Buying a diversified portfolio of quality stocks at reasonable prices for the long term has stood the test of time as a sensible investment strategy.
The benefit of this approach is that through careful selection quality stocks can be readily identified. The harder part of the process is two-fold. Firstly no business operates in a vacuum which means that it is important to monitor your portfolio as over time a business will change and not always for the better. Secondly, having the patience and knowledge to only buy when a stock is selling at a reasonable price is often easier said than done.
These three companies are all market leaders which enjoy significant market share of their respective industries. Importantly they also all have strong leadership teams, strong diversified streams of revenue, and produce above average profit margins and returns on capital.
These three companies also have the potential to grow at reasonable rates considering their size.
- Woolworths has a rock solid balance sheet and is an experienced retailer. It can use these attributes to expand through acquisition, by geography and also organically as it is doing with the roll-out of the Masters Home Improvement format.
- Origin meanwhile is developing the APLNG Project which has a long life span. This should be a massive growth engine for the integrated energy player.
- Brambles continues to enjoy a long run way within its pooling operations. Despite its scale there are still plenty of new customers and new regions to target which is a huge positive for the stock.
Investors putting together a long-term portfolio generally desire a mix of growth and income. Blue-chip companies can be great for providing steadily growing and maintainable dividends. Based on one consensus of analyst forecasts, Woolworths, Origin and Brambles are currently trading on FY 2015 dividend yields of 4.1%, 3.5% and 2.6% respectively. Importantly the dividends paid by these three firms can be expected to grow for many years.