Time and again buy-and-hold investing has been proven to be a great strategy for accumulating wealth over the longer term, but with one caveat. You need to pick the right stocks. And in my view, solid companies with a strong competitive advantage fit the bill nicely when it comes to this style of investing.
Strong brands
For instance, Reckitt Benckiser (LSE: RB) isn’t a company that many people outside the investment community will have heard of, but take a peek at the small print on the label of many household products, and you’ll find it there. Dettol, Cillit Bang, Gaviscon and Neurofen are just a few well-known brands that adorn our bathroom and medicine cabinets, and although diverse in nature, they all come from the same global consumer goods giant that is Reckitt Benckiser.
The strength of its brands is clearly a huge competitive advantage for the Slough-based group, and added to the fact that most of its products are immune to the wider political and economic landscape, makes it an ideal buy-and-hold selection. Let’s face it, the world’s population is likely to continue suffering from headaches and indigestion, and still require cleaning products whoever occupies The White House or Downing Street, or whatever horrors Brexit may bring.
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Fill your boots
I’ll admit that companies like Reckitt Benckiser may seem a little boring, but who cares when your investment is growing in value, and the modest, yet reliable dividends get larger and larger with each passing year. The group’s shares have performed well in recent years, doubling in value since 2013 and hitting all-times of £81 per share in June of last year.
But I believe this could be a perfectly opportune moment to add this quality stock to a well-diversified portfolio. After a sharp sell-off in the latter half of 2017, Reckitt’s shares are trading on a much lower rating than in recent years at 19 times forecast earnings for FY2018. Now could be a good time to fill your boots.
There’s no competition
There’s no doubt that Reckitt’s strong brands give the company a huge advantage over its competitors, but regulated water company United Utilities (LSE: UU) has an even bigger edge – it has no competition whatsoever.
The Warrington-based utility giant serves a captive audience of around 7m people and 400,000 businesses with water and wastewater services in the North West of England, as far north as Carlisle and as far south as Crewe. I’ll admit that as a regional water company focussd on just one geographical area, there are limitations on its growth, but that’s not what utility stocks are all about.
When it comes to gas, electricity and water companies it’s all about the dividend, and United Utilities is one of the best. The group aims to increase its shareholder payouts at least in line with inflation each year for the foreseeable future, and at current levels this equates to a healthy 5% yield. That should be more than enough to quench the thirst of dividend-hungry income seekers.
