When building a long-term stock portfolio, it’s crucial to find great businesses with room to grow, competitive advantages and strong balance sheets.
These companies are few and far between, but investing in them over years or decades is the most reliable way to build long-term wealth.
Here are three slam-dunk stocks to consider buying now and holding forever.
Software giant Microsoft (NASDAQ:MSFT) has been one of the best stocks to hold onto over the past two decades. Today, the company is a dominant force in its industry with a strong moat, massive recurring revenue streams and widespread use among both businesses and consumers.
Despite no longer turning in the rapid growth it saw in the 1990s and early 2000s, Microsoft continues to perform exceptionally well for a business of its size.
In Q2, the company achieved revenue growth of 12 percent, bringing in $51.9 billion. Earnings per share reached $2.23, a 3 percent increase over the previous year.
While earnings fell short of the $2.29 consensus estimate, it’s impressive that Microsoft was able to achieve net income growth while battling both inflation and hardware supply chain difficulties.
In the short term, Microsoft offers one of the more stable investments in the high-growth tech industry. The median analyst target price for Microsoft is $327.50, reflecting an 18.5 percent upside against the most recent price of $276.34. Analysts also expect Microsoft to achieve revenue growth of about 10.9 percent this fiscal year.
On a longer time horizon, investors should expect Microsoft to continue growing at a steady pace. The company holds a massive competitive advantage in software research and development. Cloud computing, in particular, will likely be a driver of future growth. In Q2, revenue from the company’s Azure cloud service and other related services grew by 40 percent year-over-year. Overall growth from server products and cloud services was 22 percent.
Today, Microsoft is trading at a somewhat high P/E ratio of 27.4. While this is higher than its pre-pandemic levels, Microsoft is more or less fairly valued at current prices. For investors who are planning to add this stock to a long-term portfolio, the returns will likely make paying these prices worthwhile.
eCommerce and cloud computing platform Amazon (NASDAQ:AMZN) is another stock investors should consider holding for the long haul. Even on a short time horizon, Amazon has considerable upside potential.
The median target price for Amazon in the next 12 months is $172. This would allow the stock to return 28.8 percent based on the most recent price of $133.55.
Despite this generally bullish outlook, Amazon did struggle in Q2. While net sales rose 7 percent to reach $121.1 billion, the company posted a net loss of $2.0 billion. This was a major reversal of the company’s profitability, as it had posted a net income of $7.8 billion in Q2 2021.
Free cash flow also turned negative, with total outflows of $23.5 billion on a trailing 12-month basis.
Many of Amazon’s current difficulties are tied to the macroeconomic climate. Rising costs and reduced consumer spending associated with inflation have both taken their toll on the company’s bottom line.
Such macroeconomic forces, however, are temporary. When inflation eventually wanes and consumers renew their spending, Amazon will be in an excellent position as the go-to eCommerce platform.
As such, Amazon is a strong candidate to buy and hold for the long run. It may take time for the eCommerce giant to regain its footing, but Amazon hasn’t lost its competitive advantage.
In the meantime, investors can also count on Amazon’s Web Services business line to continue delivering strong growth. AWS beat analyst expectations in Q2 and will likely see considerable growth ahead as more businesses adopt cloud computing.
JP Morgan Chase
JP Morgan Chase (NYSE:JPM) is one of America’s most prominent financial institutions. Unlike many other companies, banks like JP Morgan Chase can actually benefit from periods of interest rate hikes, allowing them to earn higher returns on their capital. As such, this financial stock is a good one to buy now and hold indefinitely.
Although JPM missed estimates in Q2, it reported a return on tangible common equity of 17 percent. Loan balances increased by 7 percent year-over-year, and credit card balances increased by 9 percent.
These metrics point to solid ongoing potential at JP Morgan Chase, as loans initiated today will continue paying off well into the future.
When evaluating it as a long-term investment, it’s also worth noting the incredible history behind JP Morgan Chase. The bank’s roots go back more than a century. In that time, this bank and its forebearers have successfully weathered everything from the Great Depression to the 2008 financial crisis.
In each instance, the institution has managed to survive and go on to achieve even higher levels of success. As a result, JP Morgan Chase is an excellent long-term play on the American financial industry.
Another good reason to buy and hold JP Morgan Chase is its relatively high dividend. The bank’s stock yields 3.45 percent, paying $4.00 per share annually.
With a payout ratio of just 32.1, JP Morgan Chase has plenty of room to raise this dividend in the coming years.
Together with returns from share price increases, the dividend could make the stock a market-beating asset over the coming years. It also makes JP Morgan Chase a good choice for investors looking for stable income from their portfolios.
In the coming 12 months, analysts expect JP Morgan Chase stock to rise 16.6 percent from $115.83 to $135. Paired with its high dividend, this would give the stock a total return of approximately 20 percent.
As the business continues to grow and profit from higher interest rates, investors will likely see solid returns over the next several years. JP Morgan Chase may be one of the most historically reliable stocks to hold, and it appears that the current market environment is well-suited to this venerable financial institution.
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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.