If you have £5,000 or any other amount to invest in an ISA today, I highly recommend buying a basket of high-quality UK shares.
The best companies to buy if you want to build a big financial net egg are those businesses with a robust competitive advantage and large profit margins.
Today I’m going to take a look at two UK shares that appear to have these qualities.
Should you invest £1,000 in BP right now?
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UK shares to buy in an ISA
I reckon one of the best companies on the London market today is credit rating agency Experian (LSE: EXPN).
The firm has a vast amount of data on customers. This is not the sort of information that is easy to acquire overnight.
The company has been at the forefront of consumer credit data collection for decades. Therefore, it owns an almost unrivalled collection of information. This gives it a strong competitive advantage in the credit and financial services markets. And the longer the corporation is in business, the broader its competitive advantage will become. Only a handful of other UK shares offer similar qualities.
As the world becomes more reliant on data and credit services, Experian should be able to use its scale to grow.
As the company already owns the majority of its data, it earns large profit margins. Last year, for example, the group reported an operating profit margin of 23%.
Much of this excess profit is being returned to investors. The stock currently supports a dividend yield of only around 1.3%, but management is repurchasing stock as well.
Considering the company’s competitive advantages, large profit margins and cash return plans, I think Experian is one of the best UK shares to buy for an ISA today.
Sage
Sticking with the technology theme, I think accounting software provider Sage (LSE: SGE) could also be an excellent long-term ISA investment.
Sage and Experian are somewhat similar UK shares. They both provide a unique product online or through the cloud, which is difficult to replicate. Sage is one of the world’s best-known accountancy software providers.
Like Experian, Sage’s market position gives the company a strong competitive advantage. Accounting software can be complicated to set up and difficult to change. As a result, customers don’t tend to change providers very often. Doing so could result in lost data, which may lead to fines from authorities.
Therefore, I reckon Sage could be an excellent long-term investment for any portfolio of UK shares. Its competitive advantages should help the firm earn profits year after year. Meanwhile, the stock supports a dividend yield of 2.3%. The payout is well covered by earnings per share, and the company is highly cash generative, which tells me this dividend is sustainable.
All in all, Sage looks as if it has the potential to produce high total returns for investors in the long run. As such, I think the stock would make a perfect addition to a portfolio in a Stocks and Shares ISA.
