If I could only buy one UK share for my personal share portfolio, what would I choose?
I’ll start by saying that I would never actually put all of my money into one share. No company is perfect and there are always risks that may not be obvious from the outside. I believe that some diversification is essential.
However, if I did want to invest my entire portfolio in one UK share, I’d want a company that had proven its worth many times. I’d also want to know that top management had a big shareholding in the business, so their interests would be aligned with mine.
This leads me to a few, simple requirements.
First, the company would need to have some age, preferably as a publicly listed stock. That way I could be confident that any serious problems with the business model would probably already have been revealed.
Second, I’d want a company that has generated value for shareholders over long periods. I’d look for a strong share price performance and reliable dividends.
Finally, I’d want to see owner-management. Ideally, the CEO or founding family would have a substantial shareholding. This would give me confidence that they’d care about protecting the value of the business and delivering sustainable growth.
My perfect company?
If I could only buy one stock, the UK share I’d buy today is Associated British Foods (LSE: ABF). This unusual group owns a broad range of food and grocery brands, including Twinings, Kingsmill, Patak’s, and Silver Spoon. ABF also owns the Primark fashion retail chain.
Although owning such a diverse mix of businesses is not fashionable these days, this FTSE 100 stock satisfies all of my requirements:
- ABF has been in business since 1935 and listed on the London Stock Exchange since 1994.
- The Associated British Foods share price has risen by 425% over the last 20 years, and by 130% over the last 10 years.
- ABF’s dividend has only been cut once (last year) since 2000.
- The founding Weston family still control and run the business. George Weston is CEO and the Weston family control 54% of the shares.
Why I’d buy this UK share today
Associated British Foods is not the cheapest stock I’ll find on the UK market. It doesn’t have the highest profit margins or the highest dividend yield. And it certainly isn’t the most exciting.
However, what this business does have is a long track record of generating attractive returns for its shareholders, many of whom are family members.
As it happens, ABF shares now look cheaper to me than they have done for a number of years. Last year was tough for the company, which generates more than half its profits from Primark. With stores closed for much of the last 12 months, ABF’s management estimate that the group lost £3bn of sales and over £1bn of profit.
Fortunately, the company’s debt-free balance sheet allowed the company to navigate the year without having to raise funds from shareholders. Furlough payments are being returned and the dividend has been reinstated.
ABF shares currently trade on 17 times 2021–22 forecast earnings, with a 2% yield. I’d be happy to buy at this level for a long-term holding.