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 Rio Tinto (LSE: RIO) (NYSE: RIO.US), Rolls-Royce Holding (LSE: RR) and Dignity (LSE: DTY) are worth consideration for a beginners portfolio.
Rio Tinto
The mining industry goes through periods of over-production and falling prices, and periods during which production races to keep up with demand and prices go crazy. Therell be times when you think your mining share is your best ever investment, and times when you think its your worst.
Nevertheless, backing a big mining company through thick and thin should pay off over the long term, as industrialisation around the world is set to continue for many decades to come. Rio Tinto is one of the worlds biggest miners, and, with a market capitalisation of 45bn, ranks among the super-heavyweight companies in the FTSE 100.
Miners have been at a low ebb for a few years, and now could be a good time to buy for patient investors. Rios shares are trading at 3,186p, and currently sport a 4% dividend yield. Even if the shares remain depressed for a while, you can reinvest the dividends to buy more shares while theyre cheap, and thus compound your long-term returns.
Rolls-Royce
Rolls-Royce is another FTSE 100 company. The renowned aerospace and defence firm has a market capitalisation of close to 20bn at a current share price of 1,030p.
Rolls-Royce is currently suffering from a bout of weakness in some of its markets (defence and marine), which has spooked some impatient share speculators, but created an attractive opportunity for long-term investors.
While 2014 is set to be a below-par year, Rolls-Royces order book stands at over 70bn equivalent to four-and-a-half years of revenue and the companys chief executive says the prospects for long-term growth remain outstanding across the Group.
Dignity
Dignity is the UKs only stockmarket-listed owner of crematoria and provider of funeral-related services. While the company is small, relative to Rio and Rolls-Royce Dignity has a market cap of under 800m at a current share price of 1,484p the funerals market is very predictable and reliable!
As such, Dignity is somewhat similar to a steady, regulated utility, such as National Grid. In particular, the company is able to borrow money for long periods at attractive rates to boost shareholders returns.
From time to time, as Dignity grows, and it increases its borrowings, the company makes capital returns to shareholders on top of regular dividends. Indeed, management has just announced its latest proposal to return 100p per share.
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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.
