One old City saying goes: “Never fall in love with your shares”. I agree. In the past, I have ruthlessly sold stakes in companies that let me down badly. However, much of our current family portfolio is invested in reliable FTSE 100 shares — including some that we may (hopefully) never sell.
Two of my FTSE 100 core holdings
Between June 2022 and this month, my wife and I built a new portfolio of quality stocks. Our ongoing goal is to ‘fire and forget’, by fiddling with this pot as little as possible.
Our investments include seven mega-cap US stocks, 15 FTSE 100 shares and five FTSE 250 holdings. These were all bought as long-term holdings, particularly those shares paying high dividends. For example, here are two stocks we aim to keep for a long time.
#1: Barclays
Barclays (LSE: BARC) shares have had a torrid time lately. At their 52-week high, they peaked at 198.86p on 8 March. By 20 March, they had collapsed to 128.12p. In addition, they are down 9% over one year and 14.7% over five years.
We added this cheap stock to our family portfolio for 154.5p a share in July 2022. As I write, it trades at 149.32p, down 3.4% from our entry price. This values the Blue Eagle bank at £23bn, making it a FTSE 100 middleweight.
What’s more, the shares still look crazily cheap to me today. Valued at just 4.3 times earnings, they offer a decent dividend yield of 5.2% a year. Even better, this cash yield is covered 4.5 times by earnings. To me, this payout looks safe as houses.
Then again, all is not well within the UK economy. Inflation is hitting household incomes, energy bills are brutal, and interest rates have risen relentlessly since December 2021. Thus, I fully expect Barclays to take a hit from higher bad debts and loan losses in the second half of this year.
#2: Unilever
Our second long-term holding is consumer goods giant Unilever (LSE: ULVR). I regret not having the cash to buy this FTSE 100 stock when it slumped to 3,797.5p on 13 October last year.
As I write, Unilever’s share price is 4,056.5p, valuing the Anglo-Dutch giant at £102bn and making it the FTSE 100’s fourth-largest firm. One reason why this group got so huge is that its well-known brands are used daily by about one in three households worldwide. Wow.
My wife added Unilever to our portfolio this month for 4,122.2p a share. We’re down 1.6% to date. But that’s a mere blip compared to the returns I hope to reap from this business over the coming decades.
Trading on a price-to-earnings ratio of 14.5, Unilever shares are nowhere near as cheap as Barclays. While they are up 2.9% over 12 months, they have declined by 7.6% over five years (excluding dividends).
Furthermore, this stock’s dividend yield of 3.7% a year is below the FTSE 100’s yearly cash yield of 4.1%. However, this cash payout is covered nearly 1.9 times by earnings, which is a solid margin of safety.
Finally, though Unilever’s revenue growth and margins have fallen in recent years, it has been raising prices in 2022-23. Hence, I see it as an unstoppable juggernaut, so that’s why it’s now a core holding!
