by Lawrence Meyers | November 22, 2013 2:03 pm
Certain stocks are so intrinsic to our way of life that it’d probably be a fine strategy to just hold them until the sun explodes in a supernova.
The thing is, if you’re a value investor — and I am — their prices might be a little too much to bear. However, as long as you plan to hold them for at least 10 years, I don’t think their present valuation matters — these are stocks to buy now.
It’s hard to set any criteria for what makes these stocks above value considerations. They are a bit like art in that the criteria is hard to describe, but I think you’ll agree that you’ll know ‘em when you see ‘em.
Here’s a look at four stocks to buy now regardless of their valuations:
Google (GOOG) was, to me, just a search engine. I never actually realized the company had taken over the world until it was too late.
Truthfully, there does not appear to be anything that Google doesn’t have its hands in. Email. Productivity apps. Tablets and smartphones. Maps. Translators. Payment services.
Good grief … GOOG even deployed a mysterious floating barge in San Francisco Bay that was revealed to be a giant art project.
I think owning Skynet … er, Google at an effective price of $875 (backing out its $163 per share in cash) — which is 20 times this year’s estimates on a long-term growth rate of 16% — might even be considered a value purchase.
Amazon (AMZN) is a weird beast in that its earnings are pretty volatile, which makes valuing the company difficult.
It has taken over the country’s retail marketplace by effectively being the go-to discounter. Anything I buy, I buy on Amazon at this point, except for clothing. Nothing can replace it. It will only continue to reach into the world.
On a visit to a manufacturing plant in Texas last month, the owner told me that they are now purchasing parts and things like screws through Amazon, not their old suppliers. Zoinks!
Meanwhile, AMZN constantly is spending money on new initiatives like Amazon Web Services and bolstering its Amazon Prime digital content, which could make it a true media threat, too.
There’s no way to assign a number you can trust on what the company’s growth rate might be, and its P/E is a joke thanks to its volatile earnings.
What you can trust is that Amazon has a very clear long-term plan, and the patience and brains to pull it off. I suggest just buying and holding.
Visa (V) is a stock to buy now because its one part of a duopoly.
Say all you want about Discover Financial (DFS) and American Express (AXP), but MasterCard (MA) and Visa own the vast majority of the credit card world and always will. Discover came along years ago and hasn’t done much to penetrate the outer walls of its competitors. And we always want to own companies that dominate their space.
I choose Visa over MasterCard only because, at the moment, Visa trades closer to its long-term growth rate. Valuation might not matter, but when all else is equal, why not go with the cheaper one?
Of course, this list is not complete without Berkshire Hathaway (BRK.B).
The fact that it is a tremendously diversified conglomerate is but one reason to hold the stock. The legendary management is certainly another. However, the biggest reason might simply be that the company has weathered every storm since Noah boarded his ark.
Berkshire is very dependent on its insurance holdings, yet no matter how large a tragedy may strike the U.S., Berkshire always comes out just fine.
As with Amazon, earnings from year to year aren’t easily predicted because so much of Berkshire is dependent on insurance. Earnings depend on how many claims get paid from one year to the next.
And even after Uncle Warren goes to the big See’s Candies in the sky, I have every confidence in his replacements.
Read More: 5 Hidden Dividend Gems
Lawrence Meyers does not own shares in any company mentioned.
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