The market’s bullish momentum appears to have been rekindled this week, but with the most recent wave of bullishness, investors seeking out the best stocks to buy once again must worry about the market bumping into a valuation-based ceiling.
Yet another pullback is likely.
The situation presents something of a conundrum for action-thirsty traders. The economy is on relatively firm footing, and stocks are worth owning. But, stocks are also at frothy prices, working against any further sizable near-term gains.
The solution? Rather than the usual stock-jockeying traders love to do, now’s the time to switch gears and think long-term. In other words, load up on quality stocks to buy and let time do the work for you, especially if this spring and summer dish out the usual lackluster movement.
With that as the backdrop, here’s a closer look at the 10 best stocks to buy for the next 10 years … names that let you sleep well at night because you know they’ll still be around and doing well tomorrow.
10 Best Stocks to Buy and Hold: 3M Co (MMM)
In many regards, 3M (MMM) could be viewed as something of a mini-mutual fund. It has a wide presence in the industrial and supply space, producing everything from Post-it Notes and medical coding software to road reflectors and picture-hanging hardware, just to name a few. 3M also sells products that remain marketable regardless of the economic environment.
The company sailed through the 2008 recession largely as if it wasn’t even happening, with only a modest lull in its bottom line.
Where MMM stocks really stands out as one of the 10 best stocks to buy and hold for a decade, however, is with its dividend.
Simply said, very few other names on this list — and any similar list of reliable dividend stocks — have the track record of dividend growth that 3M can boast. The company has steadily ramped up its quarterly dividend from 23.5 cents per share in early 1996 to $1.11 per quarter as of the next payout, and the company has more than doubled its payout in just the past six years.
In other words, 3M is a company that is serious about sharing the wealth, and reliable when it comes to producing it.
10 Best Stocks to Buy and Hold: Capital One Financial Corp. (COF)
Capital One Financial (COF) might not have the social favor of all, by virtue of its business model — it caters to consumers with weaker credit scores, offering providing a credit card when other providers have refused to do so, or have made it distasteful.
Investors, however, can’t deny the fact that the model has been quite successful, and COF has impressively grown its annual top line from $12.1 billion in 2005 to roughly $25 billion for the past four reported quarters. More of the same is on the way too, as — like it or not — there will always be a poor-credit market to address.
There’s no value issue, either. The trailing price-to-earnings ratio is an affordable 10, as is the forward-looking P/E of 8.6, which is dirt-cheap relative to its peers.
The only sore spot may be relatively unenthused analyst opinions, but Wall Street has been more wrong than right so far.
10 Best Stocks to Buy and Hold: General Mills, Inc. (GIS)
One of the hangups some investors have with owning a name like General Mills (GIS) is its potential to be trapped an unfavorable commodities market. What’s largely overlooked about that dynamic, however, is that the bulk of these price fluctuations can be (and usually are) passed along to consumers.
Oh, those consumers generally grumble about rising prices of groceries, sure … but they don’t stop eating them.
That’s not to say there’s no impact on the company’s bottom line as grain prices rise. There is. It’s just to say it’s not as dramatic as you might suspect.
Case in point? Grain prices have been all over the map over the course of the past 10 years, yet General Mills’ bottom and top lines have grown in most of them. The worst headwind was felt in 2015, when net income fell to a multiyear low of $1.22 billion on a slight slump in revenue. That lull has already been reversed though, as most commodity price surges are reeled in sooner than later; the supply/demand relationship is usually self-balancing in short order.
Point being, until consumers stop eating altogether, General Mills will be a consistent producer.
10 Best Stocks to Buy and Hold: Southern Co (SO)
Put Southern Co (SO) on your list of top stocks to buy for the long haul, but be prepared for one annoying oddity: Look for SO to be weak when other stocks are strong, and look for SO to be strong when other names are weak.
That’s because Southern Co is a utility name, and usually counter-cyclical. That is, the crowd flows into the safety of uber-reliable income-producing companies when there’s a threat to cyclical arenas like technology or materials; nobody cancels their electricity or water service when money gets tight. And they flee from safety and into riskier assets when economic growth appears to be at hand.
Either way, Southern Co has a heck of a dividend payment history, and kept paying them regardless of the environment. The current yield stands at a healthy 4.3%.
10 Best Stocks to Buy and Hold: Alphabet Inc (GOOG, GOOGL)
This one isn’t a tough one to figure out. Alphabet (GOOGL, GOOG) — the company formerly known as Google — is the dominant name in web search in the U.S. along with several other overseas markets. It has held that commanding lead for quite some time, and not only does Alphabet have a $70 billion war chest it can use to hold that lead, it has access to the world’s best computer engineering talent.
It’s unlikely to be dethroned anywhere it’s the market leader.
