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There's a time and a place in every portfolio for high-flying growth stocks, but most of last year's darlings have been taking it on the chin all summer. Trying to anticipate a price zig will probably get you burned by a zag, and a long-term investor shouldn't be concerned with day-to-day volatility. Back away from the ticker and let's take a look at some companies built for the long road ahead, including one whose prospects are so strong that you might one day be giving some shares to your grandchildren.

Long-term thinking through short-term movements
The Dow (INDEX: ^DJI) is still down from its peak in early May, and where it will end up in December is anyone's guess. Every company on this list has beaten the broader benchmark over that time, as they have over the last 12 wild months. The past can only guide us to the future, but if this past is any indication, your financial future would be fairly safe with these companies.


10-Year Average Annual Return


5-Year Forward Growth Estimates


McDonald's (NYSE: MCD  ) 14.6% 3.1% 10% 18.1
Altria (NYSE: MO  ) 15.3% 5.9% 8% 16.9
Diageo (NYSE: DEO  ) 11.2% 4% 10.7% 16.8
Intel (Nasdaq: INTC  ) 1.4% 3.6% 11% 10.8
Philip Morris International (NYSE: PM  ) 21.5%* 4.6% 12.7% 15.4
Costco (Nasdaq: COST  ) 8.9% 1.2% 13.3% 24.9

Source: Yahoo! Finance. *Three-year average annual return.

All offer solid growth rates, good forward momentum, and good yields. Measuring a company's ability to endure over the years is difficult and subjective, and in this case I had to do a little projecting. How well can McDonald's protect its business against the Chipotles and Five Guys of the fast-food world? How safe is Philip Morris from a lawsuit in, say, Argentina or South Korea? Let's take a closer look.

Burgers worldwide
McDonald's had at least 33,000 stores in over 100 countries before the 2007 recession, and that number has certainly climbed as the world economy has rebounded. A willingness to adapt and a world-class supply chain have kept McDonald's on top of its industry. The biggest threat to McDonald's might not be a bad economy, but a good one. Chipotle and Five Guys are more upscale options, and as this type of restaurant flourishes, it could cut into the growth of the Golden Arches. Still, Mickey D has kept its dividend growing through the depths of the recession, which is a great sign for perma-bears.

Diageo is somewhat a McDonald's of spirits, and it has a similar global reach. Fool contributor John Grgurich makes a compelling case for the stock, and it's hard to argue against him. Like fellow sin stocks Altria and Philip Morris, Diageo serves a market that's not going anywhere. One knock against it might be its flat earnings over the past five years. Analysts expect much better growth for the next five years, but those wacky analysts usually shoot for the moon, don't they?

Rise of the machines
Intel's come a long way from the dot-com boom, and it's one of the few survivors still making big gains as computers become more omnipresent. The company's on pace to double its revenue from a decade ago, and its net income has grown almost tenfold in the same time period. Despite this continued dominance, the market's given Intel a P/E that's close to scraping the single digits, practically leaving this major high-tech player for dead. The world won't stop needing computers, and Intel won't stop being among the world's largest microchip manufacturers any time soon. Intel's R&D budget has been larger than competitor AMD's entire yearly revenue for quite a few of the last 10 years. Still, unexpected breakthroughs from a competitor could blow a hole in Intel's moat. Nothing is a sure thing in high-tech.

Big stores with big potential
What about Costco? There aren't many companies that engender the fawning loyalty granted this big-box discounter. It's grown from 206 locations in 1993 (the time of its merger with Price Club) to 592 warehouses around the world today. That leaves room for tremendous growth in the future, which befits its high P/E relative to its peers on the list. Although its membership costs recently nudged higher, that shouldn't negatively impact its prospects. The high P/E could be its biggest drawback -- witness Walmart's stock price struggles over the last decade, in spite of steadily increasing earnings.

The two sides of sin stocks
Philip Morris and Altria are two sides of the same coin, but each side's engraving reveals different prospects. Altria's stuck with America, where the demographics of the tobacco market are less favorable. The Centers for Disease Control and Prevention found that adults ages 18 to 44 (Generations X, Y, and the Millennials) were less likely to have ever smoked than adults 45 and older, but older adults were less likely to be current smokers. The balance between lower smoking rates and steady population increases means that Altria might expect to do little better than tread water in the future.

