Buying stocks of quality companies and holding them long term is one of the simplest and most effective ways to achieve wealth. The best stocks for a long-term portfolio are those with reliable underlying businesses that provide consistent growth while weathering periods of volatility.
To find the top stocks for long-term growth, investors must be able to look past market fluctuations and focus on companies with durable competitive advantages, strong earnings and good management teams.
Below are three such stocks that can form the basis of a rock-solid long-term investment portfolio.
Berkshire Hathaway (BRK-B)
Warren Buffett is one of the greatest buy-and-hold investors of all time. Through his Berkshire Hathaway (NYSE:BRK-B) holding company, Buffett owns an eclectic mix of companies that includes railroads, insurers, furniture stores, and brands ranging from Fruit of the Loom undergarments to the Dairy Queen restaurant chain.
While Berkshire’s holdings may be diverse, they generally have one thing in common: They are some of the best long-term investments around. Together, Berkshire Hathaway’s businesses generate more than $300 billion in annual revenue and employ more than 400,000 people.
In total, Berkshire Hathaway holds nearly $350 billion worth of stocks. Buffett’s track record of beating the broader market with his long-term, buy-and-hold investing style is unprecedented. Between 1965 and 2020, Berkshire Hathaway’s compounded annual gain has nearly doubled that of the S&P 500.
To piggyback on Buffett’s success, you could purchase some of his top holdings. Or you could simply purchase shares of BRK-B to gain exposure to a group of ultimate long-term stocks to own.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP) is a diversified food and beverage company that has a history of providing reliable long-term gains for its shareholders. PEP stock has increased 17% in the past 12 months, is up 70% over five years, and has returned 500% since the depth of the 2008-09 financial crisis.
The company owns a broad mix of brands that include its signature Pepsi soft drink, Lay’s potato chips, Quaker oatmeal and Gatorade sports drink. Its diverse product line has helped it steadily grow revenue and earnings.
Most recently, the company reported better-than-expected Q1 results and raised guidance. Adjusted earnings per share (EPS) of $1.50 beat by 11 cents. Revenue of $17.9 billion exceeded the consensus forecast of $17.22 billion and was 10.2% higher on a year-over-year basis.
In addition to the stock’s long-term appreciation potential, PEP shares yield an attractive 2.8%.
Costco (COST)
Last up on today’s list of the ultimate long-term stocks to own is Costco (NASDAQ:COST), the membership-based warehouse club with more than 850 warehouses, predominately in the U.S., but also in Mexico, Canada, Australia, Europe and Asia.
Shares are up 17% over the past year, in line with the broader market. However, they are up 154% in the past five years, 377% in the past decade and 1,340% over the past 20 years, dwarfing the return of the S&P 500 in those time frames.
What makes COST one of the top stocks for long-term growth is its ability to perform well in good times and bad. People need groceries no matter what shape the economy is in, and this has helped Costco deliver strong results.
In its most recently reported quarter, Costco’s membership revenue hit $1.04 billion, up 5.4% year over year, while the company delivered surprise margin expansion. Meanwhile, the retailer’s membership renewal rate is north of 90%.
In addition to the company’s quarterly dividend, buy-and-hold investors have benefited from Costco’s history of special, one-time payouts, with The Motley Fool’s Daniel Sparks predicting another one could be coming soon.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
