Forever is a long time, particularly in the stock market. The Wall Street Journal archives are full of stories of companies that were once the toast of the town, only to fall into irrelevance or bankruptcy.
Enron, Lehman Bros., BlackBerry (BBRY) and JCPenney (JCP) are all fine examples of companies that were once leaders in their respective industries but fell into peril. The first two are long dead, and JCPenney and BlackBerry are fighting for their lives.
So how do you know which stocks are “buy and hold forever” stocks? Well, no rule will work 100% of the time, but these guidelines will get you close:
- The company is a leader in its respective industry.
- The industry is not particularly susceptible to technological disruption.
- Demand for the company’s products is relatively immune from fickle consumer tastes.
- The company has a “black swan-proof” balance sheet with modest amounts of debt.
- The company has a long history of prudent shareholder-friendly actions, such as paying and raising the dividend.
The first bullet is actually the least important, as all of the spectacular blowups I mention above were once industry leaders. But I include it because, when combined with the other four points, we get the makings of a quality “buy and hold forever” list.
So, with no further adieu, let’s jump into the list of stocks to buy and hold forever: