Imagine you had to pick five shares for five years. What would they be?
If you had to lock away your investments and not look at them for another five years, which equities would you choose today?
For the sake of this hypothesis, we'll assume that your overall investing strategy is balanced with cash, bonds, property, etc, but that the equities you chose today have to be reasonably safe. In other words, before you enter this Rip Van Winkle long sleep, you're going to want to select equities that will still be around when you wake.
So, with that in mind, what do you choose? Or perhaps it's wiser to ask how you select those equities. After all, we'd all place our bets differently.
A couple of years ago, Foolish writer Harvey Jones asked whether you could you not check your investments for the next decade. He included some wise advice about approaching such a task. Similarly, Warren Buffet's advice to "only buy something that you'd be perfectly happy to hold if the market shut down for 10 years" is something of a challenge. Five's a bit more like it in today's world.
But it's sage advice, and a good resolution to try and follow. And how many of us really pick shares on this basis? It's often said that a long-term investment is a short-term trade gone wrong, and this is the approach many private investors take. I know I do it from time to time, despite the fact that I also know I shouldn't.
Personally, I would like to find companies that tick as many as possible of the following boxes:
- Fundamentally good value.
- Essential industry.
- Good dividend paying.
- 'Special situation'/temporary difficulties.
- Excellent track record.
- Good prospects.
- Contrarian good timing due to macro environment.
- UK base/overseas mix.
You very rarely find something that ticks them all. But if I was locking them away for five years, I'd probably be keener on the dividends and maintenance thereof, than some other considerations.
Anyway, without further ado, I'm going to select five for you to ponder before I depart for five years:
1. J Sainsbury (LSE: SBRY) remains my favourite supermarket of the UK's big three listed groups and the highest yielding. But I think all three -- including Morrison (LSE: MRW) and Tesco (LSE: TSCO) -- would make reasonably good five-year investments from this point. It's mainly the balance sheet I like that shows NTAV of 293p per share, versus the current price of 315.3p. In some ways, Sainsbury is a commercial property company whose only lessee is its (profitable...) self -- and it's trading well.
2. Of the big insurers, my preference is just for high-yielding RSA Insurance (LSE: RSA) these days at 116.3p, though Foolish favourite Aviva (LSE: AV) remains good value.
3. BP (LSE: BP) has to be in there at 483p for me given its low valuation, which looks likely to play gradual catch-up with the market, to me, as the Gulf of Mexico tragedy recedes.
4. I'm also going to stash a few McKay Securities (LSE: MCKS) away for the long sleep at 129.5p, as I don't think its discount to NAV is justified and the 6.5% yield, reinvested, will help the pot to grow.
5. And finally, I'm going to add in a little excitement via SeaEnergy (LSE: SEA) at 32p, whose valuation makes little sense to me given its cash position and stake in 25% stake in Lansdowne Oil & Gas (LSE: LOGP). Lansdowne recently updated the market on what seems likely to be Ireland's first offshore commercial oil and gas discovery.
I'll let you know how I've got on five years from now if I'm still around to tell the tale.
So tell me -- which are your five for five?
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> David owns shares in Sainsbury, Tesco, RSA Insurance, Aviva, BP, McKay Securities and SeaEnergy. The Motley Fool owns shares in Tesco.