Buy and hold. It is a strategy as old as the stock market. And it is a simple strategy that is trumpeted by some of the world’s most successful investors, including Warren Buffett. But the strategy of holding onto long-term stocks to buy despite market ups and downs seems increasingly antiquated in a world of Robinhood day traders, algorithms and automated computer trading systems.
Today, investors can buy fractional shares or stock slices of a company and may only hold onto a stock as long as it takes to punch a sales order into their computer.
Yet holding stocks for the long term has been proven to be beneficial. Between 1950 and the Great Recession of 2009, the S&P 500 delivered an average annual return of 7%, which is quite strong and was achieved despite many market ups and downs.
An example of a successful long-term buy-and-hold strategy can be found in Coca-Cola (NYSE:KO). In 1990, investors could buy one share of Coca-Cola for $5. Ten years later it was trading at just under $29. However, during that 10-year period, its dividend quadrupled. Had you invested $10,000 in KO stock in 1990 and held onto it, the company would be paying you nearly $3,000 a year in dividends today.
Here we look at seven long-term stocks to buy and hold now:
- Home Depot (NYSE:HD)
- Walmart (NYSE:WMT)
- Microsoft (NASDAQ:MSFT)
- Disney (NYSE:DIS)
- JPMorgan Chase (NYSE:JPM)
- Amazon (NASDAQ:AMZN)
- Starbucks (NASDAQ:SBUX)
Long-Term Stocks to Buy: Home Depot (HD)
Home Depot is a brick-and-mortar retailer and blue chip stock. The company is the largest home improvement retailer in the U.S. and specializes in selling everything from hammers to washing machines. And HD stock has done very well this year, continuing the upward trajectory it has enjoyed since the end of the 2009 financial crisis.
Since bottoming at just over $150 a share in March, the stock has risen 77% to around $280 per share today. In the last 10 years, the stock has grown just under 800%. Clearly, Home Depot is the type of stock investors should have in their portfolios for the long term.
And while the retailer may not come immediately to mind when people think of stay-at-home stocks during the novel coronavirus, Home Depot has benefited from the fact that people are undertaking renovations and home improvement projects as they shelter in place. For its fiscal second quarter, Home Depot reported that sales increased 23.4% to an all-time record. Net income for the quarter reached $4.33 billion, or $4.02 a share, up from $3.48 billion, or $3.17 a share, in the same period of 2019. Home Depot beat analyst expectations for its second quarter across the board.
Plus, the company known for its orange logo is a good corporate citizen. In its second quarter, Home Depot spent $480 million on additional benefits for employees, including weekly bonuses for people working in both its retail stores and distribution centers.
Another buy-and-hold stock is Walmart. The Arkansas-based retail giant is, according to Fortune magazine, the world’s largest company in terms of revenue. In 2019, Walmart’s revenue from global sales totaled $514.4 billion. The company is also the world’s largest private sector employer with with 2.2 million employees in the U.S. and beyond.
Its success is reflected in its stock performance. WMT stock is up 20% year-to-date at $140 a share. In the last five years, the share price has appreciated almost 120%. And, Walmart is not content to be just the biggest retailer. Much of the its success comes from the fact that it is constantly adapting, innovating and offering new products to customers.
Online sales, home delivery and a new membership program similar to Amazon Prime are all innovations that Walmart has successfully pushed this year amid the Covid-19 pandemic. The company even got in on the bidding for social media company TikTok. If all this weren’t reason enough to buy Walmart, consider also that the company pays a a healthy and growing dividend.
Long-Term Stocks to Buy: Microsoft (MSFT)
Speaking of buying TikTok, how about Microsoft? The company founded by Bill Gates back in the 1970s continues to be a technology leader today and succeed in seemingly every new venture it undertakes. From the Xbox video game console to software development and cloud computing, Microsoft continues to dominate. And MSFT stock is one to hold for the long haul.
Consider that if you had invested $5,000 in Microsoft back when it had its initial public offering (IPO) in 1986, you would have $10.6 million today. That represents a compound annual return of 25% a year, or a cumulative return of 211,000%.
With its Microsoft Teams application going gangbusters as people work from home and the new Xbox Series X video game console due out in time for Christmas this year, Microsoft continues to fire on all cylinders. Buying the popular social media app TikTok would be another way for the company to further diversify and bring in more advertising revenue.
Given all of its success, it should come as no surprise that analysts remain bullish on MSFT stock, with a buy rating and median price target of $233 a share.
