If I were to invest £5,000 in UK shares today, I’d focus on buying companies with strong brands and large profit margins. I think any business that has these qualities should do well in the long run.
One of my favourites UK shares on the market is the property portal Rightmove (LSE: RMV). This company exhibits all the qualities I want to see in a high-quality enterprise. It has a robust and well-recognised brand across the country, fat profit margins of more than 50%, and it’s currently benefiting from strong tailwinds in the housing market.
That’s not to say the company doesn’t have its challenges. It faces keen competitors, such as OnTheMarket, which are nipping at its heels.
Still, I believe Rightmove’s competitive advantages should endure for some time. That’s why I’d buy the company for my portfolio of UK shares today.
Another stock I believe has all the qualities I look for in an investment is Experian (LSE: EXPN). This is another business that has a strong, well-recognised brand trusted by consumers.
The credit rating business also has almost unrivalled access to credit data. This gives the firm a substantial competitive advantage as competitors can’t just build this dataset overnight.
As such, the group has a high level of pricing power, which means it can pretty much charge what it wants. There are only really a handful of companies on the London market that exhibit this kind of pricing power. These advantages helped the business achieve organic revenue growth of 22% in the three months to 30 June.
However, the company’s access to this data comes with a lot of responsibility. One of the most significant risks facing the enterprise is a possible cyber attack. This, or data breach, could have a huge negative impact on its reputation, and it could incur significant fines.
Despite this risk, I’d buy Experian for my £5k portfolio of UK shares, considering its strong competitive advantages.
Trading UK shares
The final stock I’d buy for my portfolio is the London Stock Exchange (LSE: LSEG). In recent years, management has been building out the group’s data business. Its high-performance market data system provides real-time tick-by-tick data essential for anyone trading in the financial markets.
And like Experian, the company benefits from the fact that it’s challenging to acquire this data in the first place. Therefore, consumers have to use the LSE’s products. It has a high level of pricing power as a result.
The one thing I’m not too happy about is its high level of debt. Over the past few years, the LSE has taken on a lot of debt as it’s tried to build its product offering through acquisitions. If interest rates rise significantly in the years ahead, this could become an issue for the group.
Even after taking this risk into account, I’d buy the company for my £5,000 portfolio of UK shares right now.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Experian and Rightmove. 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.