{"id":44764,"date":"2013-11-28T21:23:31","date_gmt":"2013-11-29T02:23:31","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=44764"},"modified":"2013-11-28T21:23:31","modified_gmt":"2013-11-29T02:23:31","slug":"5-stocks-to-buy-and-hold-forever","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/11\/28\/5-stocks-to-buy-and-hold-forever\/","title":{"rendered":"5 Stocks to Buy and Hold\u2013Forever"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a><\/p>\n

Forever is a long time, particularly in the stock market.\u00a0 The Wall Street Journal<\/i> archives are full of stories of companies that were once the toast of the town\u2026only to fall into irrelevance or bankruptcy.<\/p>\n

Enron<\/b>, Lehman Brothers<\/b>, BlackBerry<\/b> (<\/span>BBRY<\/a>)<\/span> and JC Penney<\/b> (<\/span>JCP<\/a>)<\/span> are all fine examples of companies that were once leaders in their respective industries. Enron and Lehman Brothers are long dead, and BlackBerry and JC Penney are currently fighting for their lives and may not survive 2014.<\/p>\n

Related: JC Penney on Express Train to Oblivion<\/a><\/strong> and BlackBerry Chiefs Walk Away \u2013 You Should Follow<\/a><\/strong><\/p>\n

So how do you know which stocks are \u201cbuy and hold forever\u201d stocks and which are at risk of going the way of BlackBerry or Penney?\u00a0 There are no rules that are guaranteed to work 100% of the time, but these guidelines will get you close:<\/p>\n

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  1. The company is a leader in its respective industry.<\/li>\n
  2. The industry is not particularly susceptible to technological disruption.<\/li>\n
  3. Demand for the company\u2019s products is relatively immune from fickle consumer tastes.<\/li>\n
  4. The company has a \u201cblack swan proof\u201d balance sheet with modest amounts of debt.<\/li>\n
  5. The company has a long history of prudent shareholder-friendly actions, such as paying and raising the dividend.<\/li>\n<\/ol>\n

    The first bullet is actually the least important, as all of the spectacular blowups I mention above were once industry leaders.\u00a0 But I include it because, when combined with the other four points, we get the makings of a quality \u201cbuy and hold forever\u201d list.<\/p>\n

    You will notice that banks, retail stores, and technology companies are conspicuously absent from the list.\u00a0 There is a good reason for that.\u00a0 With few exceptions, technology companies tend to have short lives, and those that stick around for the long haul do so by adapting.\u00a0 Apple <\/b>(<\/span>AAPL<\/a>)<\/span>, for example, transformed itself from a struggling computer maker to the dominant consumer electronics company.\u00a0 But for every Apple, there are a lot more like BlackBerry\u2014companies that fell victim to technological disruption and failed to adapt in time.<\/p>\n

    Likewise, because they are by nature highly-leveraged and subject to macro shocks, banks are a no-go on the buy-and-hold-forever list.\u00a0 And finally, JC Penney is a warning to all retailers, even well-managed ones like Wal-Mart<\/b> (<\/span>WMT<\/a>)<\/span> and Target<\/b> (<\/span>TGT<\/a>)<\/span>.\u00a0 Penney was once an innovative leader too; its catalogue business was the precursor to online shopping as we know it today.\u00a0 Wal-Mart and Target were the disruptors that wrecked Penney\u2019s business.\u00a0 And unless they continue to adapt to fend off competition from Amazon.com<\/b> (<\/span>AMZN<\/a>)<\/span>, they will eventually succumb to Penney\u2019s fate as well.<\/p>\n

    So, with no further introduction, let\u2019s jump into the list.<\/p>\n

    1. Diageo<\/strong><\/p>\n

    I\u2019ll start with global drinks giant Diageo<\/b> (<\/span>DEO<\/a>)<\/span>, one of my very favorite long-term holdings.<\/p>\n

    Diageo meets all of our criteria; it\u2019s the leading premium spirits company in the world, \u00a0its products are as close to technology proof as you\u2019re going to get, its liquor brands span across all tastes and preferences, its business is robust enough to survive economic shocks, and Diageo is a Dividend Achiever par excellence.<\/p>\n

