Multi-billionaire Warren Buffett — probably the world’s most famous and successful investor — follows a strategy of buying great businesses with a view to holding his shares ‘forever’.
What’s good enough for octogenarian Buffett should be good enough for an investor just starting out on the road to long-term wealth accumulation.
Today, I’m going to tell you why I think Diageo (LSE: DGE) (NYSE: DEO.US), Coca Cola HBC (LSE: CCH) and Imperial Innovations (LSE: IVO) are worth consideration for a beginner’s portfolio.
Diageo
If you’re new to investing, you may not have heard of Diageo. You will, however, know many of the names in the company’s portfolio of world-famous alcoholic drinks brands: Johnnie Walker, Smirnoff and Guinness, to name but three.
Diageo’s size (it’s a £43bn FTSE 100 company), geographical spread (sales in over 180 countries), and ‘defensive’ qualities (less impacted by economic conditions than many businesses) make this a relatively steady share. And that makes it a good cornerstone holding for a beginner’s portfolio.
Diageo’s qualities mean investors are happy to pay a premium price for the shares. A current price of 1,720p represents about 18 times forecast 2015 earnings, compared with 16 times for the wider market.
Coca Cola HBC
When it comes to drinks brands, they don’t come any bigger than world number one Coca-Cola. And Buffett himself is famous for his decades-long holding in The Coca-Cola Company.
The Coca-Cola Company is listed on the New York stock exchange, and launching straight into international investing may not appeal to many beginners. However, you can still tap into the power of this stellar brand by staying at home and investing in FTSE 100 company Coca Cola HBC.
The firm, which is 23%-owned by The Coca-Cola Company, is a bottler and vendor of the US giant’s products across 28 countries stretching from the westernmost point of Ireland to the easternmost point of Russia.
At a share price of 1,280p, Coca Cola HBC trades on the same premium 18 times forecast 2015 earnings as Diageo.
Imperial Innovations
Imperial Innovations offers investors the opportunity to participate in the commercialisation of the most promising UK technology research coming out of the leading universities in the ‘golden triangle’ formed between Cambridge, Oxford and London.
Imperial Innovations leads the formation of new companies, provides operational expertise and facilities in the early stages, contributes substantial investment to accelerate development, and helps to recruit high-calibre executive management teams and board members.
At a share price of 450p, Imperial Innovations is valued at 1.5 times the current value of its net assets. However, because Imperial Innovations is a start-up investor, the companies (which are Imperial’s assets) have the potential to deliver spectacular increases in value over time.