Many people view long-term investing as buying and holding a stock for several years instead of succumbing to the psychological temptation of short-term trading. However, holding stocks for decades instead of years could create even greater generational gains that you could potentially pass on to your children and grandchildren.
For example, the S&P 500 has generated a total return of 102% over the past five years. But over the past 10 years, it has generated a total return of 209%. If we extend this chart over two decades, his total return jumps to 528%.
Buying and holding stocks for decades can be a hit-or-miss strategy because many companies simply aren’t built to last that long. Nonetheless, I think these three stocks (which I personally own) check all the right boxes as “buy and forget” investments: Amazon (NASDAQ:AMZN), Free market (NASDAQ: MELI)And LVMH (OTC: LVMUY).
1. Amazon
Amazon is the world’s largest e-commerce and cloud infrastructure company. Its advertising sales across its own e-commerce marketplaces, websites and streaming media platforms also make it one of the world’s leading advertising companies.
Over the past 20 years, Amazon shares have increased 5,470%. This growth was initially driven by the expansion of its e-commerce platform, but its Amazon Web Services (AWS) cloud platform has also grown over the past decade, with its higher-margin revenue driving the the company’s main profit driver. The expansion of AWS and its higher-margin advertising business should also offset declining margins in its e-commerce marketplace and brick-and-mortar stores for the foreseeable future.
With a market cap of $1.5 trillion, Amazon is unlikely to replicate these massive gains over the next 20 years. It also faces stiff competition in the e-commerce market little challengers as PDDit is Temu and Shein, while Microsoft remains a formidable enemy in the cloud infrastructure market.
Despite all these challenges, I think Amazon remains a great stock to buy and hold for the coming decades. It takes scale to survive and thrive in the e-commerce and cloud markets over the long term, and Amazon continues to chip away at both companies’ profits as many of its smaller competitors burn out in this tough market.
2. Free Market
MercadoLibre is Latin America’s largest e-commerce and digital payments company. It generates most of its revenue in Brazil, Mexico and Argentina.
The company went public in 2007 and its shares rose approximately 8,340% from their IPO price. This growth was driven by the expansion of its first-party logistics network – which traversed difficult terrain across Latin America – as well as increasing internet penetration rates and income levels. This pioneer advantage prevented Amazon, Sea‘s Shopee and other foreign challengers to gain a significant foothold in the region.
MercadoLibre has already served 120 million unique active users across its e-commerce and fintech platforms in its last quarter, but it still has plenty of room to grow. According to Mordor Intelligence, the Latin American e-commerce market could grow at a compound annual growth rate (CAGR) of 19% from 2023 to 2028.
With a market capitalization of $77 billion, MercadoLibre is still much smaller than Amazon. It also generated consistent profits in 2021 and 2022, thanks to economies of scale that ultimately occurred and diluted its logistics and payment processing costs. Analysts expect those profits to continue to rise, so its business model is clearly designed to last for decades and drive its shares even higher.
3. LVMH
LVMH is the world’s largest high-end luxury company. Its 75 well-known brands include Louis Vuitton, Dior, Loewe, Fendi, Tiffany & Co., Bulgari and Sephora, which generally weather recessions and economic expansions well.
Unlike mid-range luxury brands, which rely heavily on middle-class buyers, LVMH targets wealthier customers who are well insulated from macroeconomic headwinds. It is broadly diversified across a wide range of luxury markets (wine and spirits, fashion and leather, perfumes and cosmetics, watches and jewelry, and specialty retail) and countries. Its sales in China and other emerging markets have particularly exploded in recent years.
LVMH’s U.S.-listed OTC shares have generated a total return of more than 410% over the past 10 years and grown its market capitalization to nearly $400 billion. It achieved this impressive growth even as the global economy was reeling from recessions, geopolitical conflicts and the COVID-19 pandemic, and this resilience suggests it will remain an ongoing investment for decades to come, as it gradually consolidates a large part of the high-level economies. luxury end market.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun holds positions in Amazon, Lvmh Moët Hennessy-Louis Vuitton, Société Européenne, MercadoLibre and Sea Limited. The Motley Fool holds positions and recommends Amazon, MercadoLibre, Microsoft and Sea Limited. The Motley Fool has a disclosure policy.
3 actions that could create lasting generational wealth was originally published by The Motley Fool