Disney has come a long way since it produced its first animated cartoon in 1928. Today, the Mouse House is the largest entertainment company in the world and the owner of major brands ranging from Star Wars and Marvel to ESPN sports and the Hulu streaming platform.
Its proprietary streaming service called Disney+ that launched last fall has been a runaway success — signing up more than 60 million subscribers in less than a year and reaching that milestone four years ahead of schedule. While the Covid-19 pandemic shuttered Disney’s theme parks around the world, Disney+ has helped to cushion the financial blow.
And Disney has been good to its shareholders over the years, providing a 650% return over the past decade. While DIS stock remains below its 52-week high of $153.41, it has been steadily rising over the summer and is now trading above $130 per share. With movie theaters reopening, live sports returning and a Covid-19 vaccine expected by the end of the year, it likely won’t be long before Disney’s share price tests new highs. The company’s cruise line should even be sailing again in 2021.
With durable brands, plenty of diversification and a pulse on the future of entertainment, many people see Disney stock as one to hold forever.
Long-Term Stocks to Buy: JPMorgan Chase (JPM)
Having exposure to the U.S. banking system is a good thing for investors. And there is no better bank stock to own than JPMorgan Chase. The largest U.S. bank, and seventh largest lender in the world with total assets of $2.69 trillion, JPMorgan Chase is a diversified bank with plenty of upside potential.
And its stock has looked like a bargain since the Covid-19 pandemic took hold. JPM stock is still 25% below the $141 level it was trading at in January of this year. Until recently, the stock price couldn’t break above $100. While it recently rose to $103.52 a share following a bullish upgrade from Deutsche Bank, the company’s stock price is still a steal at current levels.
Much of the depressed stock price can be attributed to the banking sector as a whole, which investors have taken a wait-and-see attitude toward since the pandemic hit this spring, concerned about the prospect of rising non-performing loans and persistently low interest rates. However, like Deutsche Bank, analysts are turning increasingly bullish on JPM stock as a vaccine against Covid-19 nears and the economy shows signs of a tentative recovery.
Despite current headwinds, JPMorgan Chase is a stock to hold for the long term. In the past decade, the price per share has grown nearly 350%. The company remains a rock-solid financial institution.
What more can be said about Amazon at this point, or its stock? Back in 1997 when the company had its IPO, investors could have purchased one AMZN share for $18. A $1,000 investment in the stock back then would today be worth more than $1.5 million for a 150,000% return. It is almost difficult to process how much the largest online retailer’s stock has appreciated.
And the growth in share price has continued this year as people have shunned going out and ordered more items online than ever before. Since its March low, Amazon stock has doubled to $3,294.62. It has remained extremely resilient in the wake of the worst economic shock since the Great Depression, and continues to be a great long-term investment.
So what is next for AMZN stock? While many people are calling for a stock split, Amazon CEO Jeff Bezos and his management team are focused on expanding the company into areas ranging from drone deliveries to quantum computing. Now that it has mastered online shopping, there seems to be no stopping Amazon moving forward. The company should continue to see big returns from its AWS enterprise software business, as well as its popular Prime membership that grants people access to the streaming of movies and TV, as well as free shipping and delivery of items bought online.
All this from humble beginnings as an online book retailer.
Long-Term Stocks to Buy: Starbucks (SBUX)
No matter what happens, people still need their daily caffeine fix. And America’s premier coffee chain has adapted well to the new normal, increasingly focusing on digital sales, enhancing its loyalty program and aggressively expanding into new markets such as China. SBUX stock has responded and risen more than 50% from its March low to $86 a share.
Ten years ago, Starbucks stock was just breaking out of penny-stock territory. All told, the stock has grown 1,625% over the last decade, making it one to hold onto.
Moving forward, SBUX stock should continue to gather steam and rise above its 52-week high of $94.13 per share. Many analysts feel it is only a matter of time before the stock breaks through $100 a share for the first time. While the pandemic has slowed the company down somewhat, it still expects to open at least 500 new stores in China this year. And, Starbucks opened 130 net new stores in its third fiscal quarter. The company also continues to benefit from a brisk drive-thru and delivery business. And, ordering on mobile applications during the third quarter increased 6% from a year ago to make up 22% of total transactions.
Starbucks has proven that it is a nimble and adaptable company capable of growth and expansion in good times and bad. Long term, value investors should take note.
On the date of publication, Joel Baglole held positions in MSFT and DIS.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.