It’s a daunting prospect, starting up a stock investment portfolio — and even if you narrow it down to the FTSE 100, that’s still a lot of companies to get your head around. But I firmly believe that starting off with a few that have stood the test of time can provide a solid bedrock.
An original
Did you know, for example, that Associated British Foods (LSE: ABF) is one of only a handful of companies that have been in the FTSE 100 since its inception in 1984? An investment back then would have come close to matching the Footsie’s growth by today, so it’s not been an overall outperformer.
But that includes a bad spell before the turn of the century, and since then we’ve seen some serious outperformance. Over the past 10 years, ABF shares have soared by 255%, while the FTSE 100 has managed a gain of just 77%.
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The 2019 first-half performance, in a tough economic environment, emphasises the company’s reliability to me. Though statutory pre-tax profit fell by 15% on largely unchanged revenue, that was put down to an exceptional charge of £79m, and adjusted pre-tax profit was flat at £627m.
Sugar profits dipped, but chief executive George Weston said “we expect our sugar profitability to improve,” adding that the “strong underlying growth in grocery profits demonstrates good momentum.”
Shining light
But the star for ABF was, as always, Primark. The budget fashion chain reported a 25% uptick in profits, resulting from improving margins and “better buying“, although favourable exchange rates played a part.
Expansion of the Primark brand is still continuing, and I’m reminded of the Lidl and Aldi phenomenon here. Although high street retail is suffering, people still need clothes, and a cheap, no-nonsense offering will always attract customers — my nearest Primark is always packed with shoppers.
I reckon Associated British Foods could be good for another 35 years in the FTSE 100.
Super safe
When it comes to ultra reliability, Unilever (LSE: ULVR) always comes to my mind. The global producer of household and consumer goods is also a founder member of the FTSE 100, and it’s rewarded investors in a very similar way over the past decade with a 240% share price rise.
I’ve recently explained why Unilever would be one of my top ‘buy and hold forever’ stocks, and it’s based on the company’s extensive range of top brands and its penetration into almost every market in the world.
And while retail is struggling, Unilever’s 2019 first quarter shows it’s another firm that’s bucking the trend. Underlying sales came in 3.1% ahead of the same period last year, with underlying emerging markets sales up 5% — and that latter segment must have massive future potential.
Slow and steady
Chief executive Alan Jope described it as “a solid start that keeps us on track for our full-year expectations,” while predicting “underlying sales growth to be in the lower half of our multi-year 3%-5% range” for the full year.
That’s the kind of modest-but-steady sales growth that will build (and has built) into ever growing cash for shareholders over decades, and that was emphasised by a 6% hike to the first-quarter dividend.
Two shares to stick in a starter portfolio and forget about for 10 years? These two fit the bill for me.
