It takes a certain type of stock to be one that an investor can hang onto for a decade or more. The business behind it needs to have some inalienable competitive advantages that will keep its financial statements robust for years at a time and a management team that will do right by shareholders. That doesn't leave a whole lot of companies to choose from, but three that stand out are Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), Enterprise Products Partners (NYSE:EPD), and Anheuser-Busch InBev (NYSE:BUD). Here's a quick look at why you might want to consider these stocks if you are looking to buy and hold for 10 years or more.
1. Bet on Berkshire for the businesses, not just Buffett
If there is any company that has shown to be effective at generating strong returns over the long term, it's Berkshire Hathaway. Warren Buffett's long-standing investment vehicle has become one of the largest conglomerates in the nation whose investments have huge competitive advantages, like railroads, insurance, and regulated electric utilities. These are the kinds of business that might not set the world on fire in terms of growth, but they are extremely hard to disrupt for reasons such as capital intensity or government regulation. In turn, they generate steady streams of cash flows that allow Buffett to do what he does best: allocate capital.
The obvious risk that so many investors will point to with Berkshire Hathaway that far down the road is that Buffett won't be around to oversee the capital allocation of the company a decade from now. That's certainly an unknown for the future, but the way in which Berkshire Hathaway is set up likely means that the businesses fueling it won't change much. The company has always taken a hands-off approach to the operations of its respective companies. Chances are, its earnings-generating power will mostly remain intact for much longer than a lifetime.
2. A steady pipeline of profits for your portfolio
Some technological advancements we are making today hint at a time when we may not need to consume fossil fuels to meet our energy needs. Having said that, we are still a long time off before that happens. By most accounts, we are going to continue to consume increasing amounts of oil and gas globally well into the next decade. With this in mind, Enterprise Products Partners has some of the qualities that investors would want in an oil and gas company over that long of a time horizon.
As a pipeline and logistics company, Enterprise Products Partners has little exposure to the ups and downs of commodity prices. In fact, it generates more than 80% of its gross profits from fixed fees. It also helps that many of the services it provides customers such as transportation and processing come with minimum volume commitments that ensure a steady stream of cash that the company can use to reinvest in its vast infrastructure network and pay investors a handsome yield on its investment.
It also helps that, like Berkshire, Enterprise has a management team in place that is quite adept at allocating capital. Unlike many of Enterprise's peers that have been known to pursue growth for growth's sake, Enterprise has maintained a slower, more deliberate approach to its growth that has helped it avoid the traps of too much debt or investing in lower-return projects. These are the kinds of traits that you want from a company you plan to hold onto for a decade or more.
3. Serving up steady growth for decades
There are some industries that seem immune to disruption. One of them is alcohol, namely beer. Sure, the names of what we drink can change from time to time, and the U.S. is in the midst of a cultural shift in the type of beer we consume. What hasn't changed, though, is our desire to drink the bubbly brew. Thanks to the most recent acquisition of SABMiller, it's hard to find a more dominant business in the world of beer than Anheuser-Busch InBev.
To the American beer drinker, Anheuser-Busch is mostly known for its Budweiser and Bud Light, but what's more important is that the company has five of the top 10 selling beers globally under its umbrella of brands. With SAB Miller and its 150 plus brands of beer, the combined company will have massive market share across mature markets such as North America as well as growing markets in Africa and Latin America. It should also be noted that Africa as a whole is the fastest-growing beer market and is expected to grow at three times the global rate.
Having globally recognizable brands in a consumer market that is going to be almost impossible to disrupt will be an extremely powerful tool over the coming decade, and it should do wonders for shares of Anheuser-Busch InBev.