5 Stocks With Staying Power

Published in Investing on 3 July 2012

Solid, diverse global businesses poised for long-term prosperity.

Some press comment I read over the weekend suggested -- gasp! -- that readers ought to think about putting money in the stock market. Over the long term, ran the logic, the market looked set to out-perform bank accounts, mattresses, gilts and property.

Such sentiments aren't novel, of course. Just the other day, I pointed out three reasons to buy into the market today. But such a stance does pose an obvious question, especially for the novice investor.

Namely, which shares offer long-term staying power?

Go the distance

So here, I offer up five stocks for the long-haul: five decent businesses, with decent Warren Buffett-style 'moats', decent histories of long-term dividend growth -- and which today are trading at very reasonable prices.

Better still, they're all large-cap companies, thereby offering robustness and resilience against the inevitable uncertainties that lie in the future. Three, in fact, are in the top ten FTSE 100 (UKX) stocks -- and all five of them make the top 20.

And I make no apology for another feature that they all share: a high exposure to consumer non-discretionary expenditure. With the consumer contributing about 65% to GDP, stocks reliant on captive consumer expenditure provide a good buffer of insurance against the business cycle.

But before diving into the financials, let's start with a quick 'pen picture' of each company.

Five for the future

First up is GlaxoSmithKline (LSE: GSK), which employs around 97,000 people in over 100 countries. Every minute, apparently, over 1,100 prescriptions are written for GlaxoSmithKline pharmaceutical products. Almost as attractive is its strong range of consumer-friendly brands: Ribena, Horlicks, Lucozade, Aquafresh, Sensodyne, the Macleans range of toothpaste, mouthwash and toothbrushes.

Next comes Vodafone (LSE: VOD), the world's second‑largest mobile telecommunications company measured by both subscribers and 2011 revenues, which has 390 million customers, employs over 83,000 people, and operates in over 30 countries across five continents.

Third comes British American Tobacco (LSE: BATS), the world's second-largest quoted tobacco group by global market share, possessing 200 brands sold in around 180 markets, and with 46 cigarette factories in 39 countries manufacturing the cigarettes chosen by one in eight of the world's one billion adult smokers.

Fourthly, we have Unilever (LSE: ULVR), which employs 167,000 people, sells its products in 180 countries, and has a clutch of best-selling brands as diverse as Flora, Dove, PG Tips, Marmite, Persil, Knorr, Ben & Jerry's and Colman's.

Lastly, consider 500,000-employee Tesco (LSE: TSCO), which is the world's third-largest international retailer, with fully a third of its sales coming from overseas, and spread over 13 countries. Throw in innovative home shopping, finance and telecommunications offerings, and Tesco is more than just another grocer.

Let's see the numbers

That's the five businesses. Each, clearly, is large and diversified, with a solid consumer-centric go-to-market proposition.

But how do the finances stack up? Let's take a look. The table below gives the low-down.

CompanyShare PriceMarket capForecast P/EForecast yield
GlaxoSmithKline1458p£73.7bn11.95.1%
Vodafone178p£87.7bn117.2%
British American Tobacco3265p£63.8bn15.54.2%
Unilever2148p£60.6bn16.43.7%
Tesco313p£25.1bn8.94.9%

Now, it's fair to say that not all of these shares tick the usual "screamingly cheap" boxes. All but one is rated at above the FTSE 100's average price-to-earnings ratio, for instance -- although generally not hugely above it. That said, all but one offer yields that are above the FTSE 100's average.

But in any case, for the most part these aren't shares selected because adversity has temporarily driven down their prices: these are shares chosen to be solid picks over the long term.

In short, buy-and-forget shares, that will deliver a decent total return stretching into the future. And on that basis, it's a question of price is what you pay, staying power is what you get.

The Buffett factor

That said, it's worth noting that one of the stocks emerged as a pick in this free special report from The Motley Fool: "Top Sectors Of 2012".

Here, in fact, are Motley Fool analyst Nathan Parmelee's very words: "Global diversification, long‑term growth potential, and a big dividend yield are why I see this share as an opportunity to beat the market without taking on above average risk." Its name? Why not download the report to find out? It's free.

And secondly, while all five of the shares in question have a decent history of dividend growth, one especially stands out, with an unbroken 25‑year history of solid growth and rising dividends. It's a share that I've been loading up on in recent times, having almost doubled my holding this year.

Its name? You can find that out in another free special report from the Motley Fool -- "The One UK Share Warren Buffett Loves". And from the way that Buffett has seemingly been topping-up himself in recent times, it's clear that he's also very clear about the company's long-term merits. As before, the report is free, so why not download a copy now?

Are you looking to profit from this uncertain economy? "10 Steps To Making A Million In The Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- it's free.

More investing ideas from Malcolm Wheatley:

> Malcolm owns shares in GlaxoSmithKline, Unilever and Tesco. He does not have an interest in any other shares listed. The Motley Fool owns shares in Tesco.

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Comments

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nnnnineteen 05 Jul 2012 , 1:10pm

As a relative novice investor (I started at the end of August last year) I've somehow managed to end up with 4 of the 5. And so far beating the stock market. My 5th is DGE which is performing very nicely thank you very much.

eccyman 05 Jul 2012 , 3:18pm

#nnnineteen (or should that be Paul Hardcastle??)

You look to be making the right moves for a novice, most novices try to duck and dive with whatever's trendy at the time.

DGE was a good buy - I hold them, like the company and their products. Price is a bit high at the moment, but I'll keep hold - I'm a long term income investor...

4spiel 05 Jul 2012 , 7:27pm

There is currently a tendency in a time of continuing uncertainty where money printing and rate cutting is persued with varying degrees of lack of enthusiasm and in America seen as the fall back option- to pile into some shares that would be dropped given the option to make some money from stocks that thrive when we have real and not induced economic growth.. I currently store cash from dividends as trickling in to shares is broker expensive and more economical and effective with larger amounts when there is blood on the streets

brightncheerful 06 Jul 2012 , 10:48am

Ironic to use a picture of Stonehenge when to this day nobody knows for certain why it was built or what it was used for!

MaynardPaton 13 Jul 2012 , 1:06pm

True, but stonehenge has staying power...

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