When we talk of long term investment horizons for stocks, we talk of stocks you can hold for more than 10 years- say 15 to 30or even forever, where possible. According to Warren Buffet, if you’re not planning on owning a stock for more than 10 years, don’t even think about owning it for 10 minutes.
However, not all stocks are worth owning for such a long time. When you buy stocks, you are part of the company. That translates to a long term commitment where you are ready for all the happy and sad times. In that sense, the stocks you settle for should have the below features:
- Has leadership and management that adapts
- Has products or services that are not a fad and endure the market
- A healthy balance sheet position
- A long term strategy
- A record of innovation without taking too much risk
- Healthy competition
Of course, all these qualities are hard to find in one company, but some companies check most if not all, of those. Most of the below companies have met this criterion and can earn an annual return of at least 12%.
Since 2009, Apple has been one of the top market holders in the smartphone niche, with a consistent increase in its sales over the years. Between 2014 and 2018, its iPhone sales increased from 170 million to 217.72 million.
While iPhones and iPads are the biggest sales drivers of Apple, it has continued to diversify its portfolio to include services like Apple TV, Apple News, and Apple Music. Apple has also captured the market with wearable devices like Air Pods and Apple Watch. The sales for both Apple services and wearable devices increased during the Coronavirus pandemic.
Such advanced technology is what keeps and will keep the company in the limelight and keep giving it a competitive advantage over its competitors. In addition to this, Apple retains a massive cash balance, currently at $192.8 billion during Q2 of 2020. Although this is a decline from the $207.06 billion cash on hand during Quarter 1, it is still a healthy position for sustaining low debt levels and dividend payments.
Amazon has carved a name in the retailing niche and has already surpassed the long-standing retailing giant Walmart to earn the number one retailer spot.
The Coronavirus pandemic has further cemented Amazon’s sales record with quarter two sales at $18.9 billion, a 40% increase compared to the previous year. The company’s profits also increased to $5.2 billion, beating the estimates from analysts.
While this increase is highly due to online shopping from the prevailing lockdowns, Amazon’s portfolio still has several products and services to offer. The company has made a name for itself in technology and is currently expanding its cloud computing footprint. Amazon already has several successful acquisitions and partnerships.
With many companies moving their operations online, Amazon is bound to make a killing from cloud computing services. Amazon is also making leaps with intelligent devices and still owns a large market share with its artificial intelligence products.
The streaming giant was already a household name before the Coronavirus pandemic, making progress since it was founded in 1997. With a 65% penetration rate and an increase of subscribers from 139.9 million in 2018 to 167.1 million in 2019, it is worth considering for a long term investment.
First, Netflix is quite good at adapting to the market’s needs and varied taste preferences. It’s production of Netflix Original, which has made a mark for quality content and the expansion to markets outside of the US gives the company a growth curve in the next coming years.
In 2015, it’s stocks were selling at $50 and has grown to over $500 on NASDAQ. Netflix is a worthy investment considering it still has a long growth curve ahead. Its market cap is about $113 billion compared to Apple’s market cap of about $1 trillion. That means that the company still has time to grow before hitting the $1 trillion market cap where other giants are. This leaves room for you to earn a return on your investment.
Walt Disney Co. (DIS)
When it comes to entertainment, Disney has made and a mark over the last decades. With entertainment assets on screens like Cinderella and Goofy and other revenue-generating assets, Disney’s portfolio proves to be solid. The company owns assets like theme parks, TV stations, music, game videos, studios, networks, and cruise ships; one can expect the company to have constant revenue streams in the long term.
Its streaming site, Disney+ id one of the company’s major income-earning assets and has the potential to keep growing. It has started going international with its revenues increasing over the years. The revenues for the first quarter of 2020 grew to $20.9 billion from last year’s first-quarter revenue of $15.3 billion.
Disney is also reinventing and expanding its theme parks, like the Shanghai Disneyland Park, starting to open with new access rules to ensure guests’ protection against the Coronavirus. This goes further to prove Disney parks can resume operations amidst the current conditions.