One for a lifetime
Philip Morris, on the other hand, has plenty of room to run. Dan Dzombak picked up shares for his Rising Star portfolio, and Jim Royal tabbed it for the world's best dividend portfolio. Dan mentions that Philip Morris has seven of the world's top 15 tobacco brands, but has only a 27% market share in its foreign markets. Despite that, it's still sporting superior margins. Doubling its market share would probably be optimistic, but it's a big world, and you've got the rest of your life to watch the company grow. When it comes down to long-term potential, this international powerhouse is the one to choose.

I'd welcome your thoughts on this selection, so let me know if I picked the right company, or if there's a better opportunity I'm overlooking.

There are some great values in this group, but The Motley Fool has some other ideas up its sleeve. Find out more about the five stocks the Fool owns that you should be looking at today -- they're all included in this free report.

Fool contributor Alex Planes holds no financial stake in any company mentioned here. The Motley Fool owns shares of Costco, Altria, Diageo, Philip Morris International, and Intel. Motley Fool newsletter services have recommended buying shares of Intel, Philip Morris International, McDonald's, Diageo, and Costco, as well as creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (28) | Recommend This Article (117)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 18, 2011, at 5:59 PM, prginww wrote:

    A good choice, If you are happy hawking poison.

  • Report this Comment On October 18, 2011, at 6:07 PM, prginww wrote:

    i love marlboro and smoked them to june 2011 when i was diagnosed with cancer. wish i had been smarter about pm products.

  • Report this Comment On October 18, 2011, at 6:16 PM, prginww wrote:

    PM is my top holding by far, and I agree with the author about PM being the best stock to hold for life. Would also put PG up there as a close second. I'm surprised you didn't put that on the consideration list. DEO also very solid. I wish I had bought them a few years ago when I bought PM.

  • Report this Comment On October 18, 2011, at 6:24 PM, prginww wrote:

    My stock for life is DHY. It pays 10% each year on my money and 1% each month. Not too shabby eh?

  • Report this Comment On October 18, 2011, at 7:03 PM, prginww wrote:

    @ 49cent -

    There are always downsides to the "sin stocks," and I do recognize that some moral compasses might go haywire in the presence of PM stock. Everyone has free will, and can choose to smoke or not. One could say that KO's products are just as detrimental to a person's health -- it's basically diabetes in a can.

    It's a matter of personal choice, and PM simply offers the kind of long-term stability and long-term growth potential you virtually never find in a public company, especially when combined with high dividend returns that look to keep increasing over the long run. If you don't like its products, there are 5 other companies on the list that you could argue for. Well, 4, since one of them is Altria.

    @ dd12v71 -

    I'm sorry to hear about your illness. It's never too late to invest, though. You can still set up a DRP on PM and add to it gradually over time.

    @ mmm5525 -

    Sorry, I only had so much space! PG is a good stock as well, and I'm sure I'll cover it in the future.

    Thanks for the comments, all.

    - Alex Planes

  • Report this Comment On October 18, 2011, at 8:42 PM, prginww wrote:

    I will never invest in "sin"- companies.

    Money is not the most important thing in life!

  • Report this Comment On October 18, 2011, at 9:06 PM, prginww wrote:

    I'm a bit confused. Isn't McDonald's the major shareholder in Chipotle's? If that's the case how can they be hurt by them. All they can do is make yet more money. Perhaps I'm wrong.

  • Report this Comment On October 18, 2011, at 9:35 PM, prginww wrote:

    I still love SeaDrill. With a 10% dividend, deep drilling off shore rigs are the future for oil drilling. With a fleet that is only 4 years old and most under contract, SDRL sure looks better than cigarettes!

