We Fools believe that the best way to grow a nest egg is to fill it with high-quality companies and then hold on to them voraciously. So which companies do we currently own that we plan on holding "forever"? We asked that very question to a team of Fools. Here's why they picked Enterprise Products Partners (EPD 1.41%), Verisk Analytics (VRSK -0.36%), and Alphabet (GOOG -1.10%) (GOOGL -1.23%).
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The epitome of a long-term holding
Matt DiLallo (Enterprise Products Partners): It's been nearly a decade since I made my first investment in midstream master limited partnership Enterprise Products Partners. I initially bought a slice of the company because I liked its stable business model, which is similar to a tollbooth, in that it collects fees as oil and gas pass through its system of pipelines, processing plants, and storage facilities. These payments really add up, enabling the company to pay a very generous distribution.
Over the past decade, the company has steadily expanded its energy infrastructure network with organic expansions and acquisitions. Those growth initiatives have consistently pushed cash flow higher, enabling the company to increase its distribution every single quarter that I've been an investor. In fact, the company recently notched its 51st consecutive quarterly distribution increase.
Meanwhile, there's plenty of growth left in the tank, which is why I don't plan on selling. Enterprise Products Partners is currently constructing $8.4 billion of new assets to expand its logistics network and has several more projects in development. Further, given the projections for steadily growing global energy demand, Enterprise Products Partners shouldn't have any shortage of growth opportunities in the years ahead. For example, the International Energy Agency doesn't expect oil demand to stop growing until 2040, while it sees natural gas as an even bigger winner because of its lower carbon content. That outlook should drive demand for additional energy infrastructure, which bodes well for Enterprise.
With a stable business model that generates consistent cash flow, and ample growth ahead of it thanks to the world's insatiable demand for energy, Enterprise Products Partners is the type of stock I could envision holding for the rest of my life.
Predicting a bright future for this company
Brian Feroldi (Verisk Analytics): Every insurer knows it's impossible to properly price a policy without a firm understanding of the risks involved. That's why it's critical for insurers to have regular access to huge amounts of historical data so they can make informed decisions. That's where Verisk Analytics comes in.
A number of leading insurance providers created Verisk in 1971. It was believed that pooling all of those insurers' data together would help the industry better predict losses and thus lower costs. That decision wound up providing Verisk with a database that no other information provider on Earth could match.
Over the past few decades, Verisk has become an expert at providing its clients with the data and tools they need to make informed decisions. In turn, Verisk has become an indispensable supplier to the industry, which has provided the company with enormous pricing power. Each year, Verisk pushes through price increases that its clients happily pay, since they can't run their business without the data. So perhaps it isn't surprising to learn that even Warren Buffett is a fan of this company.
A few years back, Verisk decided to expand its universe of opportunity beyond its core insurance market. The company made a series of acquisitions that gave it a foothold in the financial and healthcare industries. More recently it purchased a leading provider of information to the chemical and energy markets. All of this diversification has helped the company extend its lead while also protecting the business from a downturn in the insurance industry.
Looking ahead, I can't help thinking that the demand for data analytics is going to grow as companies from a variety of industries look for ways to reduce risk and control costs. That's why I've invested in Verisk Analytics for the long term and can't imagine myself parting ways with my shares anytime soon.
The only way to own SpaceX today
Rich Smith (Alphabet): I'm loath to say "never." To be blunt, if a company changes its business to such an extent that it's no longer the business that I originally wanted to own, I most certainly will sell the stock. (I've done it before. After buying Freeport-McMoRan as a play on gold prices, I dumped the stock when Freeport decided it really wanted to become an oil stock).
That said, there is one stock that I intend to hold on to for as long as I possibly can, and that's Alphabet.
Why? It's probably not for any of the reasons you think. It's not because Google is dominant in search, although it is. It's not because I love watching YouTube videos, although I do. It's not even because I enjoy seeing Google drive Comcast, Charter Communications, and all the other cable monopolies to distraction every time it launches a local Google Fiber service.
No, the reason I own Alphabet stock, and the reason I intend to keep on owning it, is that in 2015, Alphabet invested $750 million to acquire a 7.5% interest in Elon Musk's space company SpaceX. Because SpaceX is privately owned, and because Musk says he has no plans to conduct an IPO any time in the near future, this means that right now, owning a piece of Alphabet is the only way I can own a piece of SpaceX -- even a small piece.
And now that I do own that piece, I'm never selling.
