Finding stocks to buy and hold for the next decade is incredibly challenging. Indeed, there’s no road map or shortcut I can use to find FTSE 100 stocks that’ll be around 10 years from now.
However, by focusing on well-run companies with a sustainable competitive advantage, I think I can improve my chances of finding a long term buy-and-forget forget investment.
There are a handful of companies in the FTSE 100 that appear as if they have these qualities. I’d buy all of them for that reason.
FTSE 100 stocks to buy
A great place to start looking for companies with a sustainable competitive advantage is the pharmaceutical sector. When drugs companies develop a treatment, they’re protected by exclusive manufacturing rights for an extended period. This is their primary competitive advantage. The companies can effectively charge what they like for these products while they’ve exclusive manufacturing rights.
I think AstraZeneca is one of the most exciting pharmaceutical companies listed on the London market. It has been spending billions developing cancer treatments, and these treatments are now becoming a significant revenue stream for the group.
Unfortunately, exclusive manufacturing rights don’t last forever. When they come to an end, companies like Hikma can produce the same product at a lower cost. That’s why I would buy both Astra and Hikma.
While Astra has a great portfolio of exclusive treatments, Hikma’s one of the world’s largest producers of generic drugs. Its competitive advantage is its size. It can produce these drugs at a much lower cost than competitors. As the global healthcare sector grows, I think the demand for these services will only expand.
Both of these companies also have significant pricing power, but they could come under pressure from regulators to lower costs. If they do, this is one of the biggest challenges they may have to overcome.
As well as the pharmaceutical companies outlined above, I’d also by Legal & General to hold in my portfolio FTSE 100 stocks.
This company is built for the long term. Its primary lines of business are pension and life insurance. In both of these markets, the group has to have a multi-generation perspective. Consumers buying life insurance and pension products need to be sure the organisation will still be around when they come to use them.
As such, management has to make decisions with long-term success in mind. This is a fantastic quality for a buy-and-forget investment, in my opinion.
I’d also require distribution group Bunzl. Investors should never use past performance to guide future potential, but this company has successfully grown to become one of the UK’s largest corporations over the past few decades.
Through a combination of acquisitions and organic growth, the enterprise has gone from strength to strength. It’s now a force to be reckoned with in the relatively uninteresting distribution industry. Management has no plans to change its strategy anytime soon. That’s why I think the company can continue to grow for the next decade.
Unfortunately, while both of these businesses may be doing everything in their power to build a solid organisation, there’s always going to be the chance a hidden risk will emerge. This could hurt growth, or even lead to asset sales.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl and Hikma Pharmaceuticals. 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.