Finding the best millionaire-making UK shares to buy now is a task many investors are constantly trying to tackle. It’s always fun (or frustrating) to look back throughout history to see how much could have been made if I had invested in companies like Apple or Microsoft.
Today, these stocks seem like no-brainers. But going back two decades, it wasn’t so obvious that they’d become industry titans. And the same problem exists now. There are undoubtedly a handful of British stocks waiting to explode over the long term. But how can I identify them?
It’s obviously not easy. Yet there are a few tell-tale signs that might indicate the potential for long-term millionaire-making investment. Let’s take a closer look.
Finding the best UK shares to buy now
Looking at all the winners of the 21st century so far, there are two primary characteristics shared by them that I’ve spotted.
#1 Robust financial position
The first and most apparent is financial health. Companies with substantial cash flows and a solid balance sheet have significantly more flexibility, especially when times are tough. It enables a business to invest more into research & development, expand operations, and fund smart acquisitions.
Debt can be a powerful tool when used correctly. But all too often, it can quickly become a hindrance. Even more so today, now that interest rates are on the rise. And while focusing on high-debt companies can illuminate turnaround opportunities, these often fail as competitors can easily steal market share.
#2 Have a unique advantage
The second is a bit more nuanced and intangible. Becoming the future leader of an industry, even in the nichest of sectors, demands the ability to outperform competitors. And even after reaching the top, a business must work to retain its crown. This is where competitive advantages come in.
By being able to attract and retain more customers, raise prices, and work more efficiently, firms can generate the impressive cash flows that grant them the financial flexibility needed to thrive. That’s how Netflix beat Blockbuster, Apple beat BlackBerry and Microsoft beat IBM.
The best UK shares are never risk-free
Sometimes even the most impressive UK shares that seem to be doing everything right can be derailed by unpredictable external forces. This can come in many forms. In some industries like the tech sector, it’s usually a young disruptor with brand new technology that makes existing solutions obsolete. More recently, in 2020, it was a global pandemic that decimated the travel industry and the majority of corporations dependent on just-in-time supply chains.
No matter how encouraging a potential millionaire-making investment looks, it’s critical to diversify across multiple potential winning candidates. At least, that’s what I think. That way, my portfolio can be protected from such disruptive forces.