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When it comes to long-term investing in a Stocks and Shares ISA, I’ve long admired the idea of the barbell strategy that invests in two extremes.
On one end, an investor can pile into defensive companies with stable cash flows and dividends that tick along quietly in the background. On the other, high-growth shares are added — volatile, risky, but capable of turbocharging an ISA if they deliver.
This split is what makes the approach so appealing. In theory, the defensive half of the portfolio provides ballast when markets wobble, while the growth half gives a chance of outsize returns. The trick, of course, is finding the right mix.
For investors keen on implementing this strategy, here is one stock from each camp to consider.
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Unilever: the defensive anchor
Few shares embody reliability quite like Unilever (LSE: ULVR). The consumer goods giant has been paying dividends for over 20 years, and with a 3.3% yield, it’s a steady payer for those seeking income.
More importantly, the nature of its products — everyday items like food, soaps, and cleaning products — means demand doesn’t fall off a cliff during recessions. That makes it a stock many investors would consider for the defensive side of an ISA.
Now, it’s true the share price hasn’t exactly been exciting. Over the past five years, it’s climbed just 80.7%. Compare that with racier tech names and it looks sluggish. But the business is highly profitable, posting a return on equity (ROE) of 28.8%, which speaks to efficient use of capital.
Risks are still present. Inflation has pressured consumers to trade down to cheaper alternatives, and this has dented margins. In fact, debt now exceeds equity, which doesn’t sit comfortably for a company often thought of as ultra-safe.
That said, with its global footprint and diverse product portfolio, I think Unilever remains a good share to consider for stability within an ISA.
Babcock International: the aggressive play
On the growth side, Babcock‘s (LSE: BAB) been one of the FTSE 250’s brightest stories. The shares are up 355% in the last five years, reflecting both strong execution and market enthusiasm for defence contractors.
The ROE of 49.75% is eye-catching, while revenue has climbed 10% year on year. Earnings have also jumped by nearly 50% — not something seen every day in a sector often dominated by slow and steady growth.
The UK recently secured a £13.5bn defence deal with Norway, which should help boost the sector. And with geopolitical uncertainty not disappearing any time soon, demand for such services looks likely to remain strong. Overall, Babcock’s the kind of high-growth share an investor might consider for the other end of the barbell.
Of course, there are pitfalls. Defence companies live and die by government contracts, so political shifts could turn sentiment very quickly. Large-scale projects also carry execution risk — delays or cost overruns could take a bite out of profits.
A balancing act
A Stocks and Shares ISA doesn’t need to be tilted entirely towards safety, nor entirely towards growth. The barbell approach blends both, allowing reliable names like Unilever to offset the wilder swings of companies such as Babcock.
For me, it’s an elegant way to invest with balance. While the risks shouldn’t be ignored, this combination of ballast and ambition is a framework worth considering for any long-term ISA strategy.