  • Report this Comment On October 18, 2011, at 10:07 PM, prginww wrote:

    People crying about PM or MO and how they are "so bad and cruel" to own, get serious and grow up and stop being lifetime hypocrites. Owning cigarettes is bad but owning a fast food joint is good? What planet am I on? How is there any honour in owning a McDonald's or a Coca-Cola? What products do either provide that are anywhere near healthy? Oh and don't get me started on their salads and vitamin waters. Come on this is ridiculous! Or how about owning any of a dozen oil companies? Did April 2010 not show how bad they are? Not sure about you but I love me some MO. I smile everytime I see a stranger light one up. I will even inhale some second hand if it means I will collect another monster dividend next quarter!

  • Report this Comment On October 18, 2011, at 10:46 PM, prginww wrote:

    I'm a former smoker and have emphysema from it, but I knew it was bad for me when I started. I'm also an American and believe that I am entitled to choose for myself -- even to make stupid choices (sorry Democrats).

    I would really rather people not smoke. I tell smokers about my having to give up SCUBA diving because of the damage that I've done to my lungs. But since it is legal for cigarettes to be sold and bought, and lots of people are hooked on them, I can't see how I am being unethical to share in the profits.

  • Report this Comment On October 18, 2011, at 11:30 PM, prginww wrote:

    I work in a convince store. We sell pm, ko, hsy, xom, ect. Nobody is forced to shop at our store. No one is forced to buy our products. If you buy pm have your ID ready, we sell only sell to GROWN UPS! You live or die by your choices. I choose to take dividends. (and smoke)

  • Report this Comment On October 18, 2011, at 11:33 PM, prginww wrote:

    @ thedofca100 -

    MCD had a majority stake in Chipotle until 2006. Smart move for them to sell it, right?

    @ dontwin -

    Thanks for the pointer. Always good to investigate new opportunities. Oil is good for the long term, but not the rest-of-your-life term for even most of the younger Boomers. I think there will be viable mass market energy alternatives within most peoples' lifetimes.

    @ jm700229 -

    Well put.

    - Alex

  • Report this Comment On October 19, 2011, at 12:33 AM, prginww wrote:


    Your comments are overboard. Allow those of us who think some companies cause damage to the world to not invest in those companies, and not be derided as hypocrites!

    Admittedly, it is a hard choice on investing in PM. As a stock it is great - but they do sell death in a box, and we would have to accept that when buying the business.

    For the record, I don't really think owning MCD, KO, PEP, or DEO is a great idea either.

    Why not choose other companies doing worthy things? There are MANY. Intel looks great from the list, and Costco is well-loved. Otherwise, personally, I like ABT, KMB, and PG.

    The fact that we are investing at all puts us ahead of many people, and that we can discuss our opinions in a reasonably civil way is better. Thanks!

    By the way, Alex, the idea that you can or should choose one stock for the rest of your life, unless it is going to be a short one, is absurd. If the business changes, or management fumbles and the company does serious harm, would you double down, or sell? Or diworsification? I believe we should aim to hold forever, but check up on our businesses frequently and be willing to let go when need be. Perhaps I misunderstand the title of your piece.

  • Report this Comment On October 19, 2011, at 9:12 AM, prginww wrote:

    The sin stocks have deeper moats, and that's a major reason why they are such good investments. Simply less competition. How many companies sell cigarettes around the world that are legitimate players? 5-6? How many companies make liquor? A handful of major players. So not only are these companies recession-proof due to the fact their products will be in demand in both good times and bad, there's simply less competition. How many start-up companies out there are going into the cigarette market? You can't in the USA, as you do not even have the right. The FDA put a halt to that. The competition is virtually frozen in time. This really helps MO as the most dominant player in the USA. I like PM much more than MO, but used to own both. There is a reason why MO was the best performing stock in the S&P 500 over the past several decades.

  • Report this Comment On October 19, 2011, at 10:38 AM, prginww wrote:

    @ mungermaniac -

    I wouldn't recommend anyone stick money into a stock and forget about it for the rest of their lives. The aim of the article was just to identify companies whose underlying business models were so well-defined and stable that they could represent lifetime investments. It's always highly recommended that investors keep abreast of any major news and update their investing thesis based on new information.

    As far as PM goes, however, it would probably take a management team of rabid monkeys to destroy the business. I'd be more concerned with external developments.

