You've finally accepted the merits of tried-and-true buy-and-hold investing. Perhaps you bought a few speculative biotechnology stocks, then concluded, after several failed phase 2 trials, that one might as well play roulette. Or, worse, you tried to (gulp) day-trade. Whatever the path, you've arrived at the inevitable conclusion that long-term forget-about-it investing works. And why shouldn't it? Besides the obvious cost and tax advantages, there's oodles of data supporting the simple fact that winning companies and brands tend to keep on doing just that.
Which leads us to the tricky part: finding the long-term winners that allow compound interest to work its magic. The statistics here, while decent, are not spectacular. By 2011, the average time spent by a corporation in the S&P 500 Index was just 18 years. Sure, a portion of that is due to mergers and buyouts, but the result is the same -- a cessation of returns.
In the spirit of making readers' search a little easier, and with the full knowledge that no one has a crystal ball: Here are three companies that appear to be primed to thrive in the 21st century.
Perfect for a trip through the 21st century
Not only does Priceline Group Inc. (NASDAQ:PCLN) own one of the premier travel-booking sites in the world, with which it shares its name, but Priceline also happens to control a plethora of travel booking sites in over 200 countries. These sites include Booking.com, Agoda, KAYAK, Rentalcars.com, and even the restaurant-reservation booking site OpenTable. Each site more or less operates as an independent brand and has been specifically tailored to its target market. This organizational structure has been like rocket fuel to Priceline.
The company has averaged a 36.74% return on equity for the last five years, grew its earnings per share annually by a white-hot 22.05% on average during that same time period, and continues to throw off billions in free cash flow each and every year.
Its recent second-quarter results lend much to the idea that the good times are likely to keep on rolling. Both revenue and EPS increased 12% year over year; gross bookings were up 19%, driven by a particularly strong performance of its internationally focused site Booking.com; and hotel-room nights increased by a whopping 24% compared with the second quarter of 2015.
More broadly, the 21st century is likely to be marked by a continuation of what we've seen in the 20th: increased interconnection and, of course, travel. Traveling to China, Europe, or anywhere else in the world would have been practically unheard of for the average American at the dawn of the 20th century. Now, it is not uncommon for college students to study abroad or for retiring baby boomers to go to southern France or Spain. And to walk the National Mall in Washington, D.C., is to be in the presence of tourists from every corner of the world.
The next century is going to be marked by ever-increasing mobility and travel, and Priceline will be there to help humanity book its reservations.
Serving a "cold one" to emerging markets
The big story in beer has been, at least stateside, the meteoric rise of craft brewing. There are more independent breweries in operation in the United States today than at any time since the Civil War. This has, inevitably, led to a modest decline in the market shares of the megabrewers, of which our next pick, AB InBev (NYSE:BUD), is the undisputed king.
So why is a company that is experiencing increased competition in one of its biggest markets included in this list? Because while the 20th century has often been designated by historians as the "American Century," there is a strong case to believe that the 21st will be about the rise of many other nations to prominence and, at the very least, First World status. All the better: AB InBev happens to have a near-monopolistic presence in many of these same nations.
In an idea I've explored before, AB InBev, with its soon-to-be-completed acquisition of SAB Miller, is set to become the brewer of choice (or perhaps the only choice) for dozens of fast-growing emerging markets. Post-merger, the combined company will have a 64% market share in Brazil, 79% in Argentina, a staggering 98% in Colombia, 51% in Mexico, 45% in the good old U.S. of A., 14% in China, and 82% in South Africa -- just to name a few of the company's particularly strong national markets.
These countries will undoubtedly experience increased per-capita income in the decades ahead, and with that come increased luxury-goods and food purchases. And there AB InBev will be, purveying its leading beer brands to an increasingly affluent global population.
These demographic trends, coupled with AB InBev's unmatched brand power, free-cash-flow generation, and more than respectable dividend yield, make it an almost certain long-term winner.
Adapting to the future
General Motors (NYSE:GM) has come a long way since becoming one of the biggest bankruptcies in U.S. corporate history. Rising from the dark days of the Great Recession, GM has emerged as a modern auto-manufacturing juggernaut that not only continues to win accolades for its autos, but also generates enormous profits and returns on capital for its owners. Its return on equity has averaged 17.8% for the last five years; its net income in fiscal year 2015 registered at just under $10 billion; and the company has made major inroads in major foreign markets -- particularly Europe and China. The latter market has been particularly robust, with GM selling 1.81 million vehicles in China year to date, a 5.3% increase over the first six months of 2015.
As icing on the cake of GM's world-class operations, the company is making major investments in the future of commerce and transportation. This is the true reason GM is a great stock to own for the 21st century: GM has stepped up and become a bona fide innovator, willing to experiment in the name of disruption.
Early this year, General Motors famously invested $500 million in ride-hailing start-up Lyft (a major competitor of Uber), and the two companies wasted no time in announcing a driverless car partnership. In fact, starting next year, Lyft will begin testing driverless taxis in San Francisco. What model of car will Lyft be using for this little experiment, you ask? Why, the all-electric Chevrolet Bolt, of course.
General Motors isn't stopping there. Under the leadership of CEO Mary Barra, the company has also started its own short-term local car rental service (billed as a "personal mobility brand") called Maven.
These car-sharing initiatives are small potatoes compared with the strides GM has made with driverless cars. In addition to doing its own research, GM is making additional acquisitions to give itself an edge. In March 2016, GM agreed to purchase Silicon Valley driverless start-up Cruise, which specializes in creating kits that can be installed to allow traditional cars to drive autonomously on the highway. Following this purchase, GM president Dan Ammann stated: "With the Lyft alliance, our Maven car-sharing brand and now Cruise, we have a lot of pieces of the puzzle that will enable us to define the future of mobility."
GM is not only succeeding in the current auto market, but also has a clear vision as to how it fits into the driverless, ride-sharing world that is to come. This foresightedness makes it a prime candidate to thrive in the 21st century.
The long, long term
The Motley Fool's own Morgan Housel, who recently penned his last Fool.com column, left an indelible impression on me when, in his piece "The Extraordinary Story of America's Most Successful Industry", he identified the, or at the very least one of the, best performing stock(s) of the last half century: Altria (NYSE:MO). One dollar invested in Altria in 1968 was, at the time he penned his article in February 2015, worth a staggering $6,668. Few enterprises in world history come close to this long-term performance, which amounts to over 20% per annum every year since Lyndon Johnson was in the White House. Morgan's lesson on the power of owning a business with magnificent economics for an extremely long time doesn't stop there. In what might be an even more impressive figure than Altria's individual returns, Housel goes on to point out that just one dollar invested in tobacco stocks in 1900 was worth $6.3 million by the year 2010.
None of this is to say you should log into your brokerage account and buy a large amount of Altria stock. The years ahead probably won't be as kind to Altria as the last 100 have (although wouldn't it be a hoot if that turned out to be the case?). What the reader should be doing is taking to heart the real lesson here: picking the right businesses and holding them forever really can have Earth-shattering results. What we should all be doing is focusing on which companies future generations will talk about in the same light as we do Altria today. Only time will tell, but The Priceline Group, General Motors, and AB InBev are extremely strong contenders.
Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group. The Motley Fool recommends Anheuser-Busch InBev NV and General Motors. 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.