Buying a stock with the intention of never selling it, or perhaps only selling it in a few decades, requires a level of conviction that most investments simply don’t justify. It is not enough to believe that a company is doing well today or that its management team is currently doing an effective job.
What is needed is a rock-solid economic model that has already withstood different market developments and economic regimes. Here are three stocks I’m comfortable buying today and holding until retirement at the earliest.
1. Vertex Pharmaceuticals
Even though I don’t own Vertex Pharmaceuticals (NASDAQ:VRTX)I would be willing to buy it now and hold it forever if I had the capital to spare.
Investing in Vertex means exposing yourself to the benefits of its research and development (R&D) programs, which is largely true for most pharmaceutical companies. What sets Vertex apart is that it holds a dominant position in the cystic fibrosis (CF) therapy market, thanks to the constant improvement of these therapies over the years.
Rather than letting its market share be swallowed up by generic drugs, the company is constantly advancing its candidates through clinical trials, so that a new cystic fibrosis drug comes out regularly. Most of its CF drugs are now combinations of previously marketed drugs, some of which are combined with new, more effective molecules. In the first quarter, sales of these drugs brought in nearly $2.7 billion, an increase of 13% from the previous year.
Since other drugmakers don’t have a presence in the CF market, this is essentially Vertex’s home territory. With such a deep understanding of cystic fibrosis and many drugs generating steady revenue from patients who need them on an ongoing basis, the company has additional revenue to devote to riskier forays into other markets.
And this process serves as an insurance policy to ensure the company’s future growth, which is another reason to be optimistic.
2. Costco Wholesale
Costco wholesale (NASDAQ: COST) represents a large portion of my portfolio and I plan to continue growing my position for at least the next two decades, assuming my investment thesis remains valid.
There are plenty of quantitative arguments for why Costco is a smart stock to buy and hold, most of which boil down to this chart:
As you can see, this is from the last 12 months net revenue, which currently stands at $6.8 billion, has grown steadily, and more or less continuously, throughout the company’s tenure as a public entity. This is the kind of performance Warren Buffett dreams of. All of this is made possible by an extremely simple business model in which Costco sells groceries and consumer goods in bulk at a very limited profit to members, who pay for the right to shop in its warehouses.
But steady profit growth doesn’t happen in a vacuum. Costco is a rare company because it does the right thing by its customers, employees, and shareholders.
Customers enjoy low prices, membership benefits, and excellent customer service. Employees are better paid than at other retailers and, because the company prefers to promote from within, they tend to stay and bring their experience over the long term in increasingly senior roles. And shareholders receive a regular and ever-increasing dividend, numerous stock buybacks, as well as a big special dividend once every few years.
What’s not to like?
3. Apple
Apple (NASDAQ:AAPL) is the last stock I’m willing to continue buying and holding for years and years.
Apple’s thesis is that collecting revenue streams from its phones, tablets, computers, cloud services and apps will continue to fuel the company’s growth, as customers tend to become loyal and buy again and again .
While it’s true that Apple products tend to be priced higher, that clearly hasn’t been a major barrier to adoption of its iPhones or Macs. Much like Costco, it has a history of regularly increasing its dividend, undertaking large stock buybacks, and consistently growing its profits.
Apple’s net profit over the last 12 months was $100.4 billion, an increase of 160% from 10 years ago. It offers plenty of growth opportunities and tailwinds to keep the party going for years to come.
On the one hand, it hasn’t even begun to seriously look at implementing artificial intelligence (AI) in its products or operations – but, according to its recent announcement regarding a collaboration with OpenAI, it will do it soon. Then, once it has captured billions of value, it will move on to the next step, perhaps linked to its Apple Vision augmented reality (AR) ecosystem.
And it’s this process of innovating products and capturing value over years that gives me confidence that the business will exist and be profitable for the foreseeable future and beyond.
Should you invest $1,000 in Vertex Pharmaceuticals right now?
Before buying Vertex Pharmaceuticals stock, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Vertex Pharmaceuticals was not one of them. The 10 selected stocks could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $808,105!*
Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns June 10, 2024
Alex Carchidi holds positions in Apple and Costco Wholesale. The Motley Fool holds positions and recommends Apple, Costco Wholesale and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
Top 3 Stocks I Would Buy Today and Hold Forever Without Any Hesitation was originally published by The Motley Fool