    I once, tongue in cheek, argued that Diageo was the ultimate 12- to 18-year play<\/a> in reference to its premium scotch brands:<\/p>\n

    Anyone can start an exclusive new vodka brand given a sufficient pool of capital. Consider the example of Grey Goose. American billionaire Sidney Frank created the brand in 1997 and sold it to Bacardi just seven years later for a quick $2 billion. Had he opted instead to create a new scotch brand, he would not have lived long enough to enjoy its success. When the late Mr. Frank passed away in 2006, his first batch of scotch still would have needed another five years or more of aging to be taken seriously.<\/p>\n

    Diageo\u2019s dominance of scotch via Jonnie Walker and its other brands is a competitive advantage that won\u2019t be disappearing any time soon.\u00a0 Diageo also gives you access to the consumers of tomorrow; the company currently gets 42% of its sales from emerging markets, and it will soon get more than half.<\/p>\n

    The stock currently pays a dividend of 2.7%.\u00a0 I recommend you buy Diageo, instruct your broker to reinvest the dividends, and hold on to it\u2014forever.<\/p>\n

    2. Unilever<\/strong><\/p>\n

    Next on the list is Anglo-Dutch consumer goods and packaged foods company Unilever PLC<\/b> (<\/span>UL<\/a>)<\/span>.<\/p>\n

    If you\u2019ve ever set foot in a supermarket anywhere in the world, then you are familiar with Unilever\u2019s brands.\u00a0 Among many others, they include: Axe, Ben & Jerry’s, Bertolli, Dove, Lipton, St Ives, VO5, and Vaseline.\u00a0 If there was ever a set of products that was unlikely to fall to technological obsolescence or a black swan event, it would \u00a0be Unilever\u2019s.<\/p>\n

    But while its products may be mundane consumer staples in the West, Unilever has excellent growth prospects abroad.\u00a0 Unilever gets nearly 60% of its revenues from emerging markets, and while that has\u00a0hurt the company this past quarter<\/a>, it ensures that it has a bright future as living standards continue to rise.<\/p>\n

    Unilever has one of the strangest share structures of any company on the planet.\u00a0 It\u2019s listed in both London and Amsterdam as two separate companies, Unilever PLC and Unilever NV<\/strong> (<\/span>UN<\/a>)<\/span>, respectively, and both trade in the U.S. as ADRs.\u00a0 Back in the 1930s, management found it easier and cheaper to do a \u201cbusiness merger\u201d rather than a \u201clegal merger\u201d between the British and Dutch companies that today make up the Unilever Group.<\/p>\n

    Don\u2019t be distracted by any of this.\u00a0 For all intents and purposes, UL and UN are the same.\u00a0 The only effective difference is that UN is subject to 15% withholding taxes on dividends in the Netherlands, whereas UL is not. \u00a0This matters, as the dividend is an important part of Unilever\u2019s returns.\u00a0 The company has raised its dividend every year for over 25 years and currently yields 4.0%. For this reason, I recommend UL over UN.<\/p>\n

    3. Heineken<\/strong><\/p>\n

    Next on the list is global megabrewer Heineken<\/b> (<\/span>HEINY<\/a>)<\/span>.\u00a0 Beer is no longer much of a growth industry in the West, but demand is stable.\u00a0 And in many emerging markets, beer is still a phenomenal growth opportunity and an excellent way to invest in rising incomes among the new global middle class.<\/p>\n

    Heineken gets about half of its revenues and 64% of its sales by volume from emerging-market countries, and it has excellent positioning in Africa, the last real investing frontier of any size. Africa already accounts for 22% of Heineken\u2019s sales by volume and 14% of revenues, and this percentage will only increase with time as African consumer trade-up from home brews to branded beer.<\/p>\n

    Prices are considerably higher in developed countries, which explains the gap between revenues and sales by volume.\u00a0 Heineken sells less beer in the West, but it charges more for the beer it sells.\u00a0 As incomes rise in emerging markets, expect this gap to close.<\/p>\n

