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Last year my Stocks and Stocks ISA dropped about 25% or so. That was his worst performance in many years. The reason is that my ISA is largely growth oriented. And the market turned aggressive against growth stocks last year.
Despite this, there are some investments in my ISA that I still would not sell. That’s because I think the growth potential is too attractive. As such, I consider these stocks untouchable (in a good way) in my portfolio, as it stands.
Built for the long haul
The objective of Scottish Mortgage Investment Fund (LSE: SMT) is to identify the outliers that drive the most stock market returns. This investment philosophy is influenced by the work of Hendrik Bessembinder, a finance professor who published a paper showing that almost all of the stock market returns came from just 4% of publicly traded companies.
The trust has been a long-time investor in Amazon Y tesla. And while these stocks have had a period of humility of late, both have rallied substantially over the long term. Tesla shares, for example, are up nearly 400% in five years, even after their recent 65% plunge.
I think managers will once again be successful in identifying the next big winners, though of course that’s not guaranteed.
Scottish Mortgage shares are down 35% in the last 12 months. Yet over 10 years, the stock is up about 379%.
As a long-term investor, the most important thing for me is where the stock will be in a few years. And I am optimistic that it will be much higher than today. So the shares stay in my ISA.
Premium quality
The second stock that is untouchable in my ISA today is Diageo (LSE: DGE). The beverage giant owns more than 200 labels, including some of the world’s best-known alcohol brands. It is sold in more than 180 countries.
Top Diageo Brands
| BRAND | ORIGINS |
| johnnie walker | Scotland, 1820 |
| guinness | Ireland, 1759 |
| Gordon’s | England, 1769 |
| smirnoff | Russia, 1860 |
| baileys | Ireland, 1974 |
This perfectly captures the almost timeless quality of its leading brands. It also has a degree of pricing power, especially with its premium brands.
One risk with Diageo shares today is its valuation. With a price-earnings (P/E) ratio of 23, the stock has a higher valuation relative to other FTSE 100 Share.
However, I think the longer my time horizon is with this action, the more sense it will make.
Driving returns
The third untouchable stock in my portfolio today has some similarities to Diageo in terms of enduring brand power. And that’s the iconic supercar maker. ferrari (NYSE: RACE).
The Italian automaker is 75 years old, but it’s still growing like a start-up. It remains one of the world’s leading luxury brands.
Its clients are the ultra-rich, giving the company almost unlimited pricing power. In fact, the more the company raises prices, the more exclusivity it seems to give to the brand. Needless to say, it’s a very powerful competitive advantage.
I think this advantage could even protect the company’s earnings during a possible global recession, although that is far from certain.
I started my position in Ferrari stock last year, and so far it’s up 10%. But he’s already untouchable, as far as I’m concerned.
