Many very successful investors trade only rarely. Instead, they identify top shares to buy for their portfolio then hold them for years or decades. Below are three such shares I would consider adding to my portfolio.
Income and growth prospects
First up is insurer and financial services provider Legal & General. The company has a strong position in the UK market. Its vision of “inclusive capitalism” strikes me as a potentially powerful magnet to keep attracting new, younger customers. That could help the company to grow revenues in coming years.
I am attracted to the underlying business of Legal & General, but also like its income potential. Currently these FTSE 100 shares yield 6.5%. The company has also set out plans to increase its dividend in coming years, although dividends are never guaranteed. But there is a risk that increased competition in the financial sector could eat into profit margins.
Top shares to buy: Reckitt
Household product maker Reckitt (LSE: RKT) also has an attractive yield, though at 3.2% it’s only around half the size of Legal & General’s. But I consider Reckitt to be among the top shares to buy now for my portfolio and hold for years to come.
The business has had some problems, especially in its infant nutrition division. So, while the FTSE 100 is up 21% over the past year, the Reckitt share price has slumped by a quarter during the same period. But I think the company will eventually resolve its challenges in the nutrition business, either by fixing or selling it. Meanwhile, the other Reckitt businesses look attractive to me. It owns premium brands such as Dettol and Finish which give it pricing power.
That might not be enough, of course. The nutrition business underperformance could hurt the company’s balance sheet. Right now another significant risk is inflationary pressure on ingredient costs. That could eat into profit margins.
But I reckon that the company’s management is good enough to turn the ship around and unleash the potential of Reckitt’s portfolio. At its current share price, I rate Reckitt among the top shares to buy now I would consider for my portfolio.
Storing up potential
My third choice has had a better recent share price performance than Reckitt. In fact, today it touched an all-time high. Given the price, why do I like it?
The share in question is storage company Safestore. Despite the Safestore share price increasing 48% over the past year, I continue to rate it among the top shares to buy and hold for my portfolio. The business model is simple, but it has proven to be profitable. I think demand is set to increase for years to come. Compared to the US, for example, self-storage is an industry still in its infancy in the UK.
In its interim results, the company reported revenue growth of 11%. Diluted earnings per share rose 75%. The dividend per share jumped 27%. I see continued growth potential here as the company meets growing customer demand. But barriers to entry in the industry are low. One risk is that increased competition could squeeze profit margins.
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Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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