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 doing an effective job right now.
What is needed is a rock-solid business model that has already weathered various market fluctuations and different economic regimes. Here are three stocks I can easily buy today and hold until retirement at the earliest.
1. Vertex Pharmaceuticals
While I am not the owner Vertex Pharmaceutica (NASDAQ: VRTX)If I had capital to spare, I would be willing to buy it right now and then hold it forever.
Investing in Vertex means benefiting from the upside of its research and development (R&D) programs, which is largely true of most pharmaceutical companies. What makes Vertex different is that it has cornered the market for cystic fibrosis (CF) therapies as it has improved these therapies time and time again over the years.
Rather than allowing its market share to be gobbled up by generics, the company continually advances its candidates through clinical trials so that a new CF drug comes to market regularly. Most CF medications are now combinations of previously marketed medications, some of which involve newer molecules that are more effective. In the first quarter, sales of these drugs generated nearly $2.7 billion, an increase of 13% from a year earlier.
Since other drugmakers don’t have a presence in the CF market, this is essentially Vertex’s home turf. So with such a deep understanding of CF, and a plethora of drugs generating steady revenue from patients who need them all the time, the company has extra revenue to spend on riskier forays into other markets.
And that process serves as an insurance policy to guarantee the company’s future growth, which is another reason to be optimistic.
2. Costco Wholesale
Costco Wholesale (NASDAQ: COST) makes up a large portion of my portfolio, and I plan to continue adding to my position over the next twenty years, assuming my investment thesis remains valid.
There are many 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, the trailing twelve months’ net income, which currently stands at $6.8 billion, has grown consistently and more or less without interruption throughout the company’s entire tenure as a public entity. This is the kind of gig Warren Buffett dreams of. It’s all made possible by a dead-simple business model in which Costco sells groceries and consumer goods in bulk at a very small profit to members, who pay for the right to shop at its warehouses.
But steady earnings growth doesn’t happen in a vacuum. Costco is a rare company because it does justice to its customers, its employees and its shareholders.
Customers receive low prices, membership benefits and excellent customer service. Employees are rewarded better than at other retailers, and because the company prefers to promote from within, they tend to stick around and use their experience for the long term in increasingly important roles. And shareholders receive a regular and steadily increasing dividend, lots of share buybacks and a big special dividend payment every few years.
What’s not to like about it?
3. Apple
Apple (NASDAQ: AAPL) is the last stock I’m willing to continue buying and holding for years to come.
Apple’s thesis is that amassing the 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 from them again and again.
While it’s true that Apple products are often priced high, that clearly hasn’t been a major barrier to iPhone or Mac adoption. Like Costco, it has a history of steadily raising its dividend, pursuing extensive share buybacks and consistently increasing profits.
Apple’s trailing-twelve-month net income is $100.4 billion, up 160% from a decade ago. It has plenty of growth opportunities and tailwinds to keep the party going for years to come.
First of all, the company hasn’t even started to seriously look into implementing artificial intelligence (AI) into its products or operations, but according to the recent announcement about a partnership with OpenAI, it will soon. Once it has extracted billions in value from that, it will move on to the next thing, perhaps related to its augmented reality (AR) Apple Vision ecosystem.
And it’s that process of product innovation and capturing value over years that gives me confidence that the company will survive and be profitable, for the foreseeable future and beyond.
Should you invest $1,000 in Vertex Pharmaceuticals now?
Consider the following before purchasing shares in Vertex Pharmaceuticals:
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Alex Carchidi has positions in Apple and Costco Wholesale. The Motley Fool holds positions in and recommends Apple, Costco Wholesale, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
3 Top Stocks I’d Buy Today and Hold Forever Without Hesitation was originally published by The Motley Fool
