Thinking far enough down the road to predict which shares will be performing well in three-to-five years is hard enough, so should we even bother considering shares to buy for future generations? Well, we here at the Motley Fool are strong proponents of long-term investing as the best route to building wealth, so the answer to that question is an emphatic ‘yes’.
But, for any company to thrive in the coming decades it will undoubtedly need a wide moat to entry for competitors, products that consumers can’t live without and access to growth markets.
One share that ticks all these boxes is Unilever (LSE: ULVR). Its wide moat to entry comes from owning brand names that are popular globally, like Dove and Ben & Jerry’s. Selling products that consumers buy whether the unemployment rate is 4% or 10% also provides stable sales throughout the business cycle, something not many other firms can boast.
And far from being a stodgy nearly-century-old firm with few growth prospects on the horizon, Unilever could be a surprise FTSE 100 growth pick for the coming decades. That’s due to a management team that long ago sussed out the long-term potential to be found in increasingly wealthy emerging markets where Western brands offer not only foreign cachet but also reliability and safety.
This is panning out well for shareholders as Unilever’s emerging market sales rose 7.2% year-on-year in the nine months through September and now account for a full 57% of total revenue. Growing exposure to emerging markets doesn’t mean Unilever is ignoring the developed world though. Rather, it’s investing heavily in the high margin personal care division by buying up-and-coming brands such as the Dollar Shave Club and green cleaning products company Seventh Generation.
A long history of success, high growth prospects, stellar dividends and reliable sales make me think Unilever is one share I wouldn’t mind passing down for generations.
Time for a change
While its competitors are doubling down on the high-risk, high-reward niche drugs that the pharmaceutical industry is known for, GlaxoSmithKline (LSE: GSK) has been working hard in the past few years to lessen its dependence on these hit-or-miss treatments. The main driver of this change was last year’s asset swap with Novartis that saw GSK take on board massive consumer health and vaccine divisions.
This diversification has divided opinions among investors, but early results suggest the change in business plans is paying off. In the first nine months of 2016, sales from the vaccine division rocketed 18%, even stripping out the positive effects of weak sterling, while consumer healthcare saw a 12% jump in revenue. This stellar growth shows that besides relatively non-cyclical revenue, these assets also offer considerable growth potential.
That said, pharmaceuticals still account for roughly 55% of group revenue. Total constant currency sales through September were only up 2%, but this was to be expected as blockbuster drugs losing patent protection hit the bottom line. The good news is that sales from a series of new drugs are more than making up for that. GSK’s combination of stable sales from vaccines and consumer health goods, coupled with the upside of traditional drug development lead me to believe the shares will continue to perform well for many, many years to come.
