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Buying stocks you can hold for decades is the key to building wealth and reaching your financial goals.
Trouble is, they're harder than ever to find. But our experts have uncovered five long-term stocks you can set and forget.
No matter what happens in the economy and financial markets over the next decade or three, these five stocks will stand the test of time...
When you study the returns earned by hedge funds over the last decade, it's clear that the highest earners are those who buy great companies at reasonable prices and hang on for a long time.
It does not seem to matter what type of stocks they hold. The long-term buy-and-hold value folks do very well. So do the long-term owners of technology stocks.
Those who understand biotech and buy and hold for a long time also seem to do very well for their investors.
And those with the highest turnover rates have the lowest long-term performance.
There is definitely some survivorship bias in the data. Of the 20 funds with the highest turnover rates, just three have survived 10 years.
Two of those have badly underperformed the indexes over the last decade.
The one that kept up with the indexes seems to sell stocks that do not work out very quickly. The winners the fund keeps as they still have stock purchased in 2001 in the portfolio.
Long-term investing works. And the largest portion of your investment portfolio should consist of stocks you plan to own for a decade or longer.
How long is long term? We suggest starting with a decade because that gives us two to three full market cycles with bullish and bearish breakouts.
If the business is still performing well, why would you ever sell the stock and pay capital gains tax?
When looking for stocks to own for a very long time, we want to make sure we are buying good businesses that can stand the test of time. The companies need to be financially solid so that they can withstand the inevitable storms.
They need to have tailwinds from some of the powerful trends occurring in the world.
We do not want our stocks to be flash in the pans that are hot today but will be gone tomorrow. When picking long-term stocks, a key question is to consider if this business will still be needed 10 or 20 years down the road.
Or could they be disrupted to the point of extinction at some point?
Here are five best stocks to buy that pass all of our tests to be considered for a long-term portfolio.
The Best Long-Term Stock to Buy in Real Estate
Our first long-term stock to buy is Brookfield Asset Management Inc. (NYSE: BAM).
Referred to as the "toll collector of the 21st century" and the "backbone of the global economy" by Bruce Flatt, Brookfield owns all the things that make the world work.
Brookfield owns roads, airports, marine facilities, and railroads all around the world.
The company has 6.6 million customers for the utilities it owns in the United Kingdom, North America, and Asia.
Additionally, it is one of the world's largest investors in renewable power. Its facilities around the world have over 19,000 megawatts of generating capacity in wind, solar, and hydrothermal assets.
Brookfield owns substantial holdings of traditional real estate asset classes like office, multifamily, retail, and hotels worldwide. Although the business has struggled somewhat with the pandemic, Brookfield's deep pockets have shielded it from any severe problems.
The company is also working to become a leader in technology-driven real estate markets. Brookfield subsidiary Evoque Data Center Solutions is one of the world's 20 largest data center firms. That company owns and operates 31 data centers across four continents, 11 countries, and 25 markets.
Brookfield also has a successful private equity operation that has $9 billion under management.
In 2019, Brookfield purchased Oaktree Management - the giant credit investment firm run by legendary investors Howard Marks. Given Oaktree's success as distressed debt investors, the acquisition gives Brookfield one more way to benefit no matter where we are in the economic cycle.
Last but not least, Brookfield charges tolls and rents on all its assets and reinvests the cash in new projects that can be picked up for bargain prices.
The company's fantastic business model should continue to deliver high returns for shareholders for decades.
The Best Long-Term Stock to Buy in Waste Management
As long as civilized humanity exists, we will create trash. That's what has made Waste Management Inc. (NYSE: WM) a great investment since its first garbage collection in 1987... And will make the stock a great investment for the next 33 years as well.
Most of us don't spend a lot of time thinking about what happens to all the trash we generate every day. We put the can out by the curb, and all the garbage disappears, never to be seen again.
For a significant number of people in the United States, it is Waste Management picking up the cans, dumping them into the trucks, and hauling it away to the landfill or incinerator.
It turns out that trash is a fantastic business. Waste Management signs long-term contracts with municipalities and companies across the United States, so revenue is reliable and flows inconsistently.
About 75% of Waste Management's revenue is from annuity-like streams that are under long-term contracts.
The company has huge profit margins, and the return on equity is consistently above 20%.
Waste Management generates billions of dollars of cash flow each year. And a large portion of the cash is used to buy back stock and pay dividends.
Waste Management currently owns about 270 of the United States' approximately 1,500 landfills. Given that no one wants a dump developed anywhere near their house, getting approval is difficult at best.
This gives Waste Management pricing power. It can charge competitors that don't own landfills pretty much anything it wants because they have no other place to dump the trash they have collected.
Trash will be with us always. So will Waste Management, and the stock should deliver outstanding long-term returns.
The Best Supply Chain Logistics Long-Term Stock to Buy
Most of us take the global supply chain for granted. It could be one of the things we think about even less than we do what happens to all the garbage we generate.
During the coronavirus's early days, we found just how important the supply chain is for our daily lives.
