10 Stocks You Will Want to Own Forever
These Investments Are Tailor-Made for Long-Term Investor Wealth
Warren Buffett turned 87 on August 30, 2017. And there are no signs that he plans to slow down yet. Given his net worth of $80.2 billion, that can buy a whole lot of umbrella-garnished piña coladas on the beach. Even the beach itself. Or an archipelago of tropical islands. So you have to wonder why Buffett is still waist deep in the investment game.
To get the answer, look back no further than 2015, when Buffett paid a whopping $37.2 billion for Precision Castparts, an aviation supply company. It was the biggest deal of his career, and for those who thought Buffett might be plotting a last quick score, guess again. He said then that Berkshire Hathaway (ticker: BRK.A, BRK.B) would be sticking with Precision Castparts for decades. (For the record: In two decades, Buffett will close in on 110.)
His pronouncement called to mind one of his most noted maxims, written in a 1988 letter to his shareholders: “Our ideal holding period is forever.” And if one is to take that statement seriously, the so follows the question: “Which stocks are worth holding forever?”
As any investment maven will tell you, there’s no definitive answer to that question: Stocks worth holding for the long, long, long run can span diverse sectors. Some stalwarts have gained fame for their re-investible dividends; other newcomers seem to rise out of the high-tech froth to stake an apparent position of power in a digital age. And some investments, while you could hold them forever, you can’t hold, ever—as in digital-only cryptocurrencies such as bitcoin.
Whether scanning the Oracle of Omaha’s portfolio, or simply looking at the stocks that have made investors wealthy for generations, you can get a good grasp of how to make your holdings a testament to the wisdom of a buy-and-hold investment philosophy. Here we present 10 stocks that you can own for generations, even as they generate profits to make impatient market timers jealous.
Given that Buffett has sold 30 percent of his stake over the last six months, you might think IBM is not the best long-term investment. Then, you take a look at Big Blue’s performance and note that since June 2012, it’s actually down 20 percent, trading at about $155 per share. But there are plenty of reasons why you should consider IBM for the long haul. First, its price-to-earnings ration is a very healthy 12.8; compare that to Facebook (FB), which stands at a more risky 38.8. Second, a company with 414,000 employees—more than the population of Minneapolis—isn’t exactly going anywhere.
And finally, the high-tech world is moving in a big way towards artificial intelligence, and it’s there that IBM has a significant edge. It’s all thanks to IBM Watson, which is making significant inroads in the banking industry, for example. Still if you’re a beleaguered IBM shareholder, you may want to recite Alexander Graham Bell’s the famous line, “Mr. Watson, come here, I want to see you.”
Johnson & Johnson (JNJ)
This New Jersey-based health care and pharmaceutical giant is known in financial parlance as a “dividend aristocrat.” For 55 years now—ever since John F. Kennedy was in the White House—the company has increased dividends every single year, with the company well along that path for 2017 as well. On June 23, it paid out a dividend of 84 cents per share. Before you call that small change, think big: Over a long period, reinvested dividends can accumulate a large number of shares—which can be worth a substantial amount if those shares appreciate.
And appreciate they have: The stock has doubled over the last five years with an uninterrupted run up the ladder to a current share price of $134.
Dover Corp. (DOV)
While J&J can claim the Band-Aid as part of its high-profile consumer product portfolio, some dividend kingpins have all the public charisma of a toothpick. Its Chicago-based business concentrates on fluid management, industrial products and manufacturing support systems. That’s not exactly the stuff of riveting dinner party banter. But as dividends go, Dover even outdoes J&J with a yearly winning streak going on 61 out of 62 years. DOV’s 2017 dividend stands at 44 cents per share, more than twice the 16 cents per share offered 10 years ago.
Meanwhile, DOV stock boasts fluid management of a different sort: It’s up 20 percent over the last 12 months and trades at $79 per share.
Let’s face it: The days of Apple as a high-tech innovator of sexy new products are long gone. And while the late Steve Jobs wouldn’t likely be thrilled with that, he’d also embrace how current CEO Tim Cook has made Apple the consumer electronics equivalent of Ft. Knox. Today, Apple has a market capitalization of $748.4 billion, making it the most valuable publicly traded company in the world. Some are whispering it may soon hit the trillion-dollar mark, and its stock has been setting record high after record high since February.
