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 Unilever (LSE: ULVR) (NYSE: UL.US), Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) and Mountview Estates (LSE: MTVW) are worth consideration for a beginners portfolio.
Unilever, a 32bn FTSE 100 company, owns dozens of top international brands in the areas of food (eg,Knorr soups and sauces), personal care (eg,Dove beauty products) and home care (eg,Cif cleaners). Two billion people around the world use Unilever products on any given day.
Size, geographical diversification and the non-cyclical nature of the so-called fast-moving-consumer-goods industry make Unilever a relatively steady share through all economic conditions. Investors are willing to pay a premium for such businesses, and Unilevers current share price of 2,506p equates to over 19 times current annual earnings.
Ill put that into context for you with the next company
Supermarket giant Tesco is trading on less than 10 times earnings at a current price of 179p. Tesco is so cheap because of well-publicised troubles that youre doubtless aware of.
Now, its the easiest thing in the world for investment pundits like me to only tip companies that happen to be on the top of their game at the moment. The fact is, though, a fair numberof tomorrows biggest long-term winners will come from among companies that are currently struggling and rated lowly by the market.
Tesco remains the dominant force in UK food retail, has established itself in a number of exciting foreign markets, and looks to me to have every prospect of being one of those big long-term winners, even if there may be a few years pain to go through yet.
And Buffett himself, who bought Tesco shares at a much higher price an investment he recently described as a huge mistake nevertheless continues to hold. Whether he will for ever remains to be seen.
You may not be able to bring yourself to back a struggling company if youre a new investor. But do make a note of Tescos share price today, and see how the company performs over the next 10-plus years compared with currently highly-rated stocks, such as Unilever.
I suspect mostnew investors, as well as many seasoned market participants, wont have heard of Mountview Estates. This 300m property company is tiny relative to the likes of Unilever and Tesco, but it has qualities I think make it worth consideration for a beginners portfolio.
The essence of what Mountview does is extremely simple, and is only really possible because of the very long-term view taken bythe family that founded the company in 1937, and theirdescendants, who still run it today. Mountview acquires tenanted residential properties at a discount to their notional vacant-possession value, then sells them when they become vacant, often many years later.
The properties are recorded on Mountviews books at cost, and so the market value is far in excess of the worth indicated by the companys current share price of 7,725p. In other words, if Mountview simply shut down today and sold all its assets, you would see a handsome reward on your investment.
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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of Mountview Estates, Tesco, and Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.