In today’s market, buy-and-hold is considered a dead strategy by many, and considering the rapidly changing state of most industries, investors don’t exactly feel confident in stocks to buy for the really, really long-term.
But it doesn’t mean the market is completely devoid of set-it-and-forget-it stocks.
The following six stocks to buy have made moves in recent years to ensure future stability, and generally have some sort of competitive or strategic advantage over the competition.
Furthermore, if you’re going to buy a stock and own it for the next decade, you don’t necessarily need to worry about finding an attractive entry point — but it sure doesn’t hurt to squeeze every basis point of gains that you can. So these stocks to buy and hold are also trading on the cheap right now.
If you’re looking to just put part of your portfolio on autopilot through 2025 or so, check out this list of stocks to buy that should hang tough for years.
6 Stocks to Buy for the Next Decade: AT&T Inc. (T)
After acquiring DirecTV and completing two acquisitions in Mexico, AT&T (T) is expected to grow revenue by 15% and 12.5%, respectively, over the next two years, and T stock trades at just 12 times next year’s earnings.
Takeaway: AT&T stock is both cheap and growing very fast (especially for a telecom). That suggests some upside.
But beyond that, AT&T pays a dividend yield of 5.6%, and while its $113 billion in debt may be alarming, AT&T can afford both its dividend and to pay off debt. AT&T recently guided for free cash flow of $4.5 billion in the third quarter; that’s a cool $1 billion better than last year in the same period.
With DirecTV creating $3 billion in FCF last year, or $750 million per quarter, it appears that AT&T is already starting to see some of those $2.5 billion in cost reductions stemming from the acquisition, and we can thereby conclude that its $12.2 billion in FCF over the past year will only rise. With a dividend payout of $9.5 billion projected for the next four quarters, AT&T has cash to spare after dividends, capital expenditures and operating costs to pay off debt.
As a result, AT&T can move forward on investing in projects to fuel growth over the next 10 years, like building its presence in Mexico and developing its broadband Internet and wireless services in Latin America.
This upside potential in international markets combined with continued growth in wireless and U-Verse gives AT&T stock oodles of long-term upside ahead.
6 Stocks to Buy for the Next Decade: Qualcomm, Inc. (QCOM)
Qualcomm (QCOM) stock is down 20% this year. After having its trailing 12-month revenue increase 340% over the last 10 years, QCOM’s revenue this year is expected to fall 5.5% this year and next year as well.
While competition in Qualcomm’s core business of producing mobile chips that power smartphones, connect to mobile networks or connect to Wi-Fi networks has grown more competitive, no company has chip technology or a patent portfolio in mobile tech that comes close to QCOM’s.
Furthermore, QCOM is a cash cow with an operating margin of nearly 30% that returns essentially all of its profits to shareholders via buybacks and dividends. With the Internet of Things expected to quadruple the number of connected things over the next six years, Qualcomm’s opportunity will remain great as those things need chips for connectivity.
Due to the outlook for IoT coupled with Qualcomm’s leading presence in mobile and chip technology, QCOM is a stock that investors should feel great about owning long-term — especially at just 10 times next year’s earnings minus cash.
6 Stocks to Buy for the Next Decade: Dollar Tree, Inc. (DLTR)
Dollar Tree (DLTR) is the most impressive retailer in the world, producing an 11% operating margin despite having a $1 cap on all items it sells. Surprisingly, Dollar Tree’s margin is higher than any of the dollar stores, even twice that of Walmart (WMT).
This means that Dollar Tree must have an unmatched fulfillment and cost management process in place. But as the U.S. dollar loses value over time, Dollar Tree’s product assortment or margins will worsen sooner or later.
That’s what makes the acquisition of Family Dollar so enticing, as it removes that cap and gives Dollar Tree’s management the opportunity to work its magic long-term.
During Dollar Tree’s last quarter, its branded stores produced a gross margin of 28% whereas Family Dollar stores had a 13% gross margin. Based on Dollar Tree’s track record, its hard to imagine that it can’t drive Family Dollar’s gross margin higher over time.
