Twenty years is a very long time. On average, it's a period of time that will include a handful of bear and bull markets, several elections, major wars and conflicts, and periods of economic recession and expansion. Twenty years from now, most companies will have gone through one, if not more, C-level executives.
But there are some stocks that have durable businesses and obvious growth opportunities that will be exceptional, regardless of how the economy zigs or zags, or who takes the role as their next chief executive officer 20 years from now. Below, three Fools lay out a case for Mastercard (MA -0.08%), Chubb (NYSE: CB), and Boeing (BA 1.51%) as three companies that are so good they're worth buying and ignoring for the next 20 years.
Billions of reasons this payment giant is worth holding for decades
Jason Hall (Mastercard): It's easy to assume that electronic payments -- like credit and debit cards and mobile payments -- dominate global transactions. After all, it's how most people in the developed world pay for nearly everything. But globally, cash is still king, with the vast majority of transactions around the world still in cash. That's changing.
Technology is driving big growth in electronic payments around the world. Low-cost smartphones are putting electronic-payments devices in the hands of millions more consumers every year. And this growth of new consumers with access to electronic payments is set to accelerate in coming decades. By most estimates, the planet's middle class -- which drives a huge portion of consumer spending -- is set to add more than 1 billion people over the next two decades, and essentially all of these new consumers will have access to a mobile device and can participate in the explosive growth of e-commerce.
Mastercard is already a major global-payments leader. The strength of its secure payments network, as well was its relationship and reputation with merchants, financial institutions, and consumers, make it a known quantity that will keep it relevant for decades to come. And since each new customer adds more incremental profit than the one before, Mastercard's profits are set to grow faster than revenue for decades. That should drive amazing returns for shareholders.
Don't set a timer on these stocks. These are our top buy-and-hold picks for the next 20 years. Image source: Getty Images.
A forever stock
Jordan Wathen (Chubb): When it comes to stocks to hold for the long haul, culture matters. That goes double for businesses that make their money by putting their shareholders' capital at risk.
Chubb is an extraordinarily well-run insurance company that only got better when it merged with ACE in 2016. Chubb primarily underwrites property and casualty insurance for middle-market businesses, while ACE underwrites property and casualty (P&C) insurance for larger, international companies. Combined, they have an insurance offering for just about any risk worth insuring.
The hallmark of a good insurance company is a low combined ratio, which measures how much an insurer spends on operations and losses to claims and losses as a percentage of premiums -- and lower is better. Both Chubb and ACE have historically outperformed the rest of the industry by holding operating costs low and pricing risk correctly. Over the last decade as stand-alone companies, both had a combined ratio of approximately 90%. Competing insurers are lucky to merely break even on their underwriting with a 100% combined ratio.
Chubb isn't likely to be a stock that doubles overnight. It's a sleepy, slow-growing insurance company that would prefer to twiddle its thumbs than underwrite bad risks just for the sake of growth. But a conservative culture is what makes it an exceptional buy-and-hold stock, and even though it isn't obviously cheap at 2.3 times tangible book value, Chubb's pricing discipline likely will ensure that it earns above-average returns over the long haul.
Soaring for decades
Daniel Miller (The Boeing Co.): Investors looking to own stocks for two decades should look at industries with consistent long-term growth and specific companies that can return value to shareholders over the years via dividends. Boeing Co. is a great example. Heading into 2017, Boeing declared its quarterly dividend would increase 30%, to $1.42 per share. The aviation juggernaut has paid a dividend to shareholders for more than 75 years, and has raised the quarterly payment roughly 190% over the past four years.
But the reason investors can hold Boeing for two decades is the consistent growth in air travel. Boeing's commercial aircraft generates a majority of its total business, with its defense business making up a lesser portion.
While traffic varies per market, Boeing's management anticipates average annual passenger traffic to grow 4.7% annually over the next 20 years, which would drive demand for its commercial aircraft. In fact, over the next 20 years, Boeing anticipates the global need for more than 41,000 commercial aircraft valued at $6.1 trillion -- and Boeing is in line to carve out a serious chunk of that market potential.
The key for Boeing to continue rewarding shareholders will be its ability to ramp up its production rates. Boeing's 737 should move from 42 per month currently to 57 per month in 2019. With Boeing's total backlog of more than 5,700 commercial aircraft, shareholders stand to benefit over the long term.
