One of the main reasons that it’s hard to be a successful investor is that there are so many temptations along the way that can distract you from your long-term investment plan. Lately, the story du jour in the financial press has been GameStop and other stocks that have been targeted by speculative traders on Reddit and other message boards.
When stocks like these double overnight, it understandably makes long-term investors wonder why they’re “only” earning 8% or 10% per year on average. What the press often overlooks is that while stocks like this may skyrocket momentarily, many investors end up losing significant amounts. GameStop, for example, hit a high of $483 on Jan. 28, 2021, but just over one week later, on Feb. 8, the stock was trading at $60.
While stocks like this may be fun to trade, they can be ruinous to your long-term investment plan. Although the stock market, in general, will always be volatile, it may surprise you to know that the S&P 500 Index has never lost money over any 20-year rolling period. If you can pick quality stocks and hold them over the long run, your chances for success improve exponentially. As the old market axiom goes, “it’s time in the market, not timing” that creates long-term success.
Before making any moves, remember that there are no guarantees in the stock market, so be sure to consult with a licensed financial advisor before you pick up shares in any of these outstanding companies. Check out the well-established companies that are leaders in their industries and have a great chance for long-term success.
Last updated: March 31, 2021
Procter & Gamble (PG)
Procter & Gamble might not be the most exciting name on this list, but it’s arguably the most risk-free choice you can make. Procter & Gamble offers a wide range of daily necessities and has a built-in consumer base in the billions. The company’s portfolio is a veritable “who’s who” of personal health, home and fabric care products, from Tide, Downy and Bounce to Crest, Oral-B, Safeguard, Olay, Nyquil and Head & Shoulders, among many, many others.
Thanks to the global success of these products, Procter & Gamble is a cash flow machine, passing its profits through to shareholders in the form of an annual dividend for a remarkable 130 years in a row, as of 2020. The company has also raised that dividend for an astonishing 64 years in a row, boosting its payout by 6% in 2020. Even in the midst of global upheaval, consumers tend to stick with their daily home and personal care products, as evidenced by P&G’s successful 2020, in which the company posted earnings gains of 13% even through the coronavirus pandemic.
Alphabet, still known to most investors as Google, is the undisputed king of internet search, with a nearly 87% search market share. Yet, Alphabet has numerous revenue streams that seem poised to benefit from economic and consumer trends over the coming decade.
Alphabet’s YouTube division is growing tremendously as streaming usage surges, with the company reporting 120 million people are now watching YouTube on their screens. Google has numerous other divisions that could prove to be tremendous growth areas over the next 10 years, from autonomous vehicles to cloud computing and more. The bottom line is that Google has a massive, sustainable core business in search and online advertising supplemented by a diversified portfolio of growth properties that could easily keep the company on its winning ways for a decade or more.
If you’re looking for a stock that can hold up and perform for 10 years, you’ll want to focus on companies that generate intense customer loyalty. Costco is the epitome of that, generating a rabid following that most businesses can only dream of.
In 2020, the membership club posted a renewal rate in the U.S. and Canada of 91%. For a company like Costco, this renewal rate is critical, as it comprises a significant portion of its profit. For example, for the 52 weeks ending Aug. 30, 2020, Costco generated net profits of just over $4 billion, and about $3.5 billion of that amount came from membership fees. The bottom line is that the low prices Costco offers its members, along with its “treasure hunt” shopping experience and excellent customer service, will likely keep membership renewals — and thus, profits — high for the next decade.
Consumer spending accounts for about 70% of the American economy. A company like Disney is perfectly positioned in this type of economic environment, as its core businesses are all consumer-facing: film and television, cruise lines and theme parks. The company’s launch of its Disney+ streaming network has been an unmitigated success, topping 100 million subscribers just 16 months after launching. As the economy recovers, Disney seems likely to fire on all cylinders, as guests return to sea, movie theaters and theme parks. With a rapidly growing streaming business to boot, Disney seems to have all of its bases covered for a long and profitable run over the next decade.
