With the market at all-time highs, it's tempting to sell some stocks and lock in profits. But unless you need the cash, it's often smarter to hold your winners for decades instead of quarters. Some optimists might even claim that you can hold some stocks "forever".
Johnson & Johnson
Johnson & Johnson is well-diversified across three major markets -- pharmaceuticals, consumer healthcare products, and medical devices. The flexibility of those three pillars of growth make it hard for any major headwinds to knock J&J off course.
Strong demand for its multiple myeloma treatment Darzalex, its B-cell malignancies treatment Imbruvica, Stelara for immune-mediated inflammatory diseases, and its schizophrenia treatment Invega Sustenna all lifted its pharmaceutical revenues in recent quarters, which offset softer demand for its blockbuster arthritis drug Remicade amid generic competition.
Its consumer healthcare unit generates steady growth from over-the-counter medications and beauty products, while its medical devices unit is supported by its electrophysiology and advanced surgery products. Revenue at all three units rose year-over-year last quarter, and analysts expect J&J's revenue and earnings to respectively rise 6% and 8% this year.
J&J currently pays a forward dividend yield of 2.4%, which is supported by a payout ratio of 55%. It's hiked that payout annually for over half a century. The stock has also consistently outperformed the S&P 500 over the past few decades.
J&J's combination of a stable, diversified business and a decent dividend makes it a favorite pick for conservative income investors and a great stock to "buy and forget."
Disney's media empire of movies, TV networks, and theme parks makes it one of the most well-diversified entertainment plays on the planet. Its movie revenues fell last year due to tough year-over-year comparisons, but upcoming Marvel, Star Wars, and animated films (like the Incredibles 2 in 2018 and Frozen 2 in 2019) should get the studio business back on track. Its theme park revenues rose last year, as the Shanghai Disney Resort offset softer attendance at its older parks.
But the biggest concern for Disney is that its media business -- especially ESPN -- has been losing viewers to cord cutting. The bears believe that trend could gut Disney's media unit, which generated nearly half of its operating income last year. But the bulls believe that Disney will evolve by launching its own streaming platforms (one for ESPN and another for its films and shows) and reducing its dependence on cable bundles.
I personally believe that Disney will evolve through the cord cutting headwinds -- whether by launching new platforms or buying other companies -- and remain a top media brand for decades to come. Its business remains healthy, with analysts projecting 6% sales growth and 9% earnings growth this year. It also pays a forward yield of 1.6%, which is supported by a low payout ratio of 28%.
The bears will argue that Apple's days as a growth stock are over, since sales of the iPhone -- which generated only half its revenue last quarter -- will "inevitably" peak. They'll also claim that Apple's dependence on the aging iPhone is its Achilles' heel, and that other product lines like the iPad and Mac won't offset that decline.
However, the bulls will note that demand for the iPhone -- especially the iPhone X -- remains robust, and that Apple's prisoner-taking ecosystem still locks in users and keeps them loyal. They'll also note that Apple will likely use the iPhone X form factor on a trio of cheaper devices next year, which will boost its appeal with mid-range customers. Apple is also aggressively expanding its software services into a sustainable stream of revenue, and that high-margin business generated 16% of its revenues last quarter.
That's why analysts expect Apple's revenue and earnings to respectively rise 20% and 24% this year before dipping back to single-digit growth next year. The company also pays a forward yield of 1.5%, which is supported by a low payout ratio of 26%, and it's hiked that dividend annually for four straight years.
Apple's business will evolve over the next few years as it expands its ecosystem into AR, VR, autonomous driving platforms, streaming media, and other markets. But I think it will remain a powerhouse in the tech world, and that investors can consider it a stock to hold "forever".
Leo Sun owns shares of Johnson & Johnson and Walt Disney. The Motley Fool owns shares of and recommends Apple, Johnson & Johnson, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.