Research shows that one of the best ways to build wealth is to buy and hold UK shares.
Unfortunately, it’s pretty challenging to find shares that can build wealth year after year for a decade or more.
However, I believe there are a handful of these companies on the market. Here are three such stocks I’d buy for my portfolio today with the aim of holding them for 10 years or more.
UK shares for the next decade
The first company on my list is the utility supplier National Grid (LSE: NG).
When looking for companies I can buy and hold for many years, I like to concentrate on those with substantial competitive advantages. The sort that other firms may struggle to replicate.
National Grid owns and manages the electricity infrastructure in England. It would be virtually impossible for a competitor to replicate this kind of infrastructure today, considering the amount of time, effort and money that has been spent over the past century and more.
Concentrating on difficult-to-replicate assets is a strategy I believe can yield good results in the long run.
With that being the case, I’d also buy United Utilities (LSE: UU) for my portfolio of UK shares.
As one of the premier water suppliers in Northern England, the company owns infrastructure across the country that would be difficult for a competitor to build today. For example, the group owns hundreds of reservoirs that supply parts of the system. Constructing even a tiny reservoir today would take years of planning approvals and would be pretty costly.
As utility suppliers, National Grid and United also produce relatively stable income streams. These support the two firms’ dividend yields, which currently stand at 5.3% and 4.2%.
Still, these investments are not entirely risk-free. The utility sector is heavily regulated, and regulators control the amount of profit these companies can make on their assets. If regulators decide to clamp down, profits could decline. In this situation, National Grid and United’s dividends to shareholders could come under pressure.
The final stock I’d buy in my portfolio of UK shares is construction market supplier Breedon (LSE: BREE). Similar to the electric and water network operators, the company owns a large number of construction and mining assets across the country, which would be incredibly difficult to build today.
It seems incredibly unlikely a competitor could get permission to set up a series of quarries around the country without spending a tremendous amount of time, effort and resources.
This competitive advantage could leave Breedon free to capitalise on the current construction boom occurring across the UK. Of course, the company isn’t the only supplier to the industry. But it is one of the industry’s leaders.
As such, I think it should benefit as the construction market expands over the next few years. One challenge the company faces is trying to compete with lower-cost overseas peers.
If imports are cheaper than Breedon’s output, sales could decline. Management would have to lower costs to attract customers, but this could mean sacrificing profit margins.
Despite this risk, I’d buy the company for my portfolio of UK shares.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended National Grid. 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.