There are a few specific characteristics to look for if you want stocks that you could hold for decades. For example, you want companies with a strong track record of success, bulletproof balance sheets, and a sustainable competitive advantage. While it's not possible to say with 100% certainty that any stock will be a great investment for decades, here's why our contributors think Hormel Foods (HRL -0.46%), Anheuser-Busch InBev (BUD -0.86%), and Digital Realty Trust (DLR 1.31%) all have the makings of "forever stocks."
Don't miss the sale
Reuben Gregg Brewer (Hormel Foods Corp.): In late November, Hormel announced its 52nd annual dividend increase, upping the yearly payout by 10%. That's reason No. 1 to buy and hold Hormel for decades.
Image source: Getty Images.
That said, the stock has rallied pretty dramatically over the last month or so, rising by around 15%. But the yield, at around 2%, is still toward the high end of its historical range. I wouldn't call Hormel cheap, and it's clearly not as good a deal as it was just a short time ago, but it's still fairly priced. A great company at a fair price is still a pretty good opportunity in my book.
What makes this a great company? There's the more than 50 years of annual dividend hikes, of course. However, it's really what has to happen to create a streak like this that's most important. For one, Hormel has the No. 1 or 2 position in 35 different grocery categories, spread across the entire store. The company has a goal of generating 15% of revenue from newly introduced products, pushing itself on the innovation front to remain a leader in the food industry.
And while it's a conservatively run company, it isn't afraid to make notable moves to adjust along with its end markets. Most recently, that's included building a new production facility in China, expanding for the first time into South America, and extending its portfolio with bolt-on acquisitions in the retail and foodservice spaces. There's still time to get a good deal on Hormel, but you'll have to hurry.
Brewing up long-term profits
Sean O'Reilly (AB InBev): To own a stock for decades, the company in question needs an edge. Its business has to be one that an investor can be sure can make it through anything as the years go by. That's why, when asking myself what stock might fulfill this lofty requirement, I immediately thought of Anheuser-Busch InBev.
AB InBev is the world's largest beer brewer. As the owner of 500 beer brands sold in 150 countries, it's hard to go anywhere and not feel AB InBev's influence.
Its status as the world's largest beer brewer (with over 25% global market share) was cemented with its 2015 of South African megabrewer SAB Miller.
Top brands include Budweiser, Corona, Stella Artois, Beck's, and countless others.
The exact reason to consider picking up a few shares of AB InBev and holding on for the ultra-long term is its market share in dozens of countries.
Take Brazil, for example. Home to over 200 million people, AB InBev, controls over 75% of the beer market here, led by its Skol beer and 36 brewing plants across the country. This tale repeats in numerous nations, including the United States where BUD's brands command 45% of the beer market.
Bottom line: AB InBev has a business built to last. The company has dozens of "mini-monopolies" across the globe that generate billions in profits. As if this weren't enough to consider picking up shares, these profits are shared with AB InBev's owners via its dividend (currently yielding 5%).
For a bulletproof stock you can own for decades, consider pouring yourself a draft of AB InBev stock.
Data storage needs will grow for decades to come
Matt Frankel (Digital Realty Trust): Digital Realty Trust is a real estate investment trust that invests in data center properties all over the world. As of the end of the third quarter, Digital Realty owns 182 data centers located in a dozen countries all over the world.
If you're not familiar, data centers are buildings that are specifically designed to provide a reliable and secure environment for servers and network equipment. Companies rent space in Digital Realty's properties in order to house servers and other equipment they own, and the tenant list reads like a who's who of major tech and financial firms. IBM, Facebook, Oracle, AT&T, and JPMorgan Chase are all among Digital Realty's top 20 tenants, just to name a few.
Real estate can be a lucrative long-term investment, especially if it's a property type for which demand is expected to grow rapidly, and that's certainly the case here. Global data center traffic is expected to grow at a 27% annualized rate through 2020, according to Cisco, and mobile data traffic is expected to grow even faster.
This growth trend is illustrated by the fundamentals of some of Digital Realty's key markets. For instance, the massive Northern Virginia data center market is 95% occupied, and the area is absorbing inventory at three times the rate at which it's being constructed. In other words, demand is growing faster than supply, and there is no reason to believe this will change anytime soon.
