3 Shares For Your ISA From Britain’s Warren Buffett: Unilever plc, Diageo plc And Reed Elsevier plc

Unilever plc, (LON:ULVR), Diageo plc (LON:DGE) and Reed Elsevier plc (LON:REL) are three top-notch companies to consider for your ISA.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK fund manager Nick Train is a self-confessed “great devotee” of Warren Buffett. Train has built an enviable track record of first-rate returns from buying quality companies — “durable, cash-generative businesses” — and holding them for the long term.

Train reckons such companies are “undervalued by most investors for most of the time”. He told holders of his CF Lindsell Train UK Equity Fund that “in early 2015, perhaps the most helpful thing I can say is that I continue to add to most existing holdings enthusiastically”.

The top three companies in Train’s portfolio are Unilever (LSE: ULVR) (NYSE: UL.US), Diageo (LSE: DGE) (NYSE: DEO.US) and Reed Elsevier (LSE: REL).

Unilever

Unilever is the largest holding in Train’s fund with a weighting of 9.3%. The consumer goods colossus owns over 400 brands, including such iconic names as Marmite, Vaseline and Domestos. Two billion people worldwide use Unilever brands on any given day. Rising populations and increasing wealth in developing economies should help drive the company’s growth for decades to come.

Unilever’s shares are currently trading on 21x forecast earnings, with a dividend yield of 3.2%. While many analysts and investors consider such an earnings rating pricey, Train points out that periodic corporate transactions in the sector at higher multiples “demonstrate how highly business people value such assets”.

Train said in January: “For us, companies of this rarity and excellence wouldn’t be truly over-valued until they traded at 30x earnings“.

Diageo

Diageo shares many qualities with Unilever, and is Train’s second-largest holding with a weighting of 8.3%. The global drinks giant owns an abundance of top brands, including world number ones Johnnie Walker, Smirnoff, Bailey’s and Guinness. Also like Unilever, rising incomes in developing markets are a driver for long-term growth.

Diageo’s shares are currently trading on 21x forecast earnings, with a dividend yield of 2.8% — again, similar to Unilever.

The Telegraph last year asked Train to name the one share he would buy for his children or grandchildren. Train named Diageo, commenting:

“Sometimes we complicate the investment challenge. If you can find a company whose products are likely still to be consumed in 25 years’ time, and if the company can succeed in at least maintaining or preferably increasing the price of its products above inflation, then you have the basis for a wonderful long-term holding”.

Reed Elsevier

Train has described information provider and publisher Reed Elsevier — his third-largest holding with a weighting of 7.9% — as “a ‘toll booth’ for professionals in the scientific, legal, healthcare and insurance industries” and “a collection of near monopolies”.

Reed Elsevier’s shares are currently trading on 18x forecast earnings, with a dividend yield of 2.5%.

While some analysts argue that Reed Elsevier’s valuation is too rich, Train believes the business merits a “very high” rating, saying: “we look to 25x much higher earnings (boosted by ongoing share buybacks, or smart acquisitions) in 3-5 years time”.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »