Companies that are successful today could fall out of favor next year. There’s just no way to tell what’s going on around the corner.
Still, I think there are a handful of companies in the FTSE 100 that can be successful over the next decade.
Buy and keep
When I research companies that I intend to buy and hold for an extended period of time, I try to focus on companies with a substantial competitive advantage.
This advantage can take different forms. Some examples are size, reputation, and access to information, such as data.
the London Stock Exchange has a solid reputation, is one of the largest financial services companies in Europe and has access to unparalleled data flow. These impressive qualities are the reason why I would be happy to buy and hold stocks for the next decade.
As an operator of the London Stock Exchange, the LSE has a strong advantage in that its competitors simply will not be able to replicate what it does. Other companies have tried to set up new exchanges, but none have matched their success.
The company is also strongly established in the compensation market. It involves the settlement of financial transactions and is a low margin, high volume business.
It is also a sector where reputation matters. While the company faces challenges in this market, not a single challenger has the financial clout or scale of LSE.
I think Flutter Entertainment has similar qualities to its counterpart FTSE 100. The online gaming company owns some of the best known gaming brands in Europe. It is also expanding into the United States, putting its size and scale to work in this relatively underdeveloped market.
As the global online gaming market is incredibly competitive, scale matters. Flutter’s size (it’s one of the largest listed companies in the country) means it can afford to spend huge sums on marketing and technology to stay ahead of the competition.
That said, Flutter and the LSE both face key risks. We stay ahead of the competition. Their size should help with that, but they can’t take it for granted.
Companies that take their market share for granted may end up losing their lead to more nimble competitors. Rising costs can also hurt the profit margins of both companies.
FTSE 100 trust issues
In addition to the FTSE 100 companies described above, I would also buy Aviva hold out for a decade.
I like Aviva as a buy and hold investment because it is a provider of retirement and life insurance. As such, the company must take a long-term view of things. It should also make clients feel that they can trust the group until they retire. And if customers can trust the company, I think investors can too.
However, this does not guarantee that the company will always be able to avoid challenges. Headwinds, such as increased costs from regulation and rising interest rates, can affect profitability in the long run.
Rupert Hargreaves has no position in any of the stocks mentioned. The Motley Fool UK owns shares and recommended Flutter Entertainment and Flutter Entertainment PLC. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.