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FEATURE: Nick Louth picks 10 stocks for the longest investment horizon
October 28, 2010

The windswept, chilly Humber estuary isn't a place you would normally associate with one of the greatest stock market opportunities in British history. The river's muddy brown water stretches as far as the eye can see, with the horizon interrupted only by the warehouses and factories dotted for miles along its edge. It isn't pretty, by any standards.

Many years ago, the value in this place produced a stock market phenomenon, which smouldered away quietly for a generation. Those who recognised it made a fortune. This is the edge of Immingham, the largest of 21 ports that make up Associated British Ports (ABP). ABP was the single best choice that any investor in privatisations could have made, returning a total over £80 for each pound invested from sell-off on Valentine's Day 1983 until it was taken over in 2006.

That return was built on three factors: first, the ports that ABP controlled, effectively taking a 'toll' from Britain's expanding trade economy; second, following the dire industrial relations of the 1960s and 1970s better management of both employees, containerisation and mechanisation allowed costs to be cut; and third the huge benefit of extensive land holdings that came with the sale. In light of this, of course, the stock was heftily underpriced during its sell-off.

At the time, ABP was considered a piece of stock market flotsam, both dull and ugly, and a world away from the glamour of British Airways or the technological appeal (as it was then seen) of BT. Yet its returns left them both in the dust. Great stock market returns accrue to those who can identify such themes in the unlikeliest places.

When looking for similar gems, the first point is to recognise that investing is a long-term game, whether it be for pensions or profit, yet so many individuals – spurred by the plethora of tools and charts now widely available – seem to look for results day by day or week by week. In this hare and tortoise game, though, it is almost always the plodder with a sense of direction who crosses the line ahead of the zig-zag hare.

As with ABP, the stocks that have really triumphed over the longest terms may be something of a surprise. On a 20-year view it isn’t the most apparently exciting companies, nor the high-dividend utilities, nor the most defensive stocks that take the crown. Some companies manage to turn reliable growth into both share price appreciation and dividend growth, year in and year out. Some of the very best manage to be both income and growth stocks at the same time.

So just how good is good? The FTSE All-Share index has produced less than a five-fold return since 1990, dividends reinvested. Yet, the best individual stocks have done far better, with specialist engineer Rotork, for example, turning a £1 investment in 1990 into almost £80 now, and copper miner Antofagasta managing £123, once all dividends are reinvested.