Investing should be a marathon not a sprint

Thousands of runners took to the streets of the UK capital last weekend (Sunday, 23rd April) to make their way around the 26.2 mile London Marathon course.

The annual event, which has raised more than a £1bn for charities since it was founded back in 1981, saw more than 45,000 people make their way past iconic landmarks this year in what was the largest race in its history.

Known for its fancy dress and increasing inclusivity, the marathon is not just about winning but achieving personal milestones. It also illustrates what’s possible when people focus on their longer-term goals – and that brings us rather neatly to the benefits of being a long-term investor.

Buy and hold strategies

While every investor would love to see the stocks they’ve bought rocket in value overnight and secure them a handsome return on the way, unfortunately, such scenarios are pretty rare.

So, a more favoured approach is picking stocks that are expected to be consistent, longer-term winners. This ‘buy and hold strategy’ means fund managers have such faith in their analysis that they’re happy to stay invested even during volatile periods.

We asked Elite Rated portfolio managers to highlight the companies that they have held for the long-term – and the attributes they offer*.

Microsoft

The US tech giant is one of the world’s most instantly recognisable names and has had a place in the M&G Global Dividend fund since the portfolio’s launch in 2008. Stuart Rhodes, the fund’s manager, has held faith in the company during the challenging periods as well as the good days.

“When we bought into Microsoft in 2008, it was a faltering tech stock,” he said. “Since then, it has been on an impressive journey, delivering double-digit dividend growth in the process.”

According to Stuart, the stock has been “perfect” for his fund. “The overall performance numbers are strong, both in the short and long term,” he added. “Over the past year, it has registered gains of 11.6%, above the average for its peer group of 5.7%.”

Dunelm

The UK home furnishings business, which started life in 1979 as a market stall in Leicester, has become a retailing giant in recent years. It’s also a favoured name in the AXA Framlington UK Mid Cap fund, whose manager, Chris St John, emphasised its “fantastic management and market position”.

Chris also highlighted the company’s transparent capital allocation policy, discipline around store cost and location, and the fact it’s differentiated by design, service, and relationship with suppliers. “Cumulative dividends (are) well in excess of the IPO price,” he said. “It’s not only on profitable business growth but with a commercial focus and understanding of environmental, social and governance (ESG) issues.”

Yum China

The China-based restaurant chain has exclusive rights to operate the KFC, Pizza Hut, and Taco Bell brands in the region. It’s also been in the T.Rowe Price Asian Opportunities Equity fund for more than seven years, according to portfolio manager Jihong Min. “We think it is poised to benefit from China’s improving economic momentum, supported by its potential to increase profit margins,” he said.

Jihong, who focuses on high conviction stocks that are cash generative, with good earnings visibility and durable growth, has confidence in the company’s execution capabilities. “This company has been a long-term holding in our portfolio and still ticks a lot of boxes in our investment philosophy,” he added. “We anticipate margin expansion and accelerated store additions could drive its earnings growth in the coming years.”

Bloomsbury Publishing

This UK-based independent company is particularly famous for publishing JK Rowling’s hugely popular Harry Potter series. Sid Chand Lall, manager of the IFSL Marlborough Multi Cap Income fund, has held the company for a number of years and believes it offers strong, long-term growth prospects. “Bloomsbury has a first-class management team and a strong stable of prize-winning authors, including Sarah J Maas, the number one New York Times bestselling author,” he told us.

Sid also pointed out this was a global business, with two thirds of its sales outside the UK, and is benefitting from an increase in book reading since the pandemic. “Its Academic & Professional division is also going from strength to strength, underpinned by its Bloomsbury Digital Resources offering,” he added. “The company has a robust business model that has consistently delivered profit growth.”

Edenred

This is a digital platform that provides specific-purpose payment solutions for companies, employees and merchants. It’s a long-held stock in the Jupiter European fund and is currently one of the 15 largest positions in the portfolio. The fund’s managers, Mark Nichols and Mark Heslop, told us the business played a useful role within employee benefits and corporate expense management.

It’s also “highly cash generative” and has a global focus. “The company is a clear beneficiary of the secular growth trend of data and digitalisation,” they said. As well as having the largest network of merchants, the managers noted that Edenred invests a lot more than its competitors in technology, “This gives them the ability to offer more solutions on a single platform, improving client retention and further enhancing their barriers to entry,” they added.

*All holdings as at 27 April 2023

_{Photo by Jenny Hill on unsplash}