    Thanks for commenting, everyone.

    - Alex

  • Report this Comment On October 19, 2011, at 2:46 PM, prginww wrote:

    To mungermaniac: Mike's comments are far from overboard, and the author's article is far from absurd. True, tobacco and alcohol stocks are indeed poor for one's health, but no different than McDonalds or any other product consumed in excess, and one should always monitor one's holdings on a regular basis. Smoking or drinking does not automatically cause death. It's the excess that does it. Both are legal products worldwide.

    The author also never advocated putting all of one's money in one stock. I assume your point was diversification, which is admirable in theory, especially for the uneducated masses who invest blindly. That IMO was never the point of this article hence the title of @ "If only one stock..."

    My view is it was simply a hypothetical by the author. What if you were stranded on a desert island for 10-20-30-40 years with no access to your portfolio? What company would definitely still be there in the end of that time? I think that's what the author, who wrote a fine article, was getting at.

  • Report this Comment On October 20, 2011, at 10:17 AM, prginww wrote:

    Another great quarter with many more to come. My McDonald's , Coke , Mac and cheese Kraft are also doing pretty well. Saturday along with many elitist hypocrites eating next to me is Pizza night.

  • Report this Comment On October 21, 2011, at 12:28 PM, prginww wrote:

    I haven't really decided yet how I feel about investing in "sin" stocks.

    On one hand, I have no desire to participate in the destruction of people's lives, regardless of whose fault it is. I've watched family die in front of my eyes, 10-20 years before their time, because of cigarette smoking.

    On the other hand, there are an infinite number of criticisms of virtually any business model. Computer chips might not kill people (drone missiles aside...), but I'd be willing to bet that those computer chips aren't being manufactured in Middle America in an OSHA-regulated environment. If you invest in a multinational, odds are that you are profiting by employing someone in terrible working conditions. Maybe a person shouldn't invest in a company big enough that they can't know everything about it and stick to small business with private financing needs?

    Another consideration: How often have you heard someone say "I wouldn't want to live to be X years old if I couldn't do Y with the years I have"? For some people, that's eating cake. For others, that's climbing mountains. For still others, that's probably smoking. How should we evaluate cigarettes in the context of perceived quality of life? If a person who loves smoking dies of lung cancer at 55, did they make a bad decision or did they make a rational choice to trade the tail-end of their lives for more enjoyable years today?

    There are a lot of difficult questions, and I don't feel confident that I have the answers to all of them. Ultimately, I think I have an obligation to my family to maximize my earnings and investments while simultaneously living within my ethics. We all do the best we can, and the one thing we can all control is how charitable we are with what we earn once it's ours.

    I think in the end, if people want to buy cigarettes they should be allowed to. And if I believe it should be legal to smoke without endorsing that decision, I think it should probably be alright to invest in the company that provides this experience most profitably, although I completely understand someone who says they can't justify it. It's a tough call, and even I am not convinced I am right. We all do the best we can.

  • Report this Comment On October 21, 2011, at 8:23 PM, prginww wrote:

    history is fine, but sometimes conditions change. think about these electronic steam cigarettes that deliver only nicotine. ( some say no worse than caffiene).

    even in startup these things are cheaper than tobacco. i see some risks on the horizon

  • Report this Comment On October 22, 2011, at 11:50 PM, prginww wrote:

    why would you support a company that sells radioactive plants for consumers to smoke. See:

  • Report this Comment On October 25, 2011, at 11:40 AM, prginww wrote:

    I just can't bring myself to invest in a cigarette company. I hate cigarettes, I want them gone from the Earth, and I wouldn't feel right profiting from them. It's probably a somewhat irrational position, but I can't shake the feeling of disgust at the thought of it. I'll never hold PM or Altria.

  • Report this Comment On October 26, 2011, at 11:55 AM, prginww wrote:

    PM has always paid me well in bear or bullish market and hope this time too. You can buy PM without any doubts because Marlboro will pay you every time someone smoke it.

