Investing in long-term stocks sounds easy. Investors simply buy a given stock, and hold it for a very long period of time, raking in the rewards. This so-called buy and hold investing style has worked wonders for many prominent investors, and is among the most profitable strategies out there, contrary to what traders and speculators will tell you.
However, the thing is, over the course of a few decades, many companies go bankrupt, get caught up in a sector-wide scandal, are forced to close or consolidate and can shut their doors for a wide range of reasons. Thus, it’s probably worthwhile for even the most patient and care-free buy and hold investors to check their portfolios once a year and rebalance accordingly.
Additionally, it’s worth noting that many of the most profitable stocks do not make a significant impact immediately. Instead, long-term stocks tend to possess endurance, can keep rivals away and maintain steady growth for many years. Investing for the long term has advantages, as it allows you to team up with these exceptional businesses and benefit as a stockholder.
With that said, here are three of the top long-term stocks for such investors, in my view.
Berkshire Hathaway (BRK-A, BRK-B)
Before making a long-term investment decision, analyzing a stock’s fundamental strength is crucial. For buy and hold investors looking to take advantage of famous billionaire Warren Buffett’s excellent strategies for investing in long-term stocks, Berkshire Hathaway (NYSE: BRK-A, NYSE:BRK-B) is frequently recommended. Nonetheless, it’s advisable to thoroughly examine the stock before committing any funds.
Berkshire’s operating cash flow, the metric Buffett himself suggests investors should use to value the stock, did decline slightly in 2022 on a year-over-year basis. That said, much of this decline had to do with accounting-related issues within the company’s financial and insurance holdings. Thus, this conglomerate is difficult to value in aggregate. It’s the company’s holdings that are worth considering, as well as Buffett’s typically long-term investing time horizon with said investments.
I’m going to touch on two key Berkshire holdings in this article, which I also think are worth single-stock investing for those looking to buy and hold. Accordingly, I won’t belabor the reasons to own Berkshire stock, other than the fact that Buffett and his team know what they’re doing.
Although Berkshire Hathaway may not outperform the S&P 500 index yearly, it has consistently delivered positive returns in most years. According to the 2022 shareholder letter, Berkshire’s stock has declined in only four of the past 23 years since 2000, the S&P 500 declined in 6 in the same timeframe.
Coca-Cola (NYSE:KO) is a simple company that manufactures, holds trademarks for and sells various beverage products. The company’s revenue has consistently grown over the last century due to brand expansion, population growth and price increases.
Coca-Cola is considered one of the top dividend stocks to invest in during a recession due to its consistent demand, reliable dividend payments and impressive earnings growth. It is a stock worth considering for long-term investment goals.
Investors may find holding onto blue chip stocks like Coca-Cola for a long time to be profitable. However, considering valuation is essential, especially if the investment horizon is five years. Currently, Coca-Cola’s forward price-to-earnings ratio stands at 24-times, higher than the S&P 500’s price-earnings ratio of 18-times, despite having a growth outlook which is comparable to the broader market’s historical growth rate.
Investors are willing to pay more for Coca-Cola due to its dependable and consistent growth. This makes sense in the current stock market, which is quite uncertain following a challenging 2022 and concerns regarding the banking sector at the beginning of 2023.
For buy and hold investors, outstanding profitability is a key factor to consider with any core holding. Companies that can increase their earnings per share consistently over time tend to outperform those that continue to lose money. It’s a simple equation.
In the world of profitability, perhaps no stock is better than Apple (NASDAQ:AAPL). Shares of AAPL stock have more than tripled over the last five years.
The tech giant’s $2.65 trillion valuation makes it comparable to a superpower. The business has performed admirably, with a 34% rise in equity value from the start of the year. This is a company that continues to lead the way. If you’re a passive investor who owns an index fund, you already likely own Apple in a heavy weighting already. This is the bedrock of the U.S. tech economy, at least for now.
With a solid cash position, substantial rise in revenue, and high revenue margins, AAPL has excellent economic foundations in every regard.
Therefore, it makes a fantastic complement to an existing collection of blue-chip stocks. AAPL is currently a consensus strong buy, according to analysts, with an average price target of $174.28, indicating a potential upside of 4%.
On the date of publication, Chris MacDonald has a position in BRK-B, AAPL, KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.