Stocks to Buy and Hold Forever: You can find lots of stocks that are good for a trade. Momentum stocks that are in vogue or soaring biotechs are classic examples. But our old friend Warren Buffett advocates for picking just a handful of companies and sticking with them.
Imagine a punchcard, and each time you buy a stock you punch the card up to a limit of 20. Which stocks would you buy? Here is a list of stocks that conservative investor could consider to buy and hold forever.
Network Expansion and Positive Cash Flow Provides Rosy Outlook for Canadian Railways
Canadian National Railway Company [NYSE: CNI] is a major rail operator in the North American rail industry; Canada’s largest railway in terms of both revenue and its rail network.
The company operates trains on around 20,400 route miles of track in Canada and the United States. It transports cargo, including forest products, automotive products, grain and grain products, and coal.
Why Canadian National Railway Is Compelling
First and foremost, the Canadian National Railway’s [NYSE: CNI] extensive network gives it tremendous economic leverage. It is the only railroad in Northern America that cuts across all the NAFTA nations and three coasts of the Atlantic, Pacific, and Gulf.
All in all, the company moves goods worth over 250 billion Canadian dollars per year. The railroad company, for instance, was able to operate a larger number of locomotives and railcars to transport a record amount of goods, in spite of bitterly harsh weather.
After a turbulent 2018, the company’s stocks made a roaring comeback in 2019, steaming into momentum and outperforming the S&P 500 index by a fair margin.
The transportation company, in its latest quarter results, reported $1.66 EPS for the quarter, topping analysts’ consensus estimates of $1.27 by $0.39. Its revenue of $3.81 billion for the quarter marked an upswing of 3.3% on a year-over-year basis.
Meanwhile, Royal Bank of Canada rated it a ‘hold’ and specified a target price of $137.00. MO Capital Markets upgraded Canadian National Railway from a “market perform” rating to an “outperform” rating. Bank of America too upgraded Canadian National Railway from a “neutral” rating to a “buy” and set the price target for the company to $100.00.
With the management bullish on the rail transporter’s growth prospects, capital investment in network expansion, free cash flow surpassing profits, good return on capital and a solid dividend record give its shareholders plenty of reasons to remain invested.
Analysts’ 12-month forecast for Canadian National Railway’s shares ranges from $86.00 to $137.00. On average, they expect Canadian National Railway’s share price to reach $102.41 in the next year, an upside of over 13%.
All in all, if you are interested in picking up a top transportation stock, Canadian Railway should be blipping loudly on your investment radar.
With Tons of Cash in its Kitty, Berkshire’s Stellar Growth Likely to Continue
Berkshire Hathaway [NYSE: BRK.A] is an American multinational conglomerate holding company owning subsidiaries engaged in various business activities, including freight rail transportation business, electricity and gas generation and distribution, insurance and reinsurance, manufacturing of industrial products and building materials, wholesale distribution of grocery, food and non-food products and finance and financial products.
Berkshire has an enviable history. From a modest begging as a textile company, the company has developed into a mammoth conglomerate with over $200 billion in revenues.
The Omaha, Nebraska-based company, known for its control and leadership by Warren Buffett, owns brands such as Duracell, Lubrizol, Fruit of the Loom, Helzberg Diamonds, etc.
It also owns holdings in Pampered Chef, Kraft Heinz Company, American Express, Wells Fargo, The Coca-Cola Company, Bank of America and Apple. It is also the largest shareholder in United Airlines and Delta Air Lines.
Berkshire Is Huge And Still Growing
Berkshire Hathaway’s [NYSE: BRK.A] growth story remains stellar. The company’s non-insurance business generated $20.8 billion in pre-tax earnings.
Equity investments amounted to $220 billion, generating $3 billion in dividends alone in 2018.
Insurance business funds Berkshire’s various investments. As of 2018, this amounted to a staggering $123 billion. And unlike other insurance companies which invest in fixed income instruments, Berkshire focuses on equity investments and whole businesses, which deliver better results.
Riding on a remarkable performance across all its segments, Berkshire Hathaway reported third-quarter 2019 EPS of $3.21 per share, topping analysts’ estimates by more than 15%.
The conglomerate, with cash and cash equivalents of $132 billion and long-term debt of only $93 billion, remains a highly lucrative prospect for investors. The company’s diversified holdings and businesses mean investors are granted access to a cross-section of the market, but at a much lower risk.
Its superb financial strength and strong cash position put it in a strong position to capitalize on opportunities during a market downturn. With cash reserves in excess of 100 billion, a market correction would give Buffett and Munger a chance to buy high-quality assets at lower prices.
Alphabet Targets Fintech, AI and Home Automation
Alphabet [NASDAQ: GOOGL] is an American multinational technology company that specializes in internet-related services and products, handling more than 70 per cent of worldwide online search requests. It is better known to most people simply as Google.
