Even though active trading strategies can be a lot of fun and deliver immediate results, there’s something very satisfying about investing in a quality company that you can hold on to for many years. With that said, buy and hold investors need to be extremely selective when it comes to the companies they are adding to their portfolios. Adding highly speculative stocks can pay off in a big way, but can also lead to many sleepless nights due to their unpredictability.
The best buy and hold stocks for long term investors are typically companies that have a strong track record of earnings growth with a wide economic moat. They are stocks that investors can use to build the backbone of their portfolios and rely on to provide steady gains over the years as long as their business models remain attractive. To help you get a better sense of the best kinds of buy and hold stocks for long term investors, we’ve put together a brief overview of 3 great choices below.
Visa is a good example of a company that is a market leader in its respective industry. That means the company’s dominant position as the world’s largest payment network is something that long term investors can bank on. Visa is a company that provides essential payment services worldwide such as credit, debit, prepaid, and commercial payments to consumers, businesses, banks, and governments in over 200 countries and territories. Between the years of 2009 to 2019, Visa delivered 21% compound annual EPS growth, which is exactly the type of consistency that buy and hold investors should be attracted to.
While the pandemic and its impacts on the global economy have caused Visa’s revenues to take a hit lately, over the long term the company should deliver nice earnings growth thanks to secular growth in online payments and share buybacks. With 80% of the world’s retail transactions still handled with cash and checks, there is considerable room for growth in the payments space that should benefit Visa. Investors are likely also underestimating the company’s digital currency strategy that can help financial institutions use Visa’s platform to tap into the growing world of crypto assets and blockchain networks. Finally, this is a financially stable company that offers healthy free cash flow generation and pays a 0.61% dividend yield, making it a strong option for buy and hold investors.
Next up is a company that offers long term investors exposure to the semiconductors industry, which should see substantial growth over the next decade. Applied Materials is the world’s largest manufacturer of wafer fabrication equipment for the semiconductor industry. It’s a company with a history of creating quality products and providing reliable service, which means that competitors will have a hard time taking market share from it over the long term. While many semiconductor equipment companies are highly cyclical, the fact that Applied Materials is a large company and has such a diversified set of products means that it is less cyclical than other options in the industry.
When you consider just how important chips are for digital devices, it’s easy to understand why Applied Materials is a strong pick for the long-term. With customers including manufacturers of semiconductor chips, OLED displays, and liquid crystal, this company’s solutions are used to produce virtually every new chip and advanced display in the world. For example, products like memory chips and high-definition OLED screens that are used in 5G devices are produced with Applied Materials equipment. Last year, the company saw its revenue grow by 18% year-over-year to reach $17.2 billion, which was a new annual record for the company. While the stock has rallied considerably over the past year and has a higher beta than the other companies on this list, any significant pullback could be a gift for long-term investors.
Procter & Gamble (NYSE:PG)
Last on our list is Procter & Gamble, a household products company that has a lot of the best qualities to look for in a buy and hold investment. 140 years of consecutive dividend payments and 64 consecutive years of dividend increases? Check. Wide economic moat thanks to strong brand names including 21 that generate more than $1 billion in annual global sales each? Check. Consistent earnings growth and a strong balance sheet? Check.
This stock has a lot to offer buy and hold investors and the company recently raised its forward guidance after reporting an 8% year-over-year organic sales increase in Q2. With well-known brands like Tide, Gillette, Pampers, Bounty, Crest, and more, you really can’t go wrong by adding a company like Procter & Gamble to your portfolio. The stock is at an attractive entry point after pulling back over the last month and offers a 2.45% dividend yield at this time.
Featured Article: What is a good dividend yield?7 Outdoor Recreation Stocks For Growth And Dividends
If American’s liked outdoor activities before, they love them even more now. The COVID-19 pandemic has done many things, and one of them is reinvigorating American’s love of the outdoors. Data from across the industry shows a sustained uptick in revenue that has the entire complex moving higher.
The RV Industry Association, for example, reports shipments of RVs are up greater than 30% in 2020 and are expected to grow another 20% or more in 2021. If data from the two of the industry’s largest manufacturers are any indication, that forecast is very conservative.
And the gains aren’t limited to RVs. Everything that has anything to do with outdoor recreation is booming. Sales at Dicks Sporting Goods, an iconic brand for retail and the outdoors, has seen a sustained 20% increase in revenue since the 2nd quarter shutdowns. If anything, revenue in this sector is being held back by rapidly declining inventory and tight shipping conditions.
The stocks we are about to show all have something in common; the outdoors. Within the group, you will find everything from RVs to Radios and everything in between an outdoor enthusiast could need or want. Some pay dividends and some don’t, but all will deliver solid returns to investors in 2021.
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