Investing for the really long term is a big challenge. It's impossible to predict events that could transform society decades from now, much less a scandal or disruption that could turn any of today's best companies into tomorrow's has-beens. Consider that there's only one company that has managed to stay in the Dow Jones Industrial Average (^DJI -0.11%) for all of the last 100 years, General Electric. Who could have foreseen that in 1917?
Still, it's possible to look at today's companies and get a sense of which ones are most likely to thrive over the long haul. We asked three of our Foolish investors to do exactly that. Here's why they like Amazon.com (AMZN -1.64%), Johnson & Johnson (JNJ -0.69%), and Medtronic plc (MDT -1.12%).
A retail colossus that could grow for decades to come
John Rosevear (Amazon.com): "Forever" is a long time, but I think online-retail giant Amazon is very well-positioned to keep piling up growth -- if not "forever," then at least for the next several decades.
Amazon's stock has already had a breathtaking run over the last 20 years, of course. But the thing is, 20 years on, it's still finding ways to generate significant revenue growth, quarter after quarter, by fine-tuning its current businesses and expanding -- constantly -- into new ones. Just think about what it has brewing right now: It's moving into major new retail categories, like groceries and autos; building out its artificial-intelligence expertise, which could spawn whole new lines of business before long; and expanding its Amazon Web Services cloud-infrastructure business to capture more and more of a fast-growing market.
Deliveries by drone? It's just one of a slew of new ventures that Amazon is working on. Image source: Amazon.com.
The upshot was a 25% year-over-year jump in revenue last quarter -- and believe it or not, that growth fell short of Wall Street's expectations. That shows you how accustomed we've become to big top-line growth from Amazon, quarter after quarter and year after year.
Of course, we've been talking about revenue and not profit, and that's a concern that many investors have about Amazon. But I kind of think of it as a feature: CEO Jeff Bezos is committed to plowing Amazon's excess cash into new businesses that should keep that revenue growth going for many more years to come. That should keep Amazon's stock growing for years to come, too.
The healthcare titan with a 130-plus-year history
Chuck Saletta (Johnson & Johnson): Healthcare giant Johnson & Johnson (JNJ -0.69%) has a tremendous history that stretches back more than 130 years. Yet while that history qualifies it for "heirloom" status, what makes it worth owning today is its incredible prospects for the future.
While Johnson & Johnson is perhaps best known for its everyday healthcare products like Band-Aid bandages, it has its eyes also squarely set on the future. A part owner in Verb Surgical, Johnson & Johnson is setting itself up to leapfrog existing best-in-class robotic-surgery systems in order to cement itself in the operating rooms of the future.
Adding to the investment case is the fact that Johnson & Johnson has a better-than-50-year history of rewarding its shareholders with increasing dividends. That's a history of shareholder-friendliness that very few companies can match. With a payout ratio of around 55% of earnings, and those earnings expected to grow by around 6% annualized over the next five years, investors have a solid chance of seeing some level of continued dividend growth.
Trading at around 24 times trailing earnings, Johnson & Johnson isn't exactly a bargain-priced business at the moment. Still, if you're an investor with a long-term time horizon looking for a solid company with shares to hold forever, you could do far worse than this one.
A defendable position
Cory Renauer (Medtronic plc): One stock in my portfolio that I fully expect to hold forever, and pass on to future generations, is the single largest manufacturer of medical devices on the planet. The company has historically held a leading share in a handful of specific niches such as insulin pumps and cardiac devices. Following the acquisition of Covidien a few years ago, though, the company has also become a one-stop shop for hospital purchasing departments across the globe.
Medtronic recently raised its dividend for the 40th year in a row, and the stock offers a 2.3% yield that might not be tempting now. Consider the fact that the company has raised the payout at a 14% annual rate over the past four decades, though, and you can easily see why you might want to hold this stock forever.
Of course, past performance doesn't guarantee future results, but Medtronic's highly defensible position certainly suggests years of steady profit growth ahead. The company's less thrilling devices enjoy economies of scale and brand recognition that few peers can match. When it comes to replacement heart valves that surgeons slide into position without making major incisions, for example, hospitals must invest a great deal of time training surgeons to use a competing product.
High switching costs are just one advantage that helped Medtronic report a 9% year-to-year increase in adjusted quarterly earnings when the company last reported. You'll be glad to know management also expects between 9% and 10% adjusted earnings growth for the full fiscal year, which ends in April. In the decades to come, a highly defensible position at the top of the pecking order makes this one stock I expect to continue growing long after my children inherit the shares.
