Investing with an extremely long time horizon can be challenging for a number of reasons, not least of which is that monumental changes in society can happen over such extended periods. Case in point: There's only one company that was in the Dow Jones Industrial Average 100 years ago that's still a component today -- General Electric. Back then, the index was dominated by companies focused on steel, rubber, and railroads.
Still, recognizing that it's an incredible challenge to predict what companies will be thriving a century in the future, we asked three of our contributing investors to give it their best shots. Their picks: Amazon.com (NASDAQ:AMZN), American Water Works (NYSE:AWK), and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL). Below, they explain why.
This retail giant could grow for decades to come
John Rosevear (Amazon.com): A century is an awfully long time -- far too long to make truly accurate predictions. But if I had to pick one company that looks set not just to survive, but to grow significantly for decades to come, I'd go with Amazon.
The e-commerce giant's stock has already had a run for the ages over the last 20 years, of course. But the thing that gets my attention is this: It's still, 20 years later, chasing (and finding) major revenue growth.
Consider: Amazon's revenue was up 25% last quarter, to a hefty $38 billion, on strong retail sales and a good result for the Amazon Web Services cloud-infrastructure business. That's not a fluke -- in fact, it fell short of Wall Street expectations, believe it or not.
We've become accustomed to big revenue growth from Amazon, and there's more to come. Between Amazon's expansion into new retail categories (like groceries and autos), its fast-growing artificial-intelligence expertise, and that cloud infrastructure business, there are new revenue doors opening all the time.
Of course, profits are hit-or-miss with Amazon, as it tends to plow most of its cash back into new opportunities. The thinking is that at some point this will pay off big for shareholders, of course. It could be a bumpy ride between here and there -- Amazon's stock is no bargain at current valuations, and it could take a hit if the market gets choppy -- but over the very long haul, I like its chances to deliver outsize returns to patient investors.
Investing in something that has been constant for centuries
Tyler Crowe (American Water Works): We as investors are bad at two things. We overestimate how much can get done in a year or less, and underestimate what we can get done over multiyear time horizons. The pace of change in technology, health, energy, and consumer behavior makes it hard for us to even conceptualize what our world will look like several decades from now.
For all the changes we will likely see, though, there are some constants in life. We are still living creatures who need to sustain ourselves, and that means that companies which provide essentials like food and water are the kinds of investments you want if you are looking at a holding period of a century or more. With that in mind, American Water Works is worth considering.
The two things that make American Water Works specifically compelling are the company's footprint and the regulated nature of its business. It is one of the nation's largest providers of municipal drinking water and wastewater treatment. Its large, multistate asset portfolio gives it both the financial fortitude and the operational base to either acquire smaller private water treatment operators or take over public operations from municipalities. Also, thanks to the regulated nature of the business, American Water is guaranteed a rate of return on new investments that ensures steadily growing earnings.
It's impossible to make guarantees in investing, but I can guarantee you that 100 years from now, humans will still need water. And chances are, the way we get that water won't change much, either. That makes American Water Works a great bet for a long time horizon.
If data is the new oil, I'm holding this company for the next century
Brian Stoffel (Alphabet): Outside of Facebook, there's no company that's even close to having as much data on hand as Alphabet, parent company to Google. In a world of artificial intelligence and deep learning, the company with the most data will have an undeniable edge over the competition.
For well over a decade, Google has been the default search engine for the world outside of China. Throw in all the data collected by Google's other six products with over one billion active users -- Play Store, Maps, GMail, YouTube, Android, and Chrome -- and Alphabet's sitting on the digital equivalent of gold mine.
But here's the real thing that makes me think I could own this stock for as long as I possibly can: multiple futures. Right now, advertising accounts for 89% of the company's revenue. I don't expect that to change anytime soon.
The company's "Other Bets" -- which include self-driving car unit Waymo, life science company Verily, and a host of other startups -- represent low-risk, high-reward opportunities to meaningfully drive the company's bottom and top lines. While most of these bets will end in failure, all it will take is one or two "hits" to make a huge difference. Given a 100-year time frame, I'm willing to bet that at least one of these ventures will succeed -- and reward shareholders handsomely.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Stoffel owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. John Rosevear owns shares of Amazon and Facebook. Tyler Crowe owns shares of General Electric. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. The Motley Fool has a disclosure policy.