I’ve been thinking about how I’d invest £3,000 today into a trio of stocks to buy and hold for the long term.
Here are three UK shares I’d consider adding to my portfolio for the long haul.
Drinks champion
Diageo (LSE: DGE) is the company behind a panoply of beverage brands, from Sipsmith to Guinness. Its brands help to differentiate it from competitors. That can support premium pricing.
I like the scale and depth of the Diageo ecosystem. Take its whisky portfolio as an example, which accounts for 23% of Diageo sales. As it owns a lot of different distilleries in Scotland, the company is able to sell single malts like Talisker and Lagavulin. But it can also use the whiskies in blends such as the entry level Johnnie Walker Red Label and more premium offerings like Haig Club.
That gives the company some insulation against economic shifts and changing consumption trends, in my opinion. It can simply adjust its focus to the right product mix at any one time to match what customers want to drink and pay.
One risk with Diageo as a stock to buy and hold is that younger consumers are drinking less alcohol than previous generations did in many markets. That could eat into future sales and profits.
UK stocks to buy and hold
I would also consider putting £1,000 into JD Sports (LSE: JD) today.
The company has proven its ability to grow over the long term. With people dressing more casually now even for work, customer demand looks set to grow. The company’s international reach in countries such as Australia and the US means that it can tap into growth opportunities wherever they arise.
The company doesn’t just sell sports gear. It also has a growing gym business. That should enable it to differentiate itself from pure retailers, and build its appeal to sports fans.
Risks include increasing price competition from online retail platforms. That could make it harder for the company to sustain its current profit margins in future.
Buffett-style stocks to buy and hold
Consumer goods companies like Reckitt (LSE: RB) and Unilever (LSE: ULVR) have a lot of the qualities appreciated by investor Warren Buffett. They have strong brands, pricing power, and large franchises.
I don’t like the way Reckitt is still struggling to turn its infant formula business around, however. So I would invest my third £1,000 today into Unilever instead. Unilever does face risks of its own. For example, rising raw material costs threaten to reduce its profits in coming years.
But I see it as a stock to buy and hold in my portfolio because the company has a number of advantages. Its wide brand portfolio gives it pricing power and the ability to sell at different pricepoints. That is good for sales growth in developing markets. I also think Unilever has a strong ESG story. That could help it attract environmentally conscious customers.