  • Report this Comment On October 26, 2011, at 5:47 PM, prginww wrote:

    @ oldcheme -

    I don't think that sort of device has the kind of broad appeal to replace cigarettes, especially in the developing world, where people may not have access to the cartridges, charging units, etc. needed to keep such a system consistently available.

    @ PragmaticBuckeye, freewheeljay, DJDynamicNC, and others -

    I recognize the moral issues inherent in choosing a stock like this, and I understand them. I've tried to get my parents, aunts, uncles, etc. to stop smoking for years, to rather limited success. I've no interest in smoking and will never take it up. As PragmaticBuckeye points out, we should feel obligated to those around us to make the best investing decisions we can, as long as it allows us to sleep at night.

    My personal morality accepts that cigarettes are not healthy and avoids them in my private life whenever possible, but recognizes that PM is a very healthy investment for the long term due to what's in its products. No one puts a gun to anyone's head and says "SMOKE THIS!" No one tells people that cigarettes will leave your insides minty fresh and will help you live longer. No one can cover it up. The health risks of smoking are by now fairly universally known.

    I won't sleep any worse if other people choose to spend their money on a pack of Marlboros. Many agree with this sentiment, which is why they invest in PM (or MO, or others). Many don't, which is why they've chosen other positions. I respect and understand both sides, and I hope you might find one of my other suggestions a more compelling lifetime play. I think they could all make the case for a lifetime of success.

    Thanks for the comments, all. I enjoy hearing your opinions, and I hope you found some value in this article, even if you didn't agree with the final conclusion.

    - Alex

  • Report this Comment On October 27, 2011, at 3:36 AM, prginww wrote:

    I really do not see any problems with owning any of the "Sin" stocks. My father had a heart attack in his mid 40's, and I am married to an alcoholic. She gets all the help that she needs from a program that she is involved in! I have personally never tried smoking cigarettes or drinking to the point where I have had problems, but let's be serious here-- This is the united States of America! I count myself so lucky to be a member of this great nation!

  • Report this Comment On October 27, 2011, at 4:59 PM, prginww wrote:

    If you look at any big company hard enough and deep enough, you'll find "sin"--if you want to find it and have a reason to not own it.

    My philosophy is that you can buy whatever stocks you want, and I won't get on you about them so long as you're satisfied--and I deserve the same consideration. I own some "sin" stocks, and I own them for one reason, they're good investments IMO.

    To the moralists out there, I say this: Buy companies with which you're comfortable, and I'll do the same. May we both prosper, quietly.

  • Report this Comment On October 27, 2011, at 7:06 PM, prginww wrote:

    Man, what a bunch of whining little girls. I don't smoke, never have. I have no problem profiting from someone making a choice to smoke. They are adults and can do what they want, nobody is forcing them to smoke. My dad, mom, cousin (last year) all died from lung cancer. I need to retire one day and I want a solid company with a big dividend. PM is my main holding and Chevron is my second biggest. Smoke and drive FOOLS!

  • Report this Comment On November 02, 2011, at 4:49 AM, prginww wrote:

    I just wish people would stop beating me over the head with their morality. I don't give a damn.

  • Report this Comment On November 03, 2011, at 1:14 AM, prginww wrote:

    Phillip Morris. Really. One for a lifetime?

    Does the irony escape you? How about "one to halve your expected lifetime" ? Or better yet...

    "Phillip Morris, one for a lifetime of struggling for air"?

    Of course there are those, such as children through no fault of their own are at greater risk due to second hand smoke.

    As a hospital nurse, I suctioned far too many victims of tobacco over the years.

    If I could, I would put breathing and feeding tubes down the throat of every tobacco company executive (and throw in a catheter for

    good measure). Then I would suction

    them every two hours for a week. During that time they could contemplate the rising value of their stock options. Those recommending Phillip Morris could sit at the bedside, watch the suffering of the patient on the ventilator and feel great about their investment.

    Other "vice stocks" such as alcoholic beverages have at least some known benefits. Tobacco has none.

    Endorsing Phillip Morris unconscionable.

    Not giving a damn about investments that actually harm others may just come back to haunt you.

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10/21/2016 4:01 PM
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Diageo CAPS Rating: *****
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