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I think there are some great UK stocks for someone setting out on an investing journey. If I were starting again at age 20, I’d be looking to buy shares that I could hold until I retired.
Even without any savings, I’d aim to invest as soon as possible. Keeping enough money on hand for any emergencies, I would start figuring out the best stocks to buy.
Investing at 20
With the UK retirement age currently 68, I’d be able to invest with a long time horizon if I started at 20. This would give me two big advantages.
First, I could choose my stock investments from the full range. Rather than needing dividends straight away, I could invest in companies that have great prospects but will take time to develop.
Second, it would give me longer to compound my returns. Investing £1,000 at a 7% annual return comes to £2,000 after 10 years, but after 40 years, it amounts to almost £15,000.
The question for me, then, would be which shares are going to offer the best returns over the next few decades. And I have some ideas from the FTSE 100 and the FTSE 250.
Rightmove
I’d start with Rightmove (LSE:RMV) – a FTSE 100 technology stock. I think this company has a business model that can generate really exceptional returns if it’s given enough time.
In the short term, there’s a risk a slowing UK housing market might stunt the company’s growth. But with enough time, I believe this could be a great investment.
Warren Buffett always says the best business is one that is able to grow without needing significant reinvestment. As I see it, the UK’s largest online property platform fits the bill here.
The company has a terrific balance sheet, a dominant market position, and has been growing at 13% over the last decade. Best of all, it takes almost no cash to run.
Of the £193m Rightmove generates in operating cash, only 1% is reinvested back into the business. The rest can be used to pay down debt, or is distributed to shareholders.
I think the stock could be a great buy for someone investing for the long term. I’d buy it today if I were starting out with decades ahead of me.
JD Wetherspoon
JD Wetherspoon (LSE:JDW) has a simple, but effective business model. It uses its size to make bulk purchases from suppliers and passes savings on to customers through low prices.
It’s a business model that has brought Costco enormous success. And I think it could do the same for JD Wetherspoon.
Right now, one of the biggest challenges facing the pub sector is inflation. But the company’s position in the market means it has a couple of ways to deal with this.
One option is to increase prices to offset the effect of inflation. Based on its current pricing, the company has scope to do this while still offering the best value in the indusry.
The company’s cash flow statement doesn’t look impressive at first sight. But a closer look reveals that’s because it’s been investing heavily in its pubs.
I expect those investments to pay off over time. The entire sector is still recovering from the Covid-19 pandemic, but I think there’s great long-term value here for shareholders.