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Republic Services (RSG)
Republic Services is another name that may fly under the radar of the average investor but that offers consistent growth potential over the next decade. The company is one of the industry leaders in recycling and waste disposal, services for which there will always be a need.
In addition to a constant and ongoing need for trash removal, the world is moving toward environmentally friendly solutions for waste disposal. Republic Services is dedicated to sustainability, aiming to reduce greenhouse gas emissions 35% by 2030 and to increase biogas sent to regenerative landfills by 50% by 2030. While Republic Services may not be an exciting stock, it operates a dependable and relatively predictable business.
Microsoft has dominated computer operating systems for decades, and that business still remains profitable for the company. However, the Bill Gates behemoth has been moving in exciting new directions in recent years, and it has smartly positioned itself for a decade or more of growth moving forward.
Currently, Microsoft’s fast-growing revenue engine lies in its cloud computing services division, known as Azure. Amazon Web Services is still the dominant player in this field, but Microsoft’s Azure is catching up rapidly, growing its market share from 17.6% in 2019 to 20% in 2020. Microsoft also recently announced a partnership to provide software and cloud computing for General Motors’ self-driving car division, which could be a huge growth area over the next decade.
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Bank of America (BAC)
Bank of America might not be able to double overnight like some aggressive tech stocks, but it may teach investors yet again that slow and steady wins the race.
After essentially going nowhere for the past three years or so, the stock is finally coming to life, up about 27% year-to-date. Investors are picking up shares anticipating an accelerating economy, fueled by enormous stimulus money and a “return to normal” among American businesses. Some anticipate this will trigger inflation and rising interest rates, which could actually help a business like Bank of America.
As interest rates rise, Bank of American can earn additional money on the spread between short-term interest rates — which the Fed has indicated will stay low until at least 2023 — and long-term interest rates, which the company charges on its loans. The combination of an increased interest-rate spread and rising economic activity, which triggers the need for additional loans, could be a winning formula for Bank of America going forward.
American Tower (AMT)
American Tower is a real estate investment trust that pays a solid dividend of over 2%. However, it’s the long-term growth of American Tower that could be a good bet for investors. Unlike REITs that invest in office buildings and shopping malls, American Tower is a Fortune 500 company that owns, operates and develops wireless and broadcast communications real estate globally. American Tower’s portfolio includes about 43,000 properties in the United States and more than 142,000 properties internationally. As the world moves to 5G wireless technology and other advanced communications, American Tower should be a prime beneficiary.
Amazon is the 500-pound gorilla in the room, and it has dominated and changed the retail landscape unlike any other company in recent years.
The brainchild of the current richest person in the world, Jeff Bezos, Amazon continues to innovate and adapt to the economy, which is a good structural reason to believe in its success over the coming decade. While known to most consumers as the way to buy almost anything in the world and have it delivered rapidly to your doorstep, the company’s current profit engine is actually its Amazon Web Services division. Although facing competition from Microsoft and Google, AWS is the market leader, with revenue growth of 28% in its most recent quarter. Coupled with its recent nationwide expansion into telehealth services, Amazon has shown that it’s not content to rely on selling widgets to generate profits.
One of the reasons for PayPal’s current and ongoing success is the general trend away from cash transactions. But the payment transfer service also has some company-specific reasons making it worthy of investment.
The company expects to have 750 million user accounts by 2025, roughly double where it stands today. PayPal management also indicated that its growth is accelerating, and it anticipates a 20% compound annual growth rate over the next five years, bringing it to $50 billion in annual revenue. Riding current trends, PayPal recently announced it plans to allow Bitcoin transactions on its platform, further fueling its growth, and it has a track record of making prudent acquisitions and buying back shares. This combination of solid management and being in the right place at the right time offer lots of promise for PayPal stock.
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