3/24/2011 11:19 AM ET|
The 7 best stocks for a lifetime
'Forever' isn't just for stamps. A long-term investor's portfolio needs a solid core of keepers, and these proven companies fill the bill perfectly.
Is there anything worse than buying into a stock that was sure to go up and then holding on for years as the price erodes? It's gut-wrenching. I've done it. I used to trade in and out of risky companies, refusing to take a loss, hoping the shares would come back someday.
Usually, that "someday" didn't arrive. But I've reformed. I now buy for the long term, and let the businesses work for me.
Allow me to explain, and offer seven stocks that make an airtight core that can generate wealth forever.
Are you really investing for the long term? Answer this question: "Do I buy stocks on the assumption that it'd be fine if the market closed tomorrow and didn't reopen for five years?" That's the buying strategy that works for legendary investor Warren Buffett. If you're prepared to buy and hold for five years, nothing but the best-positioned companies will do.
A long-term perspective changes everything. You'll need to rely on companies that have dominant franchises, absolutely indispensable products and services, and managers capable of driving consistent returns.
That positioning (and the confidence that comes with it) means you don't have to worry about next week. You can even take a stock's decline in stride and realize that it makes a great buying opportunity.
Below are stocks you can hold forever. And if the markets did close for years, well, all but one of these companies pay solid and growing dividends. So let these guys do the work for you.
These stocks make a fantastic core for any portfolio, and they are divided among industries, providing you with diversification by sector and country. But two threads run throughout: These companies provide goods or services that are in constant demand regardless of the economic climate, and their businesses are resistant (though not immune) to technological innovation.
|To buy and hold|
|Company||Dividend yield||Compelling consideration|
|McDonald's (MCD, news)||3.3%||World's largest restaurant chain, just getting started in China and India.|
|Colgate-Palmolive (CL, news)||3.0%||Exposure to emerging markets, with ''sticky" products.|
|Weight Watchers International (WTW, news)||1.1%||Operating margins of 27%.|
|Brookfield Asset Management (BAM, news)||1.7%||Management has acquired strategic assets.|
|Markel (MKL, news)||N/A||Book value grew by 22% over recent 20-year period.|
|Exxon Mobil (XOM, news)||2.1%||Access to resources the world can't live without.|
|National Grid (NGG, news)||5.8%||Locked-in returns as a regulated utility.|
That's probably as diversified as seven stocks can get. Their blended yield comes out to 2.6%, so you're getting an above-market payout to keep or reinvest. The histories of these businesses are nothing short of remarkable, but the future looks pretty compelling, too.
Everyone knows McDonald's (MCD, news) as an American restaurant chain, but the company derives more sales from Europe than from the United States. And that's part of the huge opportunity here -- the Oak Brook, Ill., company has plans for rapid growth in India, China and other emerging economies.
Add hidden assets and management's commitment to return free cash to shareholders, and you have a dividend play for a lifetime.
Colgate-Palmolive (CL, news) also provides investors with the chance for robust gains in emerging markets. The global maker and marketer of toothpaste, soap and other cleaning products generates 40% more of it revenue in Latin America than in the United States. The New York company has 80% of the toothpaste market in Mexico and 70% in Brazil.
Because consumers tend to stick with trusted personal-care brands -- and pay more for them -- Colgate-Palmolive should have the ability to drive its fast-growing dividend even higher.
Weight Watchers International
The cash-generating power of Weight Watchers International (WTW, news) is truly remarkable. For every dollar it allocated to capital investment over the past five years, the New York company pulled out $19 from the business.
Even modest growth rates would bulge the coffers here. And with waistlines across the world expanding, the company's growth opportunity appears to be more than modest.
Brookfield Asset Management
That's a testament to the savvy of its management team, which owns some of the choicest real estate assets in the world's leading cities. The Toronto company is also invested in infrastructure and power assets, meaning this is a defensive stock par excellence.
VIDEO ON MSN MONEY
Who came up with this nonsense? What did you do use a dartboard? Let a squid pick 'em?
The author must be planning a short life.
Some folks say he's the best investor of all time. Hey! I have an idea! Maybe we could buy his stock and do well too!
I dunno, I'm just askin'.
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[BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.
Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.
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