And with exploding smartphone markets in India and China to exploit, at least its mid-term future looks very bright. Investors can only hope that once those revenue pools begin to dry up, Apple will have invented a smartdrone or a driverless car that picks up your dry cleaning and Chinese takeout.
Gone are the days when a nerdy Bill Gates lookalike squared off against a cool Mac dude in Apple’s “PC versus Mac” ads. Suddenly Microsoft is cool again, a trajectory that began when the bungling Steve Ballmer—who earned the dubious distinction of “worst CEO” from Forbes—left in 2013. Today it owns LinkedIn, Skype and the popular Xbox video game platform, and its stock has enjoyed a resurgence worthy of its 1990s glory days. Since Ballmer’s retirement, the stock has surged 87 percent and now trades at $90 per share.
Between 2012 and 2014, more than a few stories used the words “McDonald’s” and “mojo” in the headline, accompanied by phrases such as “fallen arches” and “not lovin’ it.” At the center of the consumer disgruntlement and investor disbelief was CEO Don Thompson, whose attempts to create more choices turned the Mickey D’s menu into a mishmash of choices worthy of a truck stop buffet bar on a Tilt-A-Whirl. Since his departure in late 2013, the stock is up more than 60 percent (it trades at $155). The burger behemoth also has a market cap of $125.6 billion: By any account, that’s a Super Size.
Wells Fargo (WCF)
When news hit of the massive cross-selling scandal where employees created about two million fake accounts, Wells Fargo hit bottom, and hard. The public relations disaster and financial debacle led to the ouster of CEO John Stumpf, who looked like a scared, clueless stuffed bear on televised Senate hearings. Wells isn’t out of the hot water yet; just weeks ago, Sen. Elizabeth Warren (D-Mass.) called on the government to oust a dozen Wells board members who served while the fake accounts were created.
Meanwhile, probes into the scandal continue. Yet though it’s taken a massive beating, WCF remains one of the world’s richest banks. If it clears its current woes, Wells Fargo could prove to be an investment bargain with staying power and strong growth potential.
The company that started as a humble online bookseller is now writing the book for high-tech relevancy and creativity. Investment observers are hailing the $13.7 billion purchase of Whole Foods last month, which could really pay off if Amazon can reform the struggling chain’s image of an overpriced outlet many refer to pejoratively as “Whole Paycheck,” as well as its inefficient warehouse system. Meanwhile, Amazon is charging ahead on the digital personal assistant front. The ascent of Alexa to benchmark status is shocking considering that just a few years back, Apple had the turf to itself with Siri.
Here’s how Amazon’s e-commerce leadership translates to stunning shareholder value: a stock price that recently cracked the thousand-dollar mark. It’s now at $988, and up 40 percent over the last year alone, with not a single pronounced dip along the way.
Alphabet (GOOG, GOOGL)
You saw this one coming, didn’t you—and why not? Aside from the fact that Alphabet pretty much controls the search entire engine universe, online video (via YouTube) and the Android phone system, it’s also sitting on a ton of cash. It routinely trades places with Apple for the laurel of market cap king; at present, the company is worth $639.5 billion. Its Class A share price of $959 closely rivals Amazon’s, and over the last few years, investors have realized giddy returns of 230 percent. One criticism of Alphabet has been its ill-fated “moonshots” (such as the Nest learning thermostat) but at least one of those, the driverless car, could reap huge rewards as investors and even the driving public warms up to the idea.
Berkshire Hathaway (BRK.B)
And as long as we’re talking stocks that Buffett will own forever, we might as well concentrate on Buffett’s company itself. At $254,600, the Class A stock (BRK.A) is so stratospheric in price that most Americans would have to work three to five years to buy a share, assuming they not spend a single dime otherwise. Thank the gods of Wall Street, then for Berkshire Hathaway Class B, which trades at a much, much, much more modest at $170 per share. Betting on Berkshire is Betting on Buffett—a fairly comforting thought—and a stable of companies such as GEICO, Dairy Queen, Benjamin Moore … and all the way down to the Acme Brick Company.
Assuming you bought into BRK.B five years ago, you would’ve doubled your money, which is even better than a year’s free supply of Blizzards and Dilly Bars, or a decade’s worth of bricks.