5 Shares For 5 Years

Published in Investing on 21 March 2012

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.

Resolve needed

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.
  • Understandable.
  • 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?

> Get the latest on investing and the markets, direct from the desk of David Kuo. You'll also receive a special free report on '10 Steps To Making A Million' if you join The Motley Fool Collective today.

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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.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

AleisterCrowley 21 Mar 2012 , 3:08pm

Wot no pharma?
AZN/GSK and Smith&Nephew for me, with an ageing population.
OK populations are alway ageing, as nobody gets younger (apart from CLIFF) but you know what I mean...

QuantumDealer 21 Mar 2012 , 3:40pm

AZN, BG, SLW, APR & ULVR would be my picks as of today.

Crawfish123 21 Mar 2012 , 3:42pm

My long term blue chips that tie in with this are:
S&N
BP
TSCO
IMT
Also I like beazley (BEZ)

MagicalBeaker 21 Mar 2012 , 4:51pm

Quite similar from me:
TSCO
BP
AZN
AV
and then either RB or VOD

Harry34 21 Mar 2012 , 5:37pm

In no particular order mine would be - (and indeed are!)

BP
TSCO
CNA
VOD
AZN

I also like CLLN and think VED will rise well if it succeeds in simplying its opaque operating structure.

GrangeInvestor 21 Mar 2012 , 6:02pm

I've seen Mckay Securities talked about before, it strikes me as a very high risk investment.

Just over £2m of cash and over £100m of debt. Debt is 139% of equity.

Providing every goes fine and the economy recovers and property prices go up from here then I'm sure it'll do well but it wouldn't take very much to go wrong to be really nasty.

Personally I prefer a bit more of a safety margin in my investments. I would rather invest in British Land or Land Securities if I was looking for exposure to a recovering property market.

mrburns2050 21 Mar 2012 , 6:27pm

hsbc
ULVR
bp
vod
TSCO

also like aviva BSY and GSK

QuantumDealer 21 Mar 2012 , 7:32pm

I think BHP should be in there somewhere...I should have included it in my list but as I am a LT holder of it I kind of forget about it as 5 years is nothing considering the time I expect to hold the stock!

apprenticeDRL 21 Mar 2012 , 8:39pm

My portfolio stalwarts are

BP
AV
TSCO
BAE
RSA

I admit a bit heavy on the financials, but I tend to invest for yield and dividend reinvestment.

wellington101 21 Mar 2012 , 10:30pm

GLEN, TSCO, ULVR, BP,HSBA

Viterra, Xstrata.
Food Thailand, China.
Ice Cream,
Oil,
Money to pay for it all

7 billion mouths to feed, Cars to build and drive to the sea side and enjoy an Ice Cream. Money to pay for it all?

Make Money and Have a Fun Time!

johnlatkins 21 Mar 2012 , 10:50pm

HSBA, FSTA, BP, BLND,ULVR

F958B 21 Mar 2012 , 11:39pm

I'd be happy with just the three big food retailers: MRW, SBRY, TSCO.

But for widows and orphans, I'd choose:
GSK
RDSB
SSE
TSCO
VOD

oakwood2002 22 Mar 2012 , 6:51am

Just to be different

lloy
rbs
klr
gprt
ctl

mainly recovery plays or cyclicals. Should be in a different place in 5 years

dpeddlar 22 Mar 2012 , 10:55am

HSBC
SHELL
AMEC
COCA COLA
BMW

I'M SURPRISED NOT MORE PEOPLE ARE BACKING SHELL (RDSB) IS IT ONLY ME AND 'F958B' THAT ARE FANS?

Sotograndeman 22 Mar 2012 , 3:24pm

TSCO
BP
VOD
LLOY
RBS

DashingDave123 22 Mar 2012 , 3:47pm

As usual I am amazed that people think this is even possible. They all pick the stars of yesterday reminiscent of the Nifty Fifty that were supposed to be one decision stocks, to buy and hold. Within a few years most of them were down 80% or gone bust. The world is changing very rapidly with the rise of China, the BRICs, the Middle East, even Africa soon and the EU locked into a death-wish spiral trying to support the unworkable Euro. All you can be sure of is that the future will be different from the past and all your predictions wrong. While food and drugs will be needed there is nothing that says our ailing supermarkets and pharmas will prosper against competitors. TSCO is clearly on a downward path and AZN and GSK have little in the pipeline.

koochak 22 Mar 2012 , 3:54pm

Vodafone
BHP Billiton
British American Tobacco
Legal & General
Standard Chartered

F958B 22 Mar 2012 , 4:32pm

DashingDave

".....Within a few years most of them were down 80% or gone bust..."

