Long-term investing involves owning shares for several years. So when it comes to buying the best FTSE 100 shares, I try to focus on the big trends.
Multi-year trends and strategies allow me to ignore short-term price swings. And by looking at the big picture, it helps me to find the crème de la crème of stocks.
A top pick
For instance, security and defence is a major trend right now. As threats increase around the world, countries are investing more into military defence and cybersecurity. UK investment has been rising for several years, but the US is the biggest spender by far.
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That’s why I’d buy BAE Systems (LSE:BA.) for my new Stocks and Shares ISA. It derives most of its sales from US, UK and Saudi Arabia.
Why BAE?
BAE meets many of my key requirements for high-quality shares. For instance, it has a consistent track record of sales and profit. Over the past six years, net profits have doubled. And looking forward, it offers high levels of sales visibility due to its £70bn contract backlog.
I like that it’s a quality-growth stock but still pays dividends. With a 2.4% dividend yield, it’s not among the largest in the FTSE 100, but it has a long history of growing payments over time.
With major elections coming up around the world this year, there’s some risk of a change in policy for defence spending. That’s certainly something I’d keep an eye on.
Artificial intelligence is here
Another major trend that could last years, if not decades, is artificial intelligence (AI). Mainstream generative AI’s still relatively new. But it has a long runway ahead. My top FTSE 100 pick in this space is RELX (LSE:REL).
It might not be a household name, but it offers popular tools and analytics to business customers around the world. I like that it’s diversified across several business areas.
For instance, it provides access to the world’s biggest scientific journals. But it also hosts over 138bn legal documents that helps lawyers work efficiently.
Repeat business
They’re often subscription businesses with repeat earnings. This enables it to operate with a near-30% return on capital employed and profit margin.
Bear in mind that disruptive new technologies can be a double-edged sword. There are execution risks when it comes to properly incorporating AI across the business, so that’s an area I’d look out for.
That said, if RELX can successfully combine AI technologies with its superb data sets, I reckon it could be a big driver of growth in the years ahead.
If I had £20,000 of savings to allocate to a new Stocks and Shares ISA this month, I’d look for a selection of quality shares like these that could benefit from major trends in the years ahead.
I’d choose between five and 10 shares, including BAE and RELX. Ideally, they’d be across a range of industries. That way I’d avoid putting all my eggs in one basket.
