The stocks I’d buy and hold for the next decade share one common trait. They both invest in marketing popular brands that consumers want and think they need. The brands are likely to grow in the next 10 years and reach new markets, which should deliver rewards for investors who remain patient, ignore the noise and uncertainty around Brexit and concentrate on investing for the long term as both Motley Fool and Warren Buffett recommend.
The power of brands
Unilever (LSE: ULVR) has been through a period of turmoil recently after scrapping a proposed move to The Netherlands and thereby an exit from the FTSE 100. Now there will be a change at the top of the company with Alan Jope replacing Paul Polman as CEO in the New Year. Looking past this, however, Unilever has a track record of delivering returns for investors – the share price is up 72% over the last five years.
With brands such as Dove, Persil and Magnum, Unilever has a portfolio of popular consumer brands that gives it a global marketplace, pricing power and protects investors even if the economic climate worsens. This makes it less susceptible to any concerns around Brexit, but also in the longer term gives it potential to grow through selling more products in more markets. The strength of its brands and repeat custom is the key to Unilever’s success and it has the financial muscle to invest heavily in marketing, to help it keep and probably grow market share for its products.
Unilever is not the cheapest company, but over a long holding period such as a decade, the price is less critical than the potential for growth and the need to avoid companies that are likely to lose your money or go out of fashion. The P/E is a little over 21 and the dividend yield is just under 3%. Over the course of a long investing timeframe, this potentially represents good value.
Drink to future success
The maker of Irn-Bru, AG Barr (LSE: BAG), has seen its share price fly – even through the October market fall – since announcing first-half results in September. The results showed sales rose 5.5% in the half to £136.9m and underlying profit before tax rose 4% to £18.2m.
Since then the FTSE 250 company’s share price has risen nearly 10%. The founding Barr family remains heavily involved in the business and still controls around 20% of the company, which means they want the business to operate in a way that ensures it’s still strong in a decade and in the decades after that. To drive future growth, the company is investing in marketing and is looking to expand Irn-Bru’s appeal beyond Scotland.
The fears over the sugar tax haven’t caused pain as some thought it might; indeed so far this year the company has prospered despite the threat. To me that is a great sign for shareholders – the business is agile enough to adapt to a changing market and still grow. This gives me confidence that it can continue to invest in and grow its brands and be a great investment to buy and hold for a decade. It may seem expensive with a P/E over 25 but this is just a reflection of how popular it has become with investors because of its growth prospects.
Andy Ross has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AG Barr. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.