Earlier this month, I told you about a couple that took a $200,000 inheritance they received in 2004 and piled it all into Apple (NASDAQ:AAPL). Needless to say, they now live off that investment while enjoying retirement in a Maui condo.
While dumping all your money into one stock is risky business, the couple’s choice of stock nods to Warren Buffett’s biggest piece of investing wisdom: Pick ones that you can buy and hold forever. Why? Because great companies will last a lifetime and you won’t have to worry about the ups and downs of the market.
With this in mind, we asked our own InvestorPlace writers and contributors to choose their favorite companies for a “set it and forget it” mentality. Again, that doesn’t mean any of these names should be the only one in your portfolio, but that each should be good-to-go for decades to come.
Take a look at the four stocks our experts picked for the long haul:
By Richard Band
McDonald’s (NYSE:MCD) just reported an unexpected bump in November same-store sales after weakness earlier in the year. That’s good news, of course, but it isn’t the reason this fast-food giant is the stock I’d hold forever.
Instead, I simply love the consistency of this outfit. Mickey D’s has raised its dividend every year since 1976 — through three wars, four Fed chairmen and five recessions. The most recent hike, payable Dec. 17, amounts to a robust, inflation-beating 10%.
Newly anointed CEO Don Thompson has pledged to return all the company’s free cash flow (after capital spending) to shareholders in the form of dividends and stock buybacks. Can you imagine a more powerful statement aligning your interests with those of management? Apple and Google (NASDAQ:GOOG) — please follow suit!
Plus, McDonald’s is a solid franchise that has proven over and over again its ability to weather tough times. Even during the near-depression of 2008, the restaurant came out with new menu items (and permutations of old ones) that brought customers streaming back in. It will happen again. I’m projecting a total return (dividends plus price gain) of 15%–20% on MCD in the next year, while your investment should double within the next six years.
Aberdeen Asia-Pacific Income Fund
By Bryan Perry
At Cash Machine, the Aberdeen Asia-Pacific Income Fund (NYSE:FAX) has emerged as the ballast holding for investors, as this exchange-traded fund has generated nearly 14% annual return during the past five years.
The brightest light for the future of investing shines on the Asia-Pacific region, bar none. The ability for investors to position capital in a diversified bond fund that holds over 270 separate issues (83% of which are investment grade) with an average maturity of seven years, that pays more than a 5.3% yield with monthly distributions is arguably one of the finest assets to hold forever.
Shares of FAX are backed by short-term debt instruments based on higher yielding local currencies from Australia, South Korea, Malaysia, China, the Philippines, Indonesia, Hong Kong, Thailand, India and Singapore. FAX allows American investors to offset the long-term threat of dollar value erosion as the U.S. becomes mired in soaring deficits.
In a market where traditional fixed income investments like money markets, CDs and government backed securities pay less than 2%, FAX provides two-and-a-half times the yield plus steady capital appreciation that mirrors the strength of the Pacific Rim economies. It’s the giant sea turtle of investments that wins the race of building wealth and qualifies as “one for the ages.”
My stock to hold for a lifetime is Sherwin-Williams (NYSE:SHW), hands down. The nation’s largest producer of paints and coatings is a great long-term play because it resists market shocks like a champion.
The housing bust, for one, barely fazed it compared to competitors. From the start of 2007 to the beginning of 2009, SHW gave up 12% while PPG Industries (NYSE:PPG) dropped almost 40% and DuPont (NYSE:DD) plunged almost 50%.
One reason that shareholders are so loyal? Sherwin-Williams takes care of them through a reliable and juicy dividend (the sixth highest in its industry) and hefty stock buybacks. The company has hiked up its dividend by 160% over the past 10 years and shows no sign of stopping this trend.
Plus, now is a great time to buy SHW between its recent buyout of Comex Group and rising demand. Analysts also forecast nearly 20% earnings growth next year, while the rest of the General Building Materials sector is headed towards a 1.1% drop in earnings.
That kind of consistent outperformance is one of many reasons why I’d hold SHW for the long haul.
By Jeff Reeves
Editor, InvestorPlace.com and The Slant
Merck (NYSE:MRK) is my stock to hold forever as a result of an aging population and its need for more care in the years ahead. Healthcare generally is recession proof, and the sector has baked-in growth as Americans live longer and care gets more complex and expensive.
Specific to Merck, however, I like these factors in particular:
- Reach: MRK is a huge multinational with a $133 billion market cap and over $47 billion in annual revenue.
- Dividend: Merck yields almost 4% annually in dividends, paid since 1935. Plus, its payout ratio is a very sustainable 45%, based on fiscal 2013 earnings.
- Research: Merck bought Schering-Plough in 2009 for $41 billion and followed that up with $7 billion for Millipore in 2010 — two big-time acquisitions that have been slowly worked into operations and should yield new drugs down the road to enrich the pipeline. One big example of a potential blockbuster in the works is its Alzheimer’s treatment moving towards approval.
- Cash: The company also has $18 billion in cash and short-term investments should a development-stage biotech company catch its eye.
If you don’t like to put all your eggs in one basket, the iShares Dow Jones US Healthcare ETF (NYSE:IYH) or the Health Care Select Sector SPDR Fund (NYSE:XLV) are good alternatives. They both include Merck as a top holding along with similar plays like Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Abbott Labs (NYSE:ABT).