3 stocks to buy and hold forever
These picks are so tied to the human experience that it's unlikely they will ever slow down.
By Lawrence Meyers
There's a certain category of stocks that I consider stocks to buy and hold until the zombie apocalypse . . . or 30 years, whichever comes first.
These stocks to buy are so totally tied into the human experience that it would basically take the world's population becoming zombies for them to cease doing business. They're great investments because you don't have to spend all of your time worrying about when to buy and when to sell.
So, which are the best stocks to buy and hold forever?
The first is Chevron (CVX). With certain companies, and this includes Chevron and other big oil stocks, I'm not actually looking for earnings growth. Instead, I'm interested in the role Chevron plays in the human experience.
I'm fond of saying that the world will always need energy, that our need will only increase over time, and that the energy we will need the most will be from fossil fuels. Oil is the past, the present and the future. Entire geopolitical landscapes are shaped by oil. It heats our homes; it fills our gas tanks; it's used for plastics and polymers. You cannot escape oil. I don't care what the environmentalists say, neither solar nor wind will ever come close to the efficiency of fossil fuels.
Chevron handles processing, transport, storage, marketing, exploration, development and production. CVX does it all. It is even involved in coal, has some insurance and real estate activities, and manages interests in power assets. Chevron has $45 billion in cash against $18 billion in debt. That $27 billion in net cash translates to about $13 per share, which puts CVX stock at about 9x estimates.
Chevron throws off anywhere between $8 billion and $15 billion in free cash flow each year. That kind of free cash flow makes Chevron very well positioned for the next 30 years. The bottom line: CVX stock is a no-brainer.
AutoZone (AZO) may not be a name that you expect. But think about just how many cars are on the road and how many new and used cars get purchased every year. Then think about complex these machines are, and how many parts there are in each car.
Autos will always be with us, every machine eventually gets older, and every machine eventually needs parts. That's why you want to go with a company that has 5,109 stores in the U.S. and Mexico. Yet besides all the parts it sells, it also offers tons of discretionary auto products like air fresheners, floor mats, performance products, and stuff you see at your local car wash.
It also offers commercial credit to help its retailers, and has an automotive diagnostic and repair software program. How nice of AZO to offer a product that helps you decide which of its other products to buy.
Of all the auto part companies, AZO stock has the best valuation and is still growing strong. While it does sit on $4 billion in debt, it's cheap debt (3 percent interest), and has a $126 million cash backstop. Most of all, though, it has the kind of FCF that I so love, putting out between $900 million and $1 billion annually. AZO stock continues to power forward on 13.82 percent long-term projected growth, and trades at a FY14 P/E of just 17.
Finally in our list of stocks to buy and hold forever, we have the great Berkshire Hathaway (BRK.A). The main appeal actually isn't that Berkshire is run by Warren Buffett (pictured), though I'm sure people will worry when he's gone. The core insurance business is thriving, and it continues to power the stock.
A properly managed insurance company will always yield strong and consistent yields, and nobody is better at insurance than Berkshire. The company has been doing it for so long. But surrounding Berkshire's insurance company are dozens of other companies that I believe more accurately represent America than the Dow Jones Industrial Average.
The pure diversification of businesses helps insulate Berkshire from long-term pain. In fact, banks went to Berkshire to shore up their balance sheets during the financial crisis. That's a company you want to be with.
More From InvestorPlace
- 5 CEOs Who Might Not Last Until 2015
- 3 Simple Retirement Mistakes to Avoid
- Everything You Need to Know About IRAs
As of this writing, Lawrence Meyers was long BRK.B. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses.
When I was in graduate school, we called products you could not do without "inelastic demand" I recently discovered Merrill Lynch calls them by another name. But the concept is the same. Hard to go wrong.
OK, so here we have an advertisement for Autozone attempting to improve it’s attractiveness by association with Chevron and Berkshire.
I get it, but, I’m still not getting it.
BERK A&B do not pay dividends...May accelerate in good Markets but can fall in corrections..***
There are other Oil plays that I think are just as good and pay better dividends, plus have similar growth also.
Don't know anything about AZO...?
***although I almost bought BERK B and considered it to be a decent buy at the time.
I cannot face the fact that an OEM supplier is not the manufacturer. They never trade stock, have lower paid employees, feed the unions, and take all the heat for their high level mishaps. I pondered why these kind of companies have no real right to fight back. In the employment and merchandising markets. Not all of them are set up for only one MFG. Wake up and pay the little guys more than union wages and you will have happier employees.
After working for 25 years for somebody else I decided it was time for a change, trading was the answer for me because I need to work from home. I say stop working for somebody else and make your own money .Check out the website Bionic Traders, just Google them you should be able to find them, these guys are really doing it right and make you wonder why everybody isn't like them.
Chevron will be displaced by the future hemp market....as an awakened populous choses ethanol over oil.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
New legislation is allowing foreign companies to finally invest in the country's vast oil reserves.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.