The Mountain View, California-based Alphabet has a broad product portfolio, which also includes cloud computing, online advertising, software, and hardware, making it one of the top four influential technology companies, along with Amazon, Apple, and Facebook.
Alphabet Targets Financial Technology
Shares of Alphabet [NASDAQ: GOOGL] march along well. This time, the stock market seems to be upbeat about Google’s foray into the space of financial services. The information services provider made an announcement to this effect, informing the market about its plan to start offering checking accounts from 2020.
Fintech (amalgamation of financial technology), in fact, has been around for a while with service providers like PayPal blurring the line between banks and alternative ways of conducting monetary transactions.
Google plans to introduce Cache, which will add impetus and scope to Google’s current fintech offerings that already include Google Pay and Google Wallet.
However, it should be noted that Google is not the only technology conglomerate interested in expanding its fintech footprint. Apple [NASDAQ: AAPL] recently launched its Apple Card and Amazon [NASDAQ: AMZN] too is exploring options of offering checking accounts. Last year, Facebook generated a lot of buzz with its intention to launch a digital currency called Libra.
Another major development with respect to Alphabet (the parent company of Google) is that the tech behemoth recently filed a document, with the SEC disclosing that its CEO Sundar Pichai’s compensation will be tied to how the stock performs over the next two to three years. With his own fortune tied to the stock’s performance, investors can hope for sunny days ahead.
All in all, Google remains a solid buy option. With strong focus on elimination of bad ads and innovation shown in introducing search updates at frequent intervals, Google is all poised to grow from strength to strength.
Mobile Focus Bears Fruit For Google
Google’s focus on mobile search is bearing results and the company’s enthusiasm on innovation of its AI techniques and the home automation space is catalyzing its growth. The stock marches ahead, outperforming the industry in the past year.
However, Alphabet finds itself in the thick of growing litigation issues. Along with that, the growing competition and increased spending on YouTube could prove to be a laggard.
The same was reflected in the company’s latest quarterly report, wherein it reported $10.12 earnings per share (EPS) for the quarter, against consensus estimates of $12.42. However, its revenue of $33.01 billion topped consensus estimate of $32.84 billion.
Analysts’ 1-year price objectives for Alphabet’s stock range from $1,197.00 to $1,700.00. On average, they expect Alphabet’s stock price to reach $1,422.92 in the next 12 months, a possible upside of 5.0%.
Strong Yield and Volume Growth Catapult Waste Management Shares Higher
Waste Management, Inc. [NYSE: WM] is an American waste management and environmental services company, which provides municipal, commercial, industrial and residential waste management services in the United States, Canada, and Puerto Rico.
The company collects and transports waste and recyclable materials from its origin to a transfer station, material recovery facility (MRF) or disposal sites. The Houston, Texas-based company owns or operates transfer stations, active landfill disposal sites, recycling plants, beneficial-use landfill gas projects and power production plants.
Shares of Waste Management, Inc. [NYSE: WM] gained over 25% in 2019, in the process outpacing the industry it belongs to (22.8% growth).
There are two primary factors strongly in the waste hauler’s favor. One is internal and the other is external. Waste management continues to reap dividends from successful cost-reduction initiatives, focused differentiation and continuous improvement.
The company’s collection and disposal business, riding on strong yield and volume growth, continues to lift revenues. Stellar performance in its traditional solid waste business keeps the coffers flowing. The garbage collector’s revenue for the quarter was up 3.8%, compared to the revenue in the same quarter last year.
The second factor is the recession-proof nature of the business. Irrespective of the economic environment, people will still generate trash, which means the company continues to be on a solid footing.
Also, the trash titan owns the largest network of landfills, recycling centers, and transfer stations in North America. With a huge entry barrier in the garbage collection industry, these assets continue to give it a major clout in the industry.
Also, the trash collector has built a solid reputation of being a generous dividend payer. With its revenue and profits well-fortified, Waste Management paid out dividends worth $658 million and repurchased shares worth $248 million in the first nine months of 2019.
In 2018, the company paid out $802 million in dividends and repurchased shares worth $1.004 billion. The trash titan recently boosted its dividend share by 6.3%, thus continuing its streak of 17 straight years of payout increases. These moves by the company enhance confidence in its business, apart from creating value for shareholders and delivering a reliable stream of income for them.
Analysts’ 12-month price targets for Waste Management’s shares range from $106.00 to $130.00. On average, they expect Waste Management’s stock price to reach $121.27 in the next year, an upside of over 6%.
Increasing Services Revenue and 5G models Make Apple a Red-hot Stock
Apple Inc. [NASDAQ: AAPL] is an American multinational technology company which designs, manufactures and sells personal computers, smartphones, software and online services.