We could not find toilet paper anywhere. Meat and chicken were in low supply. Some pharmacies were running dangerously low.
You couldn't find a Diet Dr. Pepper anywhere.
Companies now know that what used to be the norm is not going to be enough going forward. If the supply chain breaks, it leads to chaos.
Companies that make the supply chain function at a higher level will grow at incredible rates and reward shareholders with high profits.
That's why we expect The Descartes Systems Group Inc. (NASDAQ: DSGX) to be an industry leader in the logistic industry for a very long time...
Descartes uses the cloud, data content, and device management to help companies manage their supply chains.
Descartes has developed the Descartes Global Logistics Network. This network manages the real-time flow of commercial, logistics, customs, and product information. It connects hundreds of thousands of logistics and transportation, manufacturing, distribution, retail, government, and e-commerce businesses in over 160 countries.
Shippers can talk to retailers, who can talk to factories. Factories can speak to government agencies and customs facilities.
Descartes charges clients to send and receive messages, data, and documents on the network. Customers typically contract for a monthly minimum over several years, so it works a lot like a software as a service sale with recurring revenue. The platform also gives Descartes a chance to sell other software services to network members.
It is the largest logistic network in the world, with more than 200,000 shippers, manufacturers, suppliers, retailers, and government agencies using the platform. The Descartes Global Network handles about 19 billion logistics-related messages each year.
In the near term, Descartes will see some increased network usage from the logistical issues surrounding vaccine distribution. There are billions of doses that need to get from the production facility to local pharmacies and into arms.
In the long run, we expect them to be the dominant player in logistics software and networks. The stock has had a good run over the last year, and as the economy becomes more globalized and e-commerce continues to rise, Descartes has a long and profitable road ahead for its business and its investors.
The Best Long-Term Stock to Buy in Water Desalination
Water could eventually be the most important commodity in the world at some point in the not-so-distant future.
It is easy to take water for granted. Turn on the tap, and we get water. Seventy percent of our planet's surface is covered in water, so why should we have to ever worry about water?
Most of us do not realize that only 3% or so of our planet's water is freshwater. A significant portion of that is glacial ice.
That leaves about 1% of Earth's water for all of us to use.
With the ever-growing population, that is not working out so well.
According to the World Wildlife Federation, 1.1 billion people worldwide lack access to water. And 2.7 billion find water scarce for at least one month of the year.
This is not just one of those emerging markets problems, either. It is estimated that as many as 1.4 million Americans lack adequate water service. Last fall, the U.S. Bureau of Reclamation said the two largest manmade reservoirs in the United States could face critical shortages as soon as 2025.
One of the potential answers to solve the worlds developing water problem is desalination.
Desalination is a process that turns undrinkable saltwater into freshwater.
That's where the Consolidated Water Co. Ltd. (NASDAQ: CWCO) comes in. This company has been using desalination to provide fresh water in the Caribbean for a long time. Consolidated Water has 12 desalination plants in the region that produce 25.6 million gallons of fresh water per day.
Today, the firm is planning to enter the U.S. market for desalination plants. Initially, it plans to focus on areas like California and Arizona, where water shortages are occurring with alarming frequency.
Consolidated already has a U.S. presence as it currently owns and operates 31 water and wastewater treatment facilities in the southwestern portion of the United States. It also has a California-based water infrastructure business and a Florida company that provides wastewater management services to municipalities.
The long-term growth part of the story is going to be desalination. Water shortages will continue to be an issue for the world, and desalination is a huge part of solving the problem.
Consolidated Water Company is going to be a leader in desalination. That should lead to substantial profits for its long-term shareholders.
The No. 1 Best Long-Term Stock to Buy Now
PacWest Bancorp. (NASDAQ: PACW) should also be in your long-term portfolio.
PacWest is a banker to the world of venture capital and private equity firms. The business develops relationships with startups to provide banking services to both the companies and employees who work there.
Essentially, the bank allows you to have a stake in startup companies without the risk of owning startups. The loans are all collateralized, so even if the startup it funds should fail, PacWest gets its money back.
PacWest also provides loans to many venture capital and private equity funds. PacWest makes a loan to the funds to close deals they make. This is an incredibly profitable business line as there has never been a default on a money call bridge loan. So, it is also incredibly safe.
When lending to venture capital or private equity portfolio companies, PacWest actually receives warrants on the company's shares. If they ever go public or sell their company, PacWest can cash in the warrants for big gains that can help move the stock price higher.
PacWest also works to develop relationships with executives and employees at venture and private equity bank companies to handle their banking needs.
We do not need to guess which tech startup will hit it big and which will fail. Instead, we can make a steady stream of cash meeting their banking needs.
When one of the companies PacWest helped finance has spectacular success, the bank cashes in the warrants. That will drive profits and the stock price a lot higher for the foreseeable future.
The Complete List of Best (and Worst) Stocks for 2021
Wall Street insider Shah Gilani says 2021 could be a gold mine for Americans.
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