A Self Invested Personal Pension’s (SIPP) a powerful wealth-building tool for British investors. It’s a near-perfect vehicle for growing an investment portfolio without capital gains or dividend taxes impeding progress. And the added bonus of income tax relief only makes it even more powerful.
My SIPP’s focused on one core strategy – dividend growth. My goal is to have a portfolio generating chunky passive income in 30 years’ time when my retirement comes knocking. And luckily for me, the London Stock Exchange is filled with such opportunities. But the challenge is finding the best ones.
With that in mind, if I could only buy three stocks for this strategy, I’d pick Games Workshop (LSE:GAW), Howden Joinery (LSE:HWDN), and Safestore Holdings (LSE:SAFE).
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Strong stocks
All of these businesses are starkly different. Games Workshop specialises in plastic miniature manufacturing for hobbyists, Howden Joinery on home renovation, and Safestore on self-storage. That itself provides some welcome diversification. However, all three of these businesses share some common traits.
The most apparent is that they’ve all been winning investments over the last decade.
Investment
FTSE 100
Games Workshop
Howden Joinery
Safestore Holdings
Total Return
79%
3,190%
230%
472%
Annualised Return
6%
41.8%
12.7%
19.1%
There are a lot of different factors driving the tremendous success of these businesses. However, a recurring theme is the presence of competitive advantages:
Games Workshop created an addictive tabletop wargaming experience that cultivated enormous pricing power putting even companies like Apple to shame
Howden Joinery optimised its logistics distribution to ensure 24-hour delivery of any critical parts for tradesmen
Safestore expanded its network to ensure almost all of its customers have access to a storage facility within 30 minutes of driving
There are other factors that granted these businesses a competitive edge. But, most importantly, none are easily replicated, ensuring these firms will likely continue to thrive for years or even decades to come. And all the while, dividends continue to be hiked, with Safestore holding the crown for an uninterrupted 14 years!
Even winners can stumble
In my experience, winners tend to keep on winning. However, even the best companies in the world can eventually crumble if mismanaged, or a threat ends up being too much to bear. Despite their tremendous success so far, all three of these companies face risks that investors must consider.
Games Workshop’s pricing power may steadily be reaching its peak. After all, the cost of building an army to play Warhammer is now stretching into the hundreds of pounds, pushing more players into the arms of 3D printed alternatives.
Meanwhile, both Safestore and Howden Joinery are feeling the backlash of higher interest rates. While neither firm’s particularly overly leveraged, the same can’t be said for all of their customers. And we’ve already seen a slowdown in performance as projects and storage requirements are being postponed or cancelled.
Nevertheless, the long-term potential of all three of these enterprises continues to fill me with confidence. That’s why I’ve already added them to my SIPP.
The post If I could only buy 3 UK stocks in my SIPP, I’d pick these winners! appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
More reading
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Zaven Boyrazian has positions in Games Workshop Group Plc, Howden Joinery Group Plc, and Safestore Plc. The Motley Fool UK has recommended Apple, Games Workshop Group Plc, Howden Joinery Group Plc, and Safestore Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