    30 years from now, Microsoft<\/strong> (<\/span>MSFT<\/a>)<\/span> and Apple may no longer exist, or if they do you can bet that they will look vastly different than they do today.\u00a0 But 30 years from now, beer drinkers the world over will still be cracking open bottles of their favorite brews.<\/p>\n

    Heineken trades for a reasonable 17 times earnings and pays a modest 1.8% dividend.\u00a0 Buy it and hold it\u2026forever.<\/p>\n

    4. Realty Income<\/strong><\/p>\n

    Moving away from consumer brands, I want to highlight my favorite long-term REIT holding, Realty Income<\/b> (<\/span>O<\/a>)<\/span>, a conservative triple-net REIT that owns things like pharmacies, gyms and distribution centers.\u00a0 Realty Income is very selective in both the properties it chooses and the tenants responsible for paying the rent.<\/p>\n

    Realty income has a 44-year track record as a landlord.\u00a0 It owns 3,800 commercial properties in 49 states and Puerto Rico, all of which are leased under long-term leases typically of 10-20 years. To spread the risk, Realty Income\u2019s tenants are spread across 200 companies and 47 industries.<\/p>\n

    Realty Income has been a dividend-paying and dividend-raising monster since going public in 1994.\u00a0 In 19 years, it\u2019s made 519 dividend payments and hiked the dividend 73 times. Importantly, unlike many of its brethren in the REIT space, Realty Income sailed through the 2008-2009 meltdown without a scratch.\u00a0 Not only did it maintain its dividend throughout, Realty Income actually raised<\/i> it.<\/p>\n

    I have no idea what the world will look like 30 years from now.\u00a0 But I have no doubt in my mind that the three rules of real estate will be the same then as today: location, location, location.<\/p>\n

    Realty Income has taken a beating of late, as have most income-oriented investments.\u00a0 Fears of rising bond yields and Fed tapering have scared away would-be investors.\u00a0 Use this as an opportunity.\u00a0 Buy Realty Income, enjoy its 5.6% dividend, and hold\u2014forever.<\/p>\n

    5. Nestl\u00e9<\/strong><\/p>\n

    Last on the list is the Swiss confectionary giant Nestl\u00e9<\/strong> (<\/span>NSRGY<\/a>)<\/span>.<\/p>\n

    Nestl\u00e9 sells food and nutrition products; everything from baby formula and chocolate milk to instant coffee and packaged food. These are the kinds of products that tend to have stable demand, even in a recession. Times would really have to be hard for a person to forgo ice cream or chocolate candy.<\/p>\n

    Nestl\u00e9 currently yields 3.1%, and as you have come to expect, that dividend is growing. Nestl\u00e9 has grown its dividend every year since 1996, and its dividend has grown at a 12.5% annual clip since 2001. (Note: these rates are in the company\u2019s reporting currency, the Swiss franc.)<\/p>\n

    Few companies in the world have as global a footprint as Nestl\u00e9. The company is active on every inhabited continent, and it gets 30% of its sales from fast-growing emerging markets. This is expected to be as high as 45% by the end of this decade, meaning that Nestl\u00e9 has ample room for continued growth.<\/p>\n

    I cannot be certain of much is this world, but of this I have no doubt: 30 years from now, Nestl\u00e9 will still be in business, and the company will be selling a lot more food and drink products than it is today. Its dividend will also be a lot higher.<\/p>\n

    This article first appeared on InvestorPlace<\/a>.<\/p>\n

    Charles Lewis Sizemore, CFA, is the editor of\u00a0Macro Trend Investor<\/b>\u00a0and chief investment officer of the investment firm Sizemore Capital Management.\u00a0<\/em>Click here<\/span><\/b><\/em><\/a>\u00a0<\/i><\/strong><\/a>to receive his\u00a0FREE weekly e-letter covering market insights, global trends, and the best stocks and ETFs to profit from today\u2019s exciting megatrends.<\/em><\/p>\n

    This article first appeared on Sizemore Insights as 5 Stocks to Buy and Hold–Forever<\/a><\/p>\n

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