The proof of the pudding? Ten straight years of sales growth, and 10 straight years of income growth, much of which was produced even in the shadow of analyst doubt. And it wasn’t just marginal growth. The top and bottom lines have been expanding at double-digit paces for the past decade, and we’ve only started to scratch the surface of mobile.
10 Best Stocks to Buy and Hold: Johnson & Johnson (JNJ)
There’s nothing sexy about diversified healthcare company Johnson & Johnson (JNJ). Not one thing. But it’s a diversified name that sells a broad based of products that consumers will always need. Its brands include Band-Aid, Tylenol and Doxil, as well as a variety of glucose monitors and surgical devices are just some of the goods the company sells.
As for the breakdown, consumer goods makes up about 20% of revenue, pharmaceuticals drive 45% of the company’s sales, and medical devices makes up roughly 35% of J&J’s business. That diversified revenue stream lets the company thrive in good times, and stay afloat when things are lean.
The end result? A company that has an impressive dividend-growth track record, and plenty of room (and reason) to keep pushing up its payout up — the kind of payment history that handily earns J&J a spot on a list of long-term stocks to buy.
10 Best Stocks to Buy and Hold: Wells Fargo & Co (WFC)
No list of best stocks to buy and hold for the long haul would be complete without some exposure to the financial sector.
Wells Fargo (WFC) is the best overall way to make that play.
Wells Fargo is arguably far more diversified than any other banking entity … and does well in each of its lines of business. That said, it’s considerably less reliant on volatile and erratic trading and investment banking revenue than the vast majority of other big banks. As Market Realist points out here, those categories account for less than 5% of the company’s non-interest income.
Underscoring the strength and superiority of its retail/consumer-oriented business as opposed to a more inconsistent institutional banking business is its network of consumer branches … the biggest in the country. With size, WFC achieves leverage and an economy of scale, and competitors are still trying to catch up with its retail customer dominance.
10 Best Stocks to Buy and Hold: AT&T Inc. (T)
Think the only sure things in life are death and taxes? Think again. There are at least two more: the need for garbage pickup, and the need to connect to the world.
It’s the latter of those two needs that puts AT&T (T) at the top of a long-term buy list.
Yes, there are other players out there looking to topple AT&T. Verizon Communications Inc. (VZ) is one of them, but hardly the only one. So why is T one the best stocks to buy, in or out of the telecom sector?
It’s the biggest, for one. That size also means it has garnered a sizable cash hoard that lets it buy innovation, and keep other players at bay. AT&T currently has $5.1 billion in the bank, and can access another $13.2 billion in short-term assets, if need be.
And contrary to popular belief, AT&T isn’t being stripped down to just a wireless behemoth. It’s becoming a powerhouse in video, and is leveraging its current video offer to sell other services. Ditto for its acquisition of DirecTV.
Those are some big tools to work with.
10 Best Stocks to Buy and Hold: Waste Management, Inc. (WM)
Speaking of garbage pickup, be sure to add “the” name in waste management, which just so happens to be Waste Management (WM).
The creative-name-challenged outfit is almost assured to generate revenue in perpetuity regardless of what the economy throws at it.
Monopolies are technically illegal, but they’re effectively inevitable. There really is room for only one player in most markets, and leveraging its size and fiscal strength, Waste Management is very often that name. It’s one of the few so-called “wide moat” stocks nobody ever thinks about owning.
This little data nugget may up its profile on that front: Waste Management has upped its dividend for 13 straight years, and that’s not apt to change anytime soon. The current dividend yield of 2.9% isn’t jaw-dropping, but what it lacks in size it makes up for in consistent growth. WM can also easily afford to pay that dividend.
The proverbial X-factor that gives an underappreciated edge to Waste Management is mounting recycling regulation. The Resource Conservation and Recovery Act rules are getting tougher by the month, which means customers are increasingly leaning on well-positioned outfits like Waste Management to get it right.
10 Best Stocks to Buy and Hold: Berkshire Hathaway Inc. (BRK.A, BRK.B)
On the off-chance you’re not familiar with Berkshire Hathaway, it’s the insurance company that Warren Buffett started to turn into a conglomerate many (many) years ago, and never stopped. As an example of its diversity, its biggest holding is a bank, its second-biggest holding is a food company and its third-biggest holding is a beverage company.
It’s not just the diversity that makes Berkshire Hathaway one of the best stocks to buy for the next 10 years, however — it’s the fact that its holdings are all hand-picked by Buffett and his team. While Warren’s involvement these days is shrinking as he gradually passes the torch to his proteges, those trainees are being well-groomed in the “Warren Buffett way” of thinking and investing as if they’ll own a company forever.
The results speak for themselves. Berkshire Hathaway has beat the performance of S&P 500 for any long-term period imaginable.
As of this writing, James Brumley was long T.