Even though you're officially "over the hill" now, you still have decades of living -- and investing -- in front of you. Finding stocks that you can live with, and that will reward you, over the years is a key to investing success.
We asked three Motley Fool contributors to identify companies they think can go the distance with you. Read on to find out why Kite Pharma (NASDAQ:KITE), IBM (NYSE:IBM), and Colgate-Palmolive (NYSE:CL) could make great stocks to grow old with.
Take a risk
Keith Speights (Kite Pharma): Ben Franklin took a risk 265 years ago by flying a kite during a thunderstorm. It paid off: He proved that lightning was static electricity. If you're in your 30s, it could make sense for you to take a risk also -- in your investing portfolio. And like Ben Franklin, you do so with a kite, in this case Kite Pharma.
Kite Pharma is a biotech with no products on the market yet. That makes it a risky pick, one that would be too risky for many investors. However, for relatively young investors, buying some riskier stocks here and there can be a good thing.
Why pick Kite? The company is a leader in the development of chimeric antigen receptor T-cell (CAR-T) drugs. CAR-T drugs work by taking blood from a patient, engineering the T cells in the blood to target cancer cells, and then placing the T cells back into the patient's body.
While Kite is a clinical-stage biotech right now, that could change in the near future. A few weeks ago, the company submitted its first CAR-T drug, axicabtagene ciloleucel (try saying that one three times fast), for U.S. regulatory approval as a treatment for aggressive non-Hodgkin lymphoma. If approved, the drug will launch later this year. Approvals for other types of cancer could follow.
Analysts think axicabtagene ciloleucel should generate peak annual sales of around $2 billion. Kite's market cap stands at a little over $4 billion, which means that if the drug meets expectations, the stock has plenty of room to run. And that doesn't factor in the potential for the company's other pipeline candidates.
There's plenty of risk with Kite, of course. But sometimes taking a risk pays off in a big way.
Artificial intelligence is coming...eventually
Rich Smith (IBM): I'm a good deal past my 30s, but I retain a dim recollection of what it felt like to be young back then. (If memory serves, the back didn't hurt quite as much, my $200,000 mortgage seemed insanely expensive, and the kids didn't complain so much about doing their chores -- because they hadn't yet learned to talk.)
I also remember being enamored of a new product that IBM was working on, which it called Watson -- a supercomputer rumored to be able to comprehend and respond to human speech, and one that promised to become the next breakthrough in artificial intelligence. A few years after I first heard of it, Watson would go on to beat Ken Jennings on Jeopardy!
For years, I waited for Watson to transform IBM into the superstar growth leader of artificial intelligence, but year after year, it failed to happen. The year after the Jeopardy! match, IBM's revenue declined 4%, and then continued to fall, and fall, and fall.
Lately, though, Watson seems to be living up more to its potential, announcing partnerships with tax prep firms, health insurers, and even drugmakers tackling the mysteries of cancer treatment. To date, these partnerships haven't done much to bolster IBM's top line, or its bottom line, either (profits in 2016 were down 10% year over year). Nearly a decade after I first heard about Watson, the supercomputer still hasn't managed to transform IBM's business.
But here's another thing that hasn't happened in 10 years: No one else has announced a supercomputer capable of rivaling Watson's performance. That means that IBM still has the lead in this market -- and that beating IBM in AI might be a whole lot harder, and take a whole lot longer, than what we all might have expected a decade ago. Give IBM another few decades to turn Watson into a moneymaker and I think IBM might still surprise us.
At a valuation of just 12 times free cash flow, that's not an expensive bet to make, and one that just might work out in the long run, especially if you're in your 30s with years ahead of you.
A global giant with a long history of success
Rich Duprey (Colgate-Palmolive): Consumer products giant Colgate-Palmolive is one of the top brand-name companies in the world. It has the largest global market share in toothpaste, manual toothbrushes, pet nutrition (in vet clinics), and liquid hand soap. It has the second-leading share in mouthwash, bar soaps, and liquid body cleansers. You probably use at least one of its products during your day and can probably find them in your linen closet, medicine cabinet, kitchen cupboard, and laundry room.
That kind of brand awareness and power has allowed Colgate to pay uninterrupted dividends on its common stock since 1895, a feat that puts it in a rarefied group of companies that have returned value to shareholders for over 100 years. The consumer products leviathan may not have raised dividends each of those years, but it has increased them for 55 years and counting.
Approximately three-quarters of its total net sales come from markets outside of the U.S., and fully half of them are from emerging markets, limiting its risk from a downturn in any one region and giving it the opportunity to expand as their economies grow.
While its most recent quarter was out of step with how it usually performs, the stock has gained about 16% over the past two months as Kraft Heinz made a bid for Unilever, and speculation immediately arose that, after its disappointing results, Colgate would make a good acquisition target for someone.
Yet that doesn't mean Colgate-Palmolive isn't still a good buy. Over the past year, the stock is up less than 6% as a result of that one quarterly misstep, but considering how well it's done over the decades and its preeminent position in the markets around the globe, it's likely an aberration and the consumer products leader will soon return to form. Sure, past results are no guarantee of future performance, but when a company has more than a century of outperformance behind it, one can only imagine what the next 100-year period holds.