The company’s product portfolio includes iPhone, iPad, Apple Watch, the Apple TV, the AirPod and Mac, as well as iOS and macOS operating systems, among others.
The Cupertino, California-based company, which became the first to reach a trillion dollar market capitalization in 2018, is considered one of the Big Four technology companies, along with Amazon, Google, and Facebook.
Apple’s shares [NASDAQ: AAPL] looked in smashing form in 2019 with gains of 83%. The iPhone maker, with EPS of $3.03 and revenue of $64.04 billion during the quarter, topped consensus estimate on both fronts.
2020 is being dubbed by analysts as “5G Super Cycle” for Apple 2020 iPhones. The iPhone maker is expected to launch four new 5G compatible models in 2020, with the capability to support the next-generation cellular technology. iPhones and iPads with rear-facing 3D sensing capabilities are also ready to be launched.
The company’s focus on strengthening the Services business is reaping rich dividends with Apple expected to hit the magical $50 billion in services revenue in 2020.
The company, with 450 million paid subscribers, is also expected to reach 500 million subscribers in early 2020. Apple Arcade is expected to expand the company’s footprint in the video gaming arena.
A refreshed MacBook, iPod and Apple Watch product lines are further expected to boost Apple’s revenue. Early resolution of the ongoing U.S.-China trade war can help Apple gain momentum further.
The company, with plenty of cash, meaningful stock buyback program and new launches in the pipeline, remains a solid investment option as has been the case since Steve Jobs’ iconic speech launching the iPhone in 2007.
Colgate Expands Into Newer Markets
Colgate [NYSE: CL] is an American multinational consumer products company, which manufactures and sells consumer products the world over. Its offerings include toothpastes, toothbrushes, bar soaps, shower gels, shampoos, hand wash, mouthwash, deodorants and skin care products, among others. The New York City-based company also sells veterinary products under its “Hill’s Pet Nutrition” brand.
Shares of Colgate [NYSE: CL] have been on downward trend, its gross margin squeezed by rising raw material costs, enhanced packaging material expenses and unfavorable foreign-currency transaction costs.
However, the consumer staples sector is popular with investors because of its recession-proof nature. Irrespective of the economic conditions, consumers will continue to use soaps, shampoo, toothbrush and tissue papers.
The consumer durables company has been grappling with slowing sales in recent years, but the management has responded well by cutting costs and funneling the money thus saved to promote its key brands.
All these initiatives, along with product innovation, higher volume and pricing, expansion into new markets, and focus on enhancing its e-commerce capabilities, are going to help the company retain its pole position in the industry.
Colgate-Palmolive earned $3.93 billion during the quarter and the management expects organic sales growth of 3-4%.
Rising Demand Benefits American Water Works
American Water Works [NYSE: AWK] is an American public utility company which provides water and wastewater services to residential commercial and industrial customers in the United States and Canada.
The company was a subsidiary of the German-based RWE Group till 2008 when it was divested in an initial public offering (IPO). The Camden, New Jersey-based company serves close to 15 million customers in 46 US States.
American Water Works [NYSE: AWK] is the country’s largest publicly traded water and wastewater utility company. The company, which is ahead of its rivals by a fair margin, has been performing exceptionally well from a financial standpoint in recent years.
AWK also has a notable presence in two other segments. Its military services arm works at U.S. military bases, where it is engaged in the business of building, operating, and maintaining water systems for the military, and its homeowner services business provides warranties for things such as water and sewer lines.
Fresh water scarcity presents a clear opportunity to invest in companies that collect, clean, and distribute water. Investors as such are pretty much optimistic about the company’s future. Sharing their positive enthusiasm are analysts who project the utility company to grow earnings per share at an average annual pace of 8.2% over the next five years.
The company, which reported $1.33 EPS for the quarter, expects an EPS compound annual growth rate of 7%-10%. The utilities provider reported a revenue of $1.01 billion and unveiled a ten-year capital spending plan worth $20B-$22B.
Lower interest rates in recent years have also benefited the water supplier as it makes servicing of debts easier and the stocks more lucrative in comparison to bonds.
Climate change, which is expected to make wet regions wetter and dry regions drier, is likely to increase demand of fresh water. Companies such as American Water Works which deal in conservation, purification, and distribution of water or running water desalination stations are likely to be the major beneficiaries of such an enhanced requirement.
5G Technology and IoT Represent Major Opportunity for American Tower
American Tower Corporation [NYSE: AMT] is one of the leading owners and operators of wireless and broadcast communications infrastructure in the United States, India, Africa and Latin America.
