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 British American Tobacco (LSE: BATS) (NYSE: BTI.US), NEXT (LSE: NXT) and Fuller, Smith & Turner (LSE: FSTA) are worth consideration for a beginners portfolio.
British American Tobacco
British American Tobacco (BAT) is the worlds most international tobacco group. This 68bn megacap is the fifth-largest company in the FTSE 100.
The imminent demise of tobacco companies has been predicted for decades, but they keep on delivering for shareholders. Ive no doubt theyll continue to do so for many years to come, as disposable incomes rise across the developing world.
BATs shares priced at 3,630p at the time of writing offer a dividend yield of over 4%. Reinvesting dividends to buy more and more shares could nicely compound the value of your investment over the long term.
(If you have an aversion to investing in sin stocks, you may wish to read about an alternative megacap highlighted in this article.)
NEXT
Clothing, footwear and home products firm NEXT is another member of the elite FTSE 100 index. The NEXT brand came into existence in the 1980s, and key members of the board of directors have been with the company for almost as long as the brand has been around. Superb management of the business is one of NEXTs greatest strengths.
The company has a policy of using any surplus cash to give shareholders special dividends (in addition to ordinary dividends); or, if management considers the shares too cheap, for buying back shares in the market, and thus increasing the value of the remaining shares.
NEXTs shares are trading at 6,945p at the time of writing. If you wanted to be greedy, you could hold back and hope to see the shares at or nearer to managements buyback level, which is currently 6,600p.
Fuller, Smith & Turner
Brewer and pubs group Fuller, Smith & Turner (Fullers) was founded in 1845, and descendents of the founders are still major shareholders and actively involved in the management of the business today. The company is conservatively run, with a strong balance sheet, backed by quality freehold properties in London and the South East.
Fullers FTSE market capitalisation 293m at a current share price of 901p doesnt quite reflect the companys true size, because not all of the firms shares are listed on the stock exchange. If all the shares were listed, the market cap would be over 500m.
Fullers may be small compared with the likes of BAT and NEXT, but a measure of the quality of the business can be found in the companys record of having increased its dividend every year since 1974 (at a double-digit compound annual growth rate) a record I believe is unmatched by any FTSE 100 company.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
