"When we own portions of outstanding businesses with outstanding
managements, our favorite holding period is forever."
Warren Buffett knows a thing or two about investing. That's why we Fools take his quotes as gospel when we're looking for stocks to buy.
Which companies do we think can be purchased today and held for decades to come? We asked a team of investors to weigh in, and they picked General Motors (NYSE:GM), Wynn Resorts (NASDAQ:WYNN), and CommerceHub (NASDAQ: CHUBA).
A revamped giant set to thrive in a changing business
John Rosevear (General Motors): It might seem counterintuitive to choose an auto stock for the next 20 years. After all, we've heard a lot about how the auto industry -- or put another way, the business of personal mobility -- is about to change dramatically, thanks to new technologies.
But what if we knew which of today's automakers would thrive amid the changes? We can't know for certain, of course, but I like General Motors' chances better than most.
Why GM? CEO Mary Barra has the old Detroit giant out in front of those new technologies and the business models they enable. Consider this:
- GM was the first to ship a long-range mass-market electric car, it's planning to launch at least 20 more over the next six years, and Barra promises that unlike the electric cars from certain other companies, GM's will be solidly profitable.
- GM has staked out a leadership position in autonomous-driving technology, with its own fully integrated solution set to deploy in ridesharing use in the near future.
- Speaking of ridesharing, GM owns a big chunk of Lyft -- and it may be gearing up to launch its own proprietary service via its Maven car-sharing subsidiary.
How will GM pay for all that new technology? Right now -- and probably for quite a few years to come -- GM is making strong profits on big sales of well-regarded trucks and SUVs, not just in the U.S., but in China, too. Those profits fund a good dividend, yielding around 3.5% at current prices, that GM expects to be able to sustain through a recession.
Best of all, Wall Street is just now catching onto this story. GM's stock price has risen about 35% over the last six months, but it's still fairly cheap at about 7.5 times expected 2017 earnings. Give this one a close look.
The legend in gaming
Travis Hoium (Wynn Resorts): Steve Wynn has been the most influential person in the history of the gaming business, inventing the megaresort we know today. He redefined the Las Vegas Strip, built two iconic resorts in Macau, and now is building a multibillion-dollar casino near downtown Boston.
The staying power of Wynn Resorts isn't necessarily about what the company will build next; it's about the durability of what's already been built. Macau's gaming industry has just six concessionaires, and Wynn is one of them. The company has a clear advantage in Macau's VIP market, which could generate as much as $2 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) annually when Wynn Palace fully ramps. Wynn Las Vegas is on the booming north end of The Strip, where a new arena and two new resorts are going in. Wynn Boston Harbor likely will be the only casino in Boston for the next 20 years.
Wynn Resorts has a durable competitive advantage by virtue of its gaming licenses and real estate in Las Vegas, Macau, and Boston. That alone would make the stock a great investment to hold for the next 20 years. But growth opportunities may arise in Japan and other markets around the world, offering further upside. With all of the growth ahead, Wynn Resorts is a stock I'll be holding for a long time.
A major tailwind
Brian Feroldi (CommerceHub): Consumers are rapidly changing their buying habits toward online purchases. This shift is creating a huge challenge for brands and retailers that have built their businesses around in-store sales. As a result, nearly every retailer and consumer-facing brand out there is currently in a rush to build out its e-commerce presence.
One company that's greatly benefiting from this e-commerce push is CommerceHub, which offers a cloud-based platform that connects suppliers, demand channels, and delivery services together under one roof. By signing onto the platform, companies like Wal-Mart, Best Buy, and Fossil gain quick access to critical back-office infrastructure that makes it easy for them to fulfill online customer orders.
Given the likelihood that e-commerce sales will continue to grow, CommerceHub's business looks poised to thrive. What's more, CommerceHub already produces great margins and has reached profitability, so this isn't an unproven business, by any means.
The only knock against buying CommerceHub today is that Wall Street has priced its stock for growth. Trading at nearly 90 times trailing earnings, this stock has big expectations already priced in. However, CommerceHub has a proven business model and looks poised to deliver some serious growth over the next few decades. That's why I think the stock is still a great buy today.