The best stocks to buy don’t always have names that sound like sci-fi villains. They build wealth for investors through long-term compounding.
These companies don’t often make headlines. But that’s exactly why they can be outstanding opportunities.
AI data centres
Whether it’s in the desert, the sea, or space, everyone is trying to build artificial intelligence (AI) data centres somewhere. Or at least, that’s what it seems.
Even Allbirds – a company that used to make shoes – has made a pivot to becoming an AI business. The plausibility of this is left as an exercise for the reader.
Right now, the stock market isn’t really interested in companies that aren’t trying to build data centres somewhere. But I think long-term investors should be.
In fact, it’s exactly because these businesses aren’t attracting attention that they’re worth paying attention to. A number are trading at attractive multiples right now.
Long-term wealth isn’t built on being one step ahead of the latest market fashitrendons. It’s built on buying companies that can quietly compound your capital while you sleep.
Being irreplaceable
Boring businesses are predictable – this is exactly what makes them boring. But that doesn’t have to be a bad thing for investors.
When a company provides a service or product that its clients can’t do without, it becomes valuable. Especially if it doesn’t account for much of the customer’s overall operating costs.
Such companies are incredibly hard to compete with. They have huge advantages based on scale, efficiency, and existing customer relationships that are difficult to disrupt.
None of this is exciting. And that means the stock market can get bored with them, especially when there are more exciting things going on – like right now.
Sooner or later though, investors tend to appreciate the value of these stocks. So the time to consider buying is when they’re unusually cheap.
A FTSE 100 stock I’m holding steady on
Bunzl (LSE:BNZL) is a perfect example of this from the FTSE 100 — and my own portfolio. It distributes things like cleaning products, packaging, and safety equipment.
None of this is exciting, but that’s the point for two reasons. One is that the firm solves a real issue for its customers and adds genuine value.
Sourcing hundreds of everyday items can be mundane and time-consuming. Bunzl’s scale means businesses can find what they need under one roof.
Swings between high inflation and product deflation have been challenging recently. And they remain an ongoing challenge for the company.
Selling things like rubber gloves and food labels also isn’t the kind of thing AI investors are interested in. At least, not most of the time.
What’s the latest news?
The latest news is that activist investor Elliott Management has bought a 5% stake in the business. And the firm is pushing for an increase in share buybacks.
I have mixed views on this. I think Bunzl has a great record of rewarding patient investors, but a push for share buybacks seems like the opposite of this.
I’m ignoring the noise and holding for the long haul. But it might be a good time to consider adding to my investment.
Should you invest £5,000 in Bunzl Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bunzl Plc made the list?
Stephen Wright owns shares in Bunzl.
