Multi-billionaire Warren Buffett, probably the worlds most famous and successful investor, follows a strategy of buying great businesses with a view to holding his shares forever.
Whats good enough for octogenarian Buffett should be good enough for an investor just starting out on the road to long-term wealth accumulation.
Today, Im going to tell you why I think Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US), ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) and Burberry(LSE: BRBY) are worth consideration for a beginners portfolio.
Royal Dutch Shell
Royal Dutch Shell is the biggest company in the FTSE 100. This oil titans market capitalisation is over 150bn, almost double the size of rival BP.
Now, you may have heard the famous investing saying elephants dont gallop, meaning big companies cant grow as fast as smaller companies, but another thing about elephants is that theyre hard to knock over.
While I think portfolios need some racier shares to turbo-charge long-term returns, its not a bad idea for novice investors to build up from heavyweight foundations. Shell, as I say, is the heaviest of the Footsie heavyweights.
The company generates prodigious cash flows, and has increased or maintained its dividend every year since Word War II. At a share price of 2,384p, Shell offers a yield of 4.7%, and the prospect of snowballing the long-term value of your investment by using your dividends to buy more and more shares.
If youre new to investing, you may not have heard of ARM Holdings. However, ARM is a notable success story in a sector in which Britain isnt renowned for global leaders: technology. ARMs microchip designs are found in over 95% of the worlds smartphones and a host of other devices.
I mentioned racier shares. Well, despite being a FTSE 100 firm, ARM has been growing at a rate many smaller companies would be envious of. Furthermore, the next big technology wave the internet of things could continue to drive ARMs profits upwards for many years to come.
Naturally, such a company doesnt come cheap. At a share price of 887p, ARM trades at 33 times forward earnings, more than double the rating of the average FTSE 100 company. But you have to pay for best in class.
You may not have heard of ARM until a couple of minutes ago, but Im sure youll have heard of Burberry a far more visible British champion at home and abroad.
Renowned for its classic trenchcoat think Audrey Hepburn in Breakfast at Tiffanys and iconic black, tan and red check pattern, Burberry has exported well as the fashion house of timeless British style. New York, London, Paris? Sure, but also Tokyo, Beijing, Dubai these days.
Burberry hasnt quite been able to match ARMs growth, but the earnings multiple about 18 times at a share price of 1,464p is less eye-popping than the tech firms, if still above that of the average FTSE 100 company.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and Burberry. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.