair, there are a number of factors:
- The group has no debt and plenty of cash;
- Pensions freedoms day is approaching and I expect the company to benefit from higher assets under management as a result;
- Lower inflation means that interest rates are likely to remain lower for longer than many expect, meaning people need to look elsewhere for higher yields;
- Parents can now move their children’s child trust fund across to a junior ISA. Hargreaves Lansdown offers a much broader range of investments for less cost. As a parent, I know what I’ll be doing with my son’s CTF;
- The company boasts industry-leading standards in customer service and retention;
- The company is shareholder-friendly and, despite the high valuation, still yields almost 3%
All in all, a high-quality, cash-rich company that one could hold over the long term or watch and buy on weakness.
Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.