HomeBusiness2 Growth Stocks to Buy and Hold Forever

2 Growth Stocks to Buy and Hold Forever

Famed investor Warren Buffett has previously said that his preference is to own “a great company forever.” The wisdom behind his buy-and-hold approach is that it forces you to invest in better companies, which goes a long way toward building lasting wealth in the stock market.

The point is, you don’t have to be a business expert to be successful in the stock market. Warren Buffett said that even he doesn’t understand all the technical aspects of the companies he invests in. You can build wealth simply by investing in companies you know and that have a track record of consistent growth.

With that said, let’s take a look at two companies with strong brands and loyal customers that can deliver growth for shareholders in the coming years.

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Starbucks (NASDAQ:SBUX) has long been a worthwhile investment and the company continues to find ample opportunities to expand its store base and grow sales. The stock is down 13% in the last three years, but this just means that investors are getting more value for every dollar of revenue it generates. The stock’s dividend yield is up to 2.4%, signaling a great buying opportunity.

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In addition to the brand, the advanced digital ordering capabilities are a key factor explaining the company’s success. Starbucks has been a leader in the restaurant industry in this critical area for years, and it’s one reason Starbucks has a growing pool of 34 million active Rewards memberships in the US.

The future growth path for Starbucks is simple. A combination of new store growth, existing store growth and expanding margins should deliver a 15% to 20% increase in annual profits, based on management’s target. In its most recent quarter, Starbucks posted a 20% year-over-year adjusted profit increase.

Starbucks has built a powerful brand that attracts many repeat purchases among its Rewards members. This is the main reason why investors can be confident that the company will be around for decades to come, increasing the value of their investment.

Moreover, this is a good time to buy shares. The stock trades at a market average price-to-earnings ratio of 23, which could undervalue the company’s prospects for above-average earnings growth.

2. Amazon

Amazon (NASDAQ: AMZN) shares have returned 861% over the past ten years. The stock has recovered from last year’s sell-off, but is still a good growth stock to buy for a number of important reasons.

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The company is still in the early stages of pursuing a growing $5 trillion global e-commerce market. Amazon’s Prime membership serves as a key gateway to the brand for international members. International sales made up just 24% of Amazon’s total sales in the fourth quarter of 2023, but grew 13% year over year when excluding currency fluctuations.

Another catalyst is that Amazon, after years of big losses in its international segment, is starting to turn more revenue into profit. The global company reported an operating loss of $419 million in the fourth quarter – a big improvement from the $2.2 billion loss in the previous quarter.

Across all segments, Amazon generated $32 billion in free cash flow last year. This is the actual amount left after all expenses and is money that can be allocated to profitable new opportunities. For example, Amazon is currently investing in artificial intelligence (AI) tools that management believes will add billions in revenue over the long term.

Amazon’s leading cloud services business gives the company a significant advantage in using AI to improve its retail operations through product recommendations and other new tools the company may release. It is for these reasons that Amazon will continue to grow in value for long-term shareholders.

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Should You Invest $1,000 in Starbucks Now?

Before you buy shares in Starbucks, consider the following:

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 Starbucks wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

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*Stock Advisor returns February 26, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Starbucks. The Motley Fool has a disclosure policy.

2 Growth Stocks to Buy and Hold Forever was originally published by The Motley Fool

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