There's plenty that can derail stocks along the way, but our Motley Fool investors believe that Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), Disney (NYSE:DIS), and Intuitive Surgical (NASDAQ:ISRG) can power portfolios higher for the long haul. Here's why they think these are three prime stocks to add to your portfolio now.
Partner up with Warren Buffett
Rich Smith (Berkshire Hathaway): Depending on how you count them, Berkshire Hathaway stock encompasses about 63 separate companies, all owned in their entirety by the parent company -- and all headed by master investor Warren Buffett.
One may rightly wonder how Buffett keeps track of the intricate details of so many diverse businesses and runs them all simultaneously. The answer is: He doesn't. Instead, here's how (Berkshire Hathaway subsidiary) Executive Chairman Matt Rose describes Buffett's management style for the companies he owns:
"He [buys] companies that he likes, he spends a lot of time in terms of developing the goals ... and then he allows management to run the company."
Buffett himself explains that when buying his companies, he is "looking for an honest and able management to run [the company] because I don't know how to run it myself."
See the connection? Because Buffett has done his research and trusts his management, he feels safe in buying a company and then basically forgetting about it. And he's gotten so good at this that, over the past 50-odd years of investing, Berkshire Hathaway stock has grown in value by about 21% annually for a half century.
Now here's the best part: Buy a share of Berkshire Hathaway and you become a business partner with Warren Buffett. You can have that same confidence -- to buy a stock and forget about it.
Let this stock entertain you
Dan Caplinger (Disney): If you want a stock that has staying power, Disney is an obvious choice. The House of Mouse packs together several attractive businesses into one corporate package, including its lucrative theme-park business, its movie studios, its retail operations, and its broadcast and cable television networks. Disney has adapted itself quite well to new demand for popular content, using its long-lived inventory of older content and supplementing it both through new organic growth and major acquisitions of other studios.
Disney has seen its stock struggle lately because of concerns about the future of its television franchises. The ESPN sports network has been one of the most successful parts of Disney's business, but a growing trend has more customers cutting the cord and giving up on their traditional cable packages, and that has posed a threat to Disney's revenue from the highly lucrative niche. Nevertheless, Disney is working to take matters into its own hands as it looks at alternative content distribution methods that could actually work to help the company capture more customer revenue than it gets through cable contracts.
Disney has had to deal with changing consumer trends before, and it has found ways to navigate difficult times successfully. With plenty of experience in wooing generations of viewers, Disney has what it takes to survive in the future and offers a no-drama investment opportunity for those who favor low-maintenance positions.
Riding robotics to riches
Todd Campbell (Intuitive Surgical): Intuitive Surgical has a near-monopoly in the robotic-surgery market, and while it won't enjoy that advantage forever, its dominant footprint and savvy razor-and-blade sales strategy positions it perfectly to benefit from robotic surgery becoming mainstream.
The company's installed more than 4,100 of its da Vinci surgical robot systems at hospitals globally; because these machines are pricey, it won't be easy for emerging competitors to unseat Intuitive Surgical.
Intuitive Surgical's systems have been used in over 4 million surgeries since 2000, and procedure growth continues to climb by solid double digits. In 2016, da Vinci assisted in 750,000 procedures, and in the first half of 2017, procedure volume grew by 17% year over year.
This procedure growth is great news for investors because it means Intuitive Surgical's selling more high-margin instruments and accessories than ever before. It gets 71% of its sales from recurring revenue, and with the typical surgery generating between $700 to $3,500 in instruments and accessory sales, rising procedure volume offers investors a big revenue tailwind.
Importantly, the company's already profitable with $735 million in earnings on $2.7 billion in sales last year.
Given there are still millions of procedures every year that aren't being done using a da Vinci, I believe that the market potential offers this company significant upside. If I'm right in thinking that robotic surgery will become more common than freehand surgery someday, then adding Intuitive Surgical to your portfolio will prove smart.
Dan Caplinger owns shares of Berkshire Hathaway (B shares) and Walt Disney. Rich Smith has no position in any of the stocks mentioned. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Intuitive Surgical, and Walt Disney. The Motley Fool has a disclosure policy.