Dave, where have you been since 31st December 1999?

Stockmarkets have been to hell and back - twice!
Lots of companies have lost 80%, some have gone bust.

.

".....The world is changing very rapidly with the rise of China, the BRICs............."

China is probably about to hit the wall, Japan-style - if it hasn't already begun. China's one-child policy will lead to horrific demographics in several years time.
Have you noticed the veiled profit warnings (regarding China's demand) coming out of the big miners such as BHP Billiton?
China was the growth story of the last decade, riding on the coat tails of "Western" consumerism. Now that the West can't afford to borrow to indulge, the excess - and often unprofitable - capacity in China will also have its own adjustment period and China's dreadful-looking demographics will not be conducive to China becoming a consumer of its own manufacturing because old people tend to save and not consume.

mao44 22 Mar 2012 , 4:33pm

TSCO
VOD
BP
BARC
CLLN
MTO

Sorry that's 6!

Charleskevin 22 Mar 2012 , 4:43pm

lloy
rbs
psn
bhp
tsco

The banks and Tesco for recovery, the housebuilder because of the promised dividends and the miner for belief in China.

DashingDave123 22 Mar 2012 , 4:55pm

Fo58b. I was trying to keep it brief so could not cover all points. I agree China may be stalling. Who knows which countries will prosper or decline in the next 5 years? The world is changing rapidly and unpredictably. 5 years ago you might have been in Enron and Lucent and not known about Google, Facebook, etc. and underestimated Apple and ARM. 5-year investment forecasts are about as useful as 5-year weather forecasts. You have to respond to share growth and decline as they happen or you could end up holding the next GEC!

1800k 22 Mar 2012 , 5:52pm

I might be mad but...
TSCO
RBS
LLOY
RSA
VOD

longpod 22 Mar 2012 , 6:32pm

Why not something more exciting like:-

FCSS
MONI
BAO
ZOX
ITM

jaizan 22 Mar 2012 , 7:28pm

Scottish Oriental Smaller Companies
Vodafone
Aberdeen Asia Smaller Companies
Sainsburys
Imperial Tobacco

dermaidvye 22 Mar 2012 , 8:32pm

Here's my two pennyworth:

Scottish & Southern Energy (SSE)
Vodafone (VOD)
Carillion (CLLN)
Diploma (DPLM)
Melrose (MRO

kvet 23 Mar 2012 , 8:32am

I could agree with virtually all of the above but must put in a word for BATs and IMPs.
Yet again a swingeing duty increase on baccy enables them to raise the wholesale pre-tax price of their products without anyone noticing. It looks as though the 15-fold increase in BAT's share price over 20 years will continue. It's paradoxically helped, not hindered, by duty increases.

cleaverdog 23 Mar 2012 , 10:46am

O2s Spanish owner Telefonica. Generous dividend and excellent growth prospects in Latin America

jackdaww 23 Mar 2012 , 11:23am

dpeddlar

i too hold shell -- in preference to bp.

also bhp for their oil exposure.

also tesco morrisons vodafone and glaxo.

dannysuko 23 Mar 2012 , 11:46am

Cant help feeling that the fool list is not looking forward. New emerging economies etc,the world is changing, Africa, Brazil, China, India and more will have a big influence over the next 5 years.

Vodafone - emerging market play and VZN investment
Vectura - Science targets developing markets China/India
Afren - African oil developer with huge potential looking forward
888 - US markets will re-open and 888 in good position
BMR - Tiny company sitting on massive resource, speculative punt

Some will think I am mad but this mix of investments IMHO has massive growth potential over 5 years. DS

andrew97d 23 Mar 2012 , 9:50pm

HLMA 30 year record of rising dividends
GSK they don't just do drugs
BP I have RDSB too but wish I had sold them in feb for £24.75
LLOY for a recovery
SSE for their hydro and network stuff
SBRY for their property assets

ATST and SMT - why not let them do the hard work. ATST are almost like a with-profits-fund but without the obfuscation and deceit.

cmlight9 23 Mar 2012 , 11:38pm

Interesting most have chosen HY stocks,
My choices.
AV
SSE,
RB,
LlOY
VOD
and put the divis in GSK

newtona2 24 Mar 2012 , 6:38pm

Apple
ITM Power
Vodafone
Google
Physical Gold coin

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