The company, which operates as a real estate investment trust (REIT), offers its services to radio, broadcasting and wireless communications industry. The Boston, Massachusetts-based company currently operates more than 170,000 towers worldwide.
American Tower Corporation [NYSE: AMT] continues to capitalize on rapid digitization and proliferation of smartphones, which is bringing in droves wireless service providers keen on upgrading their infrastructure to meet the surge in demand. Shares of AMT have been on a tear in recent years. The advent of new technologies, especially 5G and IoT, is expected to contribute significantly to its revenue and growth.
The development and deployment of fifth-generation (5G) wireless networks in mature markets such as the US and Europe is anticipated to drive bottom-line growth. Studies estimate the 5G Market to grow at a compound annual growth rate of 67% from 2019 to 2027, reaching a market size of US$47.8 billion.
It predicts a windfall for the real estate investment trust as its clients in the wireless space are likely to invest heavily in infrastructure “upgradation” to provide better service, which in turn augments the demand for American Tower’s communication towers.
The rapid development of the Internet of Things (IoT) is another significant factor for American Tower. The IoT market, which is likely to reach around US$520 billion by 2021, will boost the demand for American Tower’s communications real estate.
Additionally, a disciplined capital-allocation strategy and solid business model fundamental help the company enjoy stable revenues.
American Tower earned $1.95 billion during the quarter, a rise of 9.5% on a year-over-year basis. The company has been steadily increasing its quarterly dividends since 2012, and this December, it decided to hike the dividend by over 6%.
Walmart Acquisitions and Online Strategy Create Long-term Boon
Walmart Inc. [NYSE: WMT] is an American multinational retail corporation that engages in retail and wholesale businesses. The world’s largest retailer through Walmart U.S., Walmart International, and Sam’s Club – operates globally a chain of supermarkets, hypermarkets, department stores, grocery stores, cash and carry stores, discount stores, e-commerce websites, and convenience stores, among other outlets. The Bentonville, Arkansas-based company has 11,300 stores under 58 banners in 27 countries.
Walmart Inc. [NYSE: WMT] shares had a softer start to the quarter, having underperformed the industry during the stock market run-up of 2019.
The retailer’s margins have been contracting for a while now because of technological investments and costs associated with shoring up its e-commerce platform.
Walmart bought Indian e-commerce giant Flipkart for $16billion in 2018 and the acquisition will continue to drag down the retailer’s bottom line in fiscal 2020. Nonetheless, the purchase is expected to boost the company’s top line in the long run.
The retail giant has also demonstrated a sturdy resolve to keep pace with the changes in the market. Instead of being contended with being the largest brick-and-mortar retailer in the world, it invested heavily in ramping up its online presence and now is a successful omnichannel business, having successfully integrated its digital and brick-and-mortar supply chains.
Additionally, the company has been making sincere efforts to improve its International unit by paying more attention to more mature markets.
All these efforts seem to be paying off well as the overall sales rose by 3.3% in the third quarter, and the retailer generated 126.98 billion for the quarter, up 2.5% on a year-over-year basis. U.S. comps were +2.8%, rising for the 21st straight time.
Digital sales rose by more than 40%. Analysts, on an average, expect Walmart’s stock price to reach $124.19 in the next year, which shows the company finds itself on a stronger footing to tackle market uncertainties.
5G Technology Offers Promising Future For Crown Castle
Crown Castle International [NYSE: CCI] is America’s largest provider of shared communications infrastructure. The Houston, Texas-based company, which operates as a real estate investment trust (REIT), provides broadcast, data, and wireless communications infrastructure services in the US with more than 40,000 cell towers and approximately 65,000 miles of fiber. The company also designs networks, develops sites, and installs antennas.
Crown Castle [NYSE: CCI] stocks have gained over 23% year to date, and the reason is not beyond comprehension.
Moreover, the introduction of 5G technology is anticipated to provide an added impetus to the cell tower company’s revenues. As the new cellular technology takes hold, organizations will look to ramp up their infrastructure to offer seamless service. This will require building of additional towers, which Crown Castle is well-prepared to exploit.
Crown Castle engages in long-term contracts with its clients, which allows it to raise rents over the lease period. The company’s ability to generate healthy cash flow and its prudence to invest it into infrastructure give it an excellent track record of revenue growth. The firm’s revenue for the quarter was up 10.1% compared to that in the same quarter last year.
The operator of wireless communications towers also holds special appeal for income-seeking investors because of the dividends it dishes out. The company operates as a real estate investment trust, and as such, is required to distribute 90% or more of its taxable income.
Then there’s its appeal to income-seeking investors: Since Crown Castle operates as a real estate investment trust, it’s required to distribute 90% or more of its taxable income. And this dividend has been growing steadily. The dividend it gave out in February 2014 was $0.35 and today it stands at $1.20.
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.