Family Dollar is responsible for nearly 8,800 of Dollar Tree’s 13,864 total stores — and Family Dollar doesn’t have that $1 price cap — producing a likely outcome of long-term profit growth from this merger.
And with DLTR in a three-month funk that has sent shares down 23%, investors are looking at an attractive entry point.
6 Stocks to Buy for the Next Decade: Celgene Corporation (CELG)
Celgene Corporation (CELG) is the maker of Revlimid, a cancer drug that is expected to create $5.7 billion in sales this year. The blockbuster cancer drug will account for more than 60% of Celgene’s revenue this year, and is largely responsible for how well the stock has performed over the past decade.
But the next decade could be just as good.
Celgene has patent protection on Revlimid through 2027. By 2021, analysts figure that Revlimid sales will peak at $11 billion, where it will stay through 2027.
And CELG stock is more than a Revlimid story. Celgene acquired Receptos earlier this year to take full ownership of a Phase 3 drug called Ozanimod that has shown tremendous promise in treating multiple sclerosis, ulcerative colitis, and possibly Crohn’s Disease. When CELG announced the acquisition, it upped its 2020 sales forecast by $1 billion to $21 billion. However, most analysts figure that Ozanimod could achieve peak revenue of $5 or $6 billion, implying the biggest sales upside for this drug will come after 2020, thereby creating a long-term catalyst.
If Revlimid and Receptos weren’t enough, CELG has a partnership with the hottest CAR-T specialist in the market, Juno Therapeutics (JUNO), where CELG essentially gets to pick from Juno’s promising pipeline and market its products once approved. In looking beyond 2020, this partnership could very well yield another $5 billion in product sales for CELG.
With that said, CELG stock is trading about 15% off its 52-week high, and with all these long-term catalysts in place, it might be a good idea to take advantage of the price.
6 Stocks to Buy for the Next Decade: Alibaba Group Holding Ltd (BABA)
Looking ahead, BABA stock will continue to gain as its 367 million active customers grow to more than 620 million by 2021. Alibaba’s revenue will continue to surge as this transaction growth occurs, and also as it monetizes better with a higher take rate.
After losing 30% of its value this year and now trading at 25 times free cash flow, BABA stock is a long-term buy based solely on this growth and outlook alone.
However, Alibaba has an investment portfolio that is unlike any other, where it has invested in worldwide logistics, global e-commerce providers, media, mobile apps and even a sports team. These investments, along with AliPay, could be worth tens of billions in the long-term, and provides a hedge of sorts against BABA’s core Chinese e-commerce business.
All the more reason to buy, hold and forget for the next 10 years.
6 Stocks to Buy for the Next Decade: XPO Logistics Inc (XPO)
XPO Logistics (XPO) is a company you likely haven’t heard of. This third-party logistics broker is ed by billionaire Bradley Jacobs, and it is trading more than 40% off its 52-week high.
In 2011, XPO had revenue of just $177 million, but now the company is on pace to create revenue of $15 billion over the next 12 months. And no, that’s not a misprint.
However, it’s rampant growth (and XPO’s recent acquisition of two big companies) that’s causing XPO to sag. In short, investors are concerned with XPO’s $3.8 billion in debt and the $3 billion it still must pay for Con-Way.
However, XPO is on pace to generate $1.1 billion in EBITDA next year, and recently, Jacobs said that XPO will slow the pace of acquisitions to focus on integrating recent purchases and improving profits. Thus, XPO’s $1.1 billion in EBITDA should translate almost entirely to operating income, meaning XPO trades at less than 4 times next year’s operating income on a fully diluted basis.
Moreover, XPO still is guiding for $23 billion in revenue at the end of 2019 as it achieves double-digit organic growth and completes additional acquisitions.
Bottom line: XPO is very cheap, paying off debt will be a manageable problem, and shares have tremendous upside over the next 10 years.
As of this writing, Brian Nichols was long BABA, CELG, DLTR, T and XPO.