There are some stocks you have to keep a close eye on. The share prices, and valuations, of smaller companies and companies in cyclical industries can move a long way, and do so very rapidly, on occasions. You need to be relatively fleet of foot to exploit the opportunities, whether to buy into an undervalued stock or sell an overvalued one.
In contrast, there are companies whose shares are rather less volatile, and which rarely seem to be grossly undervalued or overvalued. The three steady stalwarts I discuss below are, I would say, among the best buy-and-forget stocks going, and provide a solid bedrock for a portfolio.
Happy to hold
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” is one of the gems of wisdom of legendary investor Warren Buffett.
BAE Systems (LSE: BA) is a stock I’d be happy to hold in such a scenario. Indeed, because BAE’s earnings can be somewhat lumpy from year to year — the timing of big orders playing a part — investors might be better off not fretting about the short term, but simply coming back after 10 years to look at the longer-term picture.
It’s difficult to imagine a world without warfare and terrorism in the next millennium, let alone the next decade. I’m pretty sure there’ll be continuing demand for heavy military hardware, and cyber and intelligence systems. And I’m pretty sure that the skills and expertise embedded in BAE will see the company continue to win orders.
Trading on a modest forward price-to-earnings (P/E) ratio of 13, with a nice 4.2% dividend yield, BAE appears a great stock to buy and forget.
Consumer goods giant Unilever (LSE: ULVR) operates across the food and drink, home care and personal care sectors. The group has built its success on the power of its brands and its global reach.
Long-term rising disposable incomes in emerging and developing economies provide a great tailwind for Unilever, whose brands are desirable markers for an aspiring middle class. Will Unilever be selling more Hellmann’s mayonnaise, Domestos bleach, Dove soap and dozens of other consumer favourites in 10 years time? I think the answer is: you bet!
Unilever is currently trading on a forward P/E of 22, with a 3% dividend yield. The valuation is a little on the rich side right now, and while long-term investors should still do well from here, a dip in the shares to under £30 would be welcome.
Again, we can ask the 10-year question of National Grid (LSE: NG). Will the country’s gas pipes and electricity wires still be required a decade from now? And will the government still allow National Grid to make a reasonable return for its shareholders from running this essential infrastructure? Again, I’m pretty confident about the answer, and I’m pretty confident that the group’s operations in North America also represent a relatively steady and long-term revenue stream.
National Grid trades on a reasonable forward P/E of 16, with a 4.5% dividend yield. As with BAE and Unilever, the company has huge appeal, both for investors seeking long-term growth by reinvesting dividends and for those seeking a good income from their stocks.
G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended 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.