As the UK economy starts to recover from the pandemic, I’ve been searching for UK shares to buy that may prosper in the recovery.
However, here at the Motley Fool, we’re looking for companies that we can buy and hold for years, not months.
With that in mind, I’ve been searching for UK shares that look to have excellent growth potential not just for the next few months but during the next five to 10 years as well.
Should you invest £1,000 in BT right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?
UK shares to buy and hold
I’ve been seeking out shares with robust competitive advantages. These advantages should help them fend off competition and achieve steady growth year after year.
The first company I’d buy for my basket of UK shares is the London Stock Exchange (LSE: LSEG) itself. When it comes to competitive advantages, this business has a huge one. It controls London’s leading stock market and the plumbing of the stock exchange.
It has taken decades for the group to build the business it has today. So it’s unlikely it’ll be unseated by an upstart competitor overnight.
There are plenty of other competitors in the market, but these businesses have a mountain to climb. Customers want to deal with the most trusted and reputable party, and that’s usually the LSE.
That’s not to say this is a risk-free investment. It is not. Its latest deal to acquire data provider Refinitiv lumped the group with a considerable amount of debt. Not only could this debt weigh on growth, but some analysts have also speculated that the business overpaid. If the deal turns sour, investors may see the value of their investments fall.
Despite these risks, I’d buy the stock for my portfolio of UK shares today.
Insurance giant
Another stock I’d buy to hold for the next five to 10 years is Direct Line (LSE: DLG).
Many insurance companies struggle to earn a consistent profit in the long run. It’s easy to see why. If an organisation does not have enough information to get its sums right, losses can spiral out of control.
Direct Line is one of the UK largest insurers. This gives the business a competitive advantage. It has both more information on risks than peers and lower costs. At the same time, the group benefits from a captive market as car insurance is a legal requirement in the UK.
While there’s always going to be the risk that the company might lose market share to peers, the firm has done an excellent job of remaining competitive over the past decade or so.
Still, as noted above, the group could find itself in hot water if it gets its figures wrong. That’s always going to be a risk. Therefore, the stock might not be suitable for all.
Nevertheless, considering the company’s competitive advantages, I’d buy Direct Line to hold for the long term.
