I'm convinced that buying high-quality stocks and holding them for long periods of time is the best way to become wealthy. After all, that's a strategy that famed investor Warren Buffet lives by, and it's worked out quite well for him.
Of course, it can be quite difficult to separate high-quality stocks from low-quality ones, as many of today's most promising companies are destined to fail. Despite that, I'm certain my portfolio has a handful of amazing stocks in it that could easily qualify as "hold forever" candidates. Below is a list of three of them that I can't ever imagine parting with.
The everything store
First up is on today's list is the house that Bezos built, Amazon.com (NASDAQ:AMZN).
While the company is best known as a one-stop shop for everything retail, the primary reasons I plan on hanging on to my shares over the long haul are its Prime and Amazon Web Services businesses. Here's why.
Research company CIRP has estimated that 63 million Americans have signed up to become Prime members. That's terrific news for shareholders, as Prime members buy more than twice as much stuff from the company's site than non-members. That's a big reason the company is fanatically investing to make a Prime membership even more attractive by also offering free access to music, books, TV shows, and movies. In a sense, Amazon has created an ecosystem that's designed to keep members very loyal to its site, and results clearly show that the strategy is working.
Then there's Amazon's Web Services (AWS), which has been nothing short of a phenomenal success. Revenue from this division is growing at stellar rates, coming in at 58% last quarter. That should easily put it on pace to surpass the 11-figure mark this year. Better still, AWS is highly profitable, providing the company with gobs of cash flow that it can use to plow back into the business to keep the growth coming.
In total, Amazon has three fantastic businesses that make it the ultimate growth stock. When you consider that only 8% of all U.S. retail sales occur online, it doesn't take much imagination to project decades of strong growth ahead. That makes this one stock that I can't imagine ever parting with.
A robotic surgery pioneer
The world's population is getting older, which should drive the demand for high-quality healthcare ever higher for decades to come. One company on the cutting edge of healthcare innovation is Intuitive Surgical (NASDAQ:ISRG), the worldwide leader in robotic surgery.
More than a decade ago, Intuitive Surgical launched its da Vinci system, which helps physicians perform a variety of surgical procedures. The system has proven to be a huge hit with patients and providers around the world. There are currently more than 3,745 da Vinci systems in place worldwide, and each time a procedure is performed on a da Vinci, Intuitive gets to rake in sales of high-margin disposables. That provides the company with a highly predictable revenue stream.
The da Vinci system currently dominates a handful of procedures in the U.S., but with each passing year, the company finds more and more uses for its machines. That's helping to drive strong growth in procedures, which totaled 652,000 last year. That sounds like a lot, but it's still only a fraction of the estimated 4 million annual procedures that occur each year in the countries where the company operates today. That number is also likely to rise as Intuitive Surgical sells new systems, expands geographically, and adds new procedures to its list.
All told, Intuitive Surgical is far and away the leader in a market that's built for decades of strong growth. That's why I think this is a great stock to buy and hold forever.
Disrupting the prototyping process
The final stock on my never-sell list is Proto Labs (NYSE:PRLB), a company that specializes in rapid prototyping and custom manufacturing.
Proto Labs has been gobbling up market share in the product development market thanks to its intense focus on speed. Traditional prototyping companies often require weeks of lead time before they can turn around a custom part for a customer, which is both costly and inefficient. Proto Labs has upended that process by creating custom software that automates the design, quoting, and manufacturing process, allowing the company to turn around a part in as little as one day. That extreme speed allows developers to test and redesign at a much faster pace, which lets them bring a finished product to market quickly.
Proto Labs' unique offering has proven to be a big hit with customers, which is why the number of product developers on its platform continues to grow at double-digit rates. That's driving strong growth on the company's top line, which is a trend I expect to continue for quite some time as the company rolls out new services and expands to new geographies.
All in all, Proto Labs is a disruptor in a gigantic industry, and I'm convinced that its proprietary software and global footprint give it a nice edge over rivals. With decades of revenue and profit growth ahead of this company, I for one plan on hanging on for the ultra-long term.
Brian Feroldi owns shares of Amazon.com, Intuitive Surgical, and Proto Labs, Inc. Common stock, but you knew that already, right?
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