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As an investor with a long-term timeframe, I always try and weigh up how durable I think a business will be when hunting for shares to buy for my portfolio. Although many members of the FTSE 100 index of leading companies have long histories, that does not necessarily mean they will be around for a long time in the future.
Of course, none of us knows how long a given company might last. Even the best company can run into unexpected challenges. That is one reason it is important for an investor to keep their portfolio diversified.
Still, here are 10 FTSE 100 shares I think have long-term business potential.
Consumer industries
People need to wash their face and shampoo their hair – and they need to buy products for doing so.
So I reckon consumer goods giants Unilever and Reckitt (LSE: RKT) could be around for a long time yet. Similarly, while shops come and go, Tesco and J Sainsbury are longstanding supermarkets I think could be gracing our high streets for decades to come.
Utilities and energy
A similar logic applies to utilities. National Grid and United Utilities could well be distributing energy for decades, I reckon.
Meanwhile, energy giants BP and Shell could keep pumping oil and gas for many years to come. Also, depending on whether fossil fuels fall further out of fashion or not (some of BP’s woes in recent years have sprung from its mixed signals on this score), they may succeed in reshaping their energy portfolios.
Industrials
It has fallen in and out of the index over the years, but Rolls-Royce is one of only three current FTSE 100 members that were in the original FT 30 index back in 1935, a forerunner of the FTSE 100 (although FT 30 still continues in its own light and was relaunched by the Financial Times this year).
While Rolls makes the aircraft engines, fellow FTSE 100 member International Consolidated Airlines Group uses them in its planes flying in the colours of Aer Lingus, British Airways, and other airlines.
I reckon civil aviation demand may ebb and flow over time but will remain substantial over the long term.
Zooming in on specific investment ideas
But just because a company looks set to hang around for a while does not necessarily make it a great investment idea.
The Rolls-Royce share price has gone up 1,144% in five years. But in the same period, Reckitt has fallen 28%.
One key question I consider when hunting for shares to buy is whether a company’s end market is likely to be resilient. I think Reckitt’s is.
I also consider what competitive advantages it has. Like rival Unilever, Reckitt benefits from strong brands, unique formulations, and an extensive international sales distribution network.
While Unilever has made some bad acquisitions over the years, Reckitt’s 2017 purchase of nutrition firm Mead Johnson was an absolute stinker. It helps explain Reckitt’s share price fall in recent years and I see a risk that ongoing product safety litigation could eat into future profits too.
Still, I see Reckitt as attractively priced for a company with a proven business model, resilient customer demand, and strong competitive advantages.
I think the FTSE 100 share is one for long-term investors to consider.
