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3 Stocks to Own For the Next Quarter-Century
Having a Long Time Horizon Makes Investing Easier Can evaluate long-term success independent of business and economic cycles. Gives the business enough time to take full advantage of growth opportunities. Lets you put short-term results into broader context. There are many advantages to focusing on stocks you can hold for 25 years or more. Source: Rick Hunter.
What Makes a Good Stock to Hold for 25 Years? Well-established stocks are reliable but have less growth potential. New players in up-and-coming high-growth areas have huge potential but are riskier. Consider personal need for capital appreciation vs. income. Diversification makes it easier to take risks with individual picks. If you want to hold a stock for 25 years, you should know where the company is and where it’s going. Source: Wikimedia Commons.
Idea #1: Berkshire Hathaway (BRK-A) Source: TMF. This Warren Buffett-led conglomerate takes advantage of the capital provided by its insurance operations to invest in a wide array of businesses in industries across the economy.
Does Berkshire Hathaway Belong in Your Portfolio? Reasons to Own Berkshire: Strong track record of long-term returns (15% average annual return since 1990) Strategic vision focuses on investing opportunities with long time horizons, aligning interests with shareholders Buffett’s reputation gives Berkshire access to investments that competitors can’t get Reasons Not to Own Berkshire: Uncertainty about success of Buffett’s eventual successor Stock doesn’t provide any income through dividends
Idea #2: MasterCard (MA) Source: MasterCard. The debit- and credit-card network provider isn’t the biggest, but it has a strong presence in overseas markets and has attractive opportunities for worldwide growth.
Does MasterCard Belong in Your Portfolio? Reasons to Own MasterCard: Powerful early stock returns (39% annually since 2006) Emphasis on international markets gives it maximum growth potential compared to mature developed markets in U.S. No. 2 position provides motivation to catch up to and surpass its primary rival. Reasons Not to Own MasterCard: Competition from other card networks and alternative electronic-payment methods could eat into its core business. Dividend yield is just 0.7%, despite explosive recent growth.
Idea #3: PepsiCo (PEP) Source: PepsiCo. This beverage giant is best known for its soft drinks, but it also has an impressive lineup of snack foods to help add diversification and growth opportunities. Source: Jeepers Media under Creative Commons License..
Does PepsiCo Belong in Your Portfolio? Reasons to Own PepsiCo: 3% dividend yield with 43 straight annual increases. Solid long-term returns (11% annual average since 1990). Emphasis on building a strong reputation in emerging markets has created opportunities in high-growth areas. Reasons Not to Own PepsiCo: Concerns about core soft-drink business could hurt long-term beverage sales. Strong competition from its beverage-giant arch-rival and from snack-food sellers that are trying to mimic its core strategy.
Create the Long-Term Portfolio You Need Concentrate on high-quality businesses. Look for market leaders or up-and-coming upstarts with a true competitive advantage. Set your sights high! Be patient to squeeze the most profit. No company is assured success over a 25-year period, but you can put the odds in your favor. Image: TMF.
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