Investors hunting for top-notch companies to stash away for the long term need to focus on quality, but the best returns can also come from owning companies that are likely to enjoy stronger tailwinds in the future. We asked top Motley Fool contributors to tell us what high-quality stocks they think offer the best reasons to own them over the next decade, and they responded with Celgene Corp. (CELG), Waste Management (WM 0.22%), and Ford (F 6.10%). Read on to find out why these companies could be perfect to include in portfolios that have a 10-year time horizon.
Image source: Celgene Corp.
Todd Campbell: Investing in biotech for the long haul is made a bit more difficult by the fact that patents on top-selling drugs expire, but one biotech stock investors might want to stash away for the next decade is Celgene Corp.
Celgene Corp. is one of the biggest and most successful biotech companies, and its Revlimid and Pomalyst are the go-to drugs used by doctors to treat first/second-line and third-line multiple myeloma, respectively. Celgene expects those two drugs will generate a combined $7.7 billion in sales this year.
The company is also seeing rapid growth for Otezla, its recently launched oral treatment for psoriasis that's quickly capturing market share for injection-based alternatives. In Q1, Otezla sales of $196 million were up 224% from last year, leading management to forecast that Otezla will become a billion-dollar blockbuster this year.
Since patents protect these drugs deep into the 2020s, Celgene has plenty of time to launch new medicines that can insulate it against the risk of future competitors. Revlimid's patent, for example, protects it in the U.S. until 2027.
Because Celgene could launch the MS drug ozanimod, the ulcerative colitis drug GED-0301, and the CAR-T cancer drug JCAR015, which is being developed in concert with Juno Therapeutics, before then, it's one of my favorite stocks to own for the coming decade.
Image source: Waste Management.
Tyler Crowe: Look back 10, 20, 30 years ago. In all of those different time periods, the rise in technological advancement has been incredible and has completely changed the way we do many things. One thing that has remained relatively constant throughout that time, though, was that humans generate waste that needs to be disposed of properly. That's what makes Waste Management one of those companies that needs to be on your radar if you're looking at investing over a decades-long time horizon.
The business of handling waste is one of those businesses that can't help but have a wide economic moat. Trash handling is one of those non-discretionary spending items we all need to do, so there's an installed customer base that isn't going anywhere. Also, the barrier of entry for new competitors is extremely high and capital-intensive because of the regulations related to opening and operating landfills.
Waste Management has taken those competitive advantages and combined them with an efficient operations team that is constantly looking at ways to generate new revenue streams or cut costs, like using methane gas generated from decomposing waste in landfills to fuel their fleet of trash-collection vehicles. These kind of creative cost-saving methods have helped the company generate a return on equity in excess of 12% for more than a decade.
The world in the 2020s will likely be very different than what it looks like today, but chances are, we will still be generating trash. That makes Waste Management a top stock for the next 10 years or more.
Image source: Ford.
Dan Caplinger: The auto industry has gone through a lot over the past decade, with most of the industry's bellwethers having gone through bankruptcy proceedings in order to survive the financial crisis. However, Ford managed to get through tough times in 2008 and 2009 without the benefit of bailouts or bankruptcy protection, and it has boosted its profits dramatically in the ensuing years. In particular, Ford benefited from a record sales year in 2015, and its profits have given the stock an exceptionally low valuation, at just over six times trailing earnings.
The concern shareholders have about Ford is that it seems almost impossible for industry conditions to get any better. Yet even if conditions remains stable, just returning to a typical earnings multiple would give shareholders a potential two-bagger. Moreover, in the next decade, advances in innovation could dramatically change the auto industry, but Ford isn't likely to get left behind with those technological moves. The decision Ford made to use an aluminum body for its landmark F-150 pickup truck model shows the company's willingness to take risks in the name of making better products, and that spirit should help the company keep moving forward for the next 10 years and beyond.
