Young and middle-aged investors should be looking for many forever stocks to buy at this point. Given the exceptionally strong businesses that the companies chosen for this column have, the lucrative sectors in which they operate and their lack of vulnerability to competition, you can hold these names until you retire. What’s more, they probably won’t cost you any sleep at night. In fact, here are those seven best forever stocks to buy and hold in 2023.
| GM | General Motors | $33.08 |
| NOW | ServiceNow | $443.68 |
| ON | ON Semiconductor | $79.17 |
| AMZN | Amazon.com | $103.63 |
| MGM | MGM. | $45.95 |
| MCD | McDonald’s | $298.07 |
| JPM | JPMorgan | $138.92 |
General Motors (GM)
On April 26, I identified General Motors (NYSE:GM) as one of several “growth stocks with huge return potential for long-term investors.” As reasons for my bullishness, I cited the automaker’s “beat-and-raise” first-quarter results, and its ability to benefit from strong travel trends in its two major markets, the U.S. and China. In the past, I’ve also been upbeat about the company’s upcoming electric vehicles and its autonomous vehicles subsidiary, Cruise.
Making me more bullish on the long-term outlook of GM stock, one of the most well-respected auto-stock analysts, Morgan Stanley’s Adam Jonas, upgraded the shares to “overweight” from “equal weight.” The analyst wrote that the automaker’s gasoline-powered vehicles had surpassed his expectations, while GM has reduced its spending. Jonas believes that the company’s EV strategy is prudent, as the company is giving itself the opportunity to either accelerate or decelerate its transition to Evs. He set a price target of $38 on the name.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) is one of the great forever growth stocks to own because it does not have a great deal of competition. It’s growing rapidly. It’s profitable. It saves its customers a great deal of money, and, not surprisingly, NOW’s customers are very loyal to it.
Those characteristics helped the company report extremely strong first-quarter results on April 26. NOW’s top line soared 22% year-over-year to $2.1 billion, while its backlog climbed 25% YOY, excluding currency changes. On the bottom line, its net income jumped 100% to $150 million. Finally, NOW hiked its fiscal 2023 subscription sales outlook to $8.47 billion to $8.52 billion versus its previous guidance of $8.44 billion to $8,5 billion.
Also noteworthy is that 85% of the company’s net new backlog is derived from its current customers.
Deutsche Bank responded to the results by raising its price target on NOW stock to $545 from $525. The bank is upbeat on the tech firm’s “execution” and believes that NOW “is being prioritized by customers in a volatile macro environment,” The Fly reported.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON) is another name I’m bullish on. In my April 4 column on “stocks to buy for the massive rally ahead,” I expressed bullishness about ON due to its high leverage to the quickly growing automotive and industrial chip markets.
ON’s first-quarter results demonstrated that the chip maker is indeed a big beneficiary of the large increases in the number of semiconductors being utilized by automakers and industrial companies.
Specifically, its automotive revenue jumped a huge 38% year-over-year last quarter, enabling its top line to come in $30 million above analysts’ average estimate. The company’s industrial sales increased 1% in Q1 versus Q4, even though Q4 is much seasonally stronger than Q1.
Amazon.com (AMZN)
Many investors are concerned that Amazon’s (NASDAQ:AMZN) cloud unit revenue climbed just 11% year-over-year last month and increased only 16% year-over-year in its fiscal Q1. However, Amazon CEO Andy Jassy noted that AWS is intensively utilizing AI, and is incorporating technology from a number of top AI startups in its cloud offerings. As a result, I’m bullish on the longer-term outlook of AWS.
Making me even more upbeat on Amazon’s longer-term potential, Morgan Stanley thinks that AWS can benefit from exploiting the “largely untapped” public clouds market. The bank estimates the total value of this sector at an incredible $2.5 trillion.
On the e-commerce front, Amazon should benefit in the medium-to-long term from the normalization of consumers’ goods-to-experiences spending ratio. Moreover, its dominance in e-commerce throughout much of the Western world is unlikely to be challenged in the foreseeable future.
Also encouragingly, Jassy reported that the company’s prescription drug business, Amazon Pharmacy launched in 2020, is “off to a good start” and “continuing to grow.” Staying with the healthcare space, I agree with Jassy’s assessment that the company can use the network of clinics that it acquired, together with Amazon Clinic, to build a sizeable, needle-moving healthcare business.
MGM (MGM)
In line with my previous predictions, MGM (NYSE:MGM) is clearly clicking on all cylinders as both Las Vegas and Macau casinos make big comebacks.
MGM reported standout first-quarter results, as its top line soared 36% versus the same period a year earlier to $3.87 billion, $280 million above analysts’ average estimate. The casino operator’s property EBITDAR, excluding certain items, climbed 41% year-over-year to a record $1.1 billion.
Conventions are returning to Las Vegas, and the city and MGM will benefit from many other positive catalysts, including the popular Formula One auto race later this year, the city’s relatively new NFL team, and, potentially, a Major League Baseball team down the road.
MGM’s gross gaming revenue from Macau came in at 78% of the levels of Q1 2019, and its revenue from the region should climb meaningfully as China’s travel boom continues. MGM’s online betting joint venture, BetMGM reported that its revenue jumped 76% year-over-year last quarter, while its overall market share was a significant 17%. MGM expects BetMGM to become profitable by the end of this year. As more parts of the U.S. allow online betting and BetMGM’s brand strengthens, the joint venture’s profit should jump tremendously.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is clearly a very popular institution, and that status is unlikely to change in the years ahead. Moreover, due to its relatively cheap offerings, MCD stock will not drop drastically during economic downturns.
Its tremendous popularity is reflected by many data points, including the fact that its traffic rose in all of its operating regions last quarter, despite the significant price increases that it implemented, while its global same-store sales jumped 12.6% year-over-year. As a result of those price hikes and traffic gains., MCD expects to generate a healthy operating margin of roughly 45% this year.
In the wake of McDonald’s Q1 results, BMO Capital raised its price target on the stock to $325 from $300 as the bank believes that the restaurant chain’s “strong momentum” and market share increases should continue going forward. BMO kept an “outperform” rating on the shares.
JPMorgan (JPM)
After acquiring First Republic’s attractive assets in a “sweetheart” deal, JPMorgan has become very attractive to conservative, long-term investors.
According to my estimates, the transaction will give JPM $62 billion of net new deposits ($92 billion of deposits less $25 billion that JPM will refund to other large banks that put money in FRC in March and $5 billion that JPM placed in First Republic). The deal is expected to raise the bank’s bottom line by an estimated $500 million annually. All while it paid $10.6 billion for “$18B in net assets ”
The deal will also add a meaningful number of new, very rich wealth management clients to JPM’s roster and many other high net worth clients. Moreover, the FDIC has agreed to ” cover 80% of credit losses over the next seven years for the residential mortgages [of First Republic’s assets acquired by JPM]and the next five years for the commercial loan portfolio.”
JPM’s EPS is now expected to climb to $14.87 in 2025, up from $12.09 last year. Given the fact that JPM has said its estimates of its profits from the First Republic deal are conservative and I believe that many analysts are underestimating the strength of the U.S. economy, I wouldn’t be surprised if its EPS comes in at around $17 in 2025.
If my estimate proves correct, the shares are trading for eight times its 2025 EPS, which is an attractive valuation.
As of the date of publication, Larry Ramer owned shares of MGM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
