We Fools like to take the long-term view. That's why we're constantly on the hunt for businesses that have the potential to deliver for decades on end.
So which stocks do we think investors can safely own for the next half-century? We asked three Foolish investors to weigh in, and they picked Amazon.com (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), and Starbucks (NASDAQ:SBUX).
For growth, look toward Omaha
Dan Caplinger (Berkshire Hathaway): There aren't many stocks I have so much confidence in that I'd hold for half a century, and Berkshire Hathaway isn't the most obvious choice to be one of them. As morbid as the subject may be, the odds are just about nil that 87-year-old Warren Buffett will live to his 137th birthday, and vice chairman Charlie Munger is even older than Buffett is. Moreover, many see Berkshire more as a value holding than a true growth stock, especially given the role of esteemed value investor Benjamin Graham in shaping Buffett's investment philosophy.
But the company has both a plan after Buffett and growth potential. Berkshire's succession plan likely involves longtime Berkshire Re executive Ajit Jain and Berkshire energy veteran Greg Abel. With these two leaders at the helm, Berkshire's insurance and non-insurance operations should thrive for years to come. With respect to growth, not only is the insurance business likely to see stronger profits in 2018 after hurricane losses hit its 2017 numbers, but Berkshire also has opportunities to put more cash to work and benefit from lower tax rates. Berkshire Hathaway won't double in a year, but its long-term gains should be ample for the needs of most investors.
Don't make this too complicated: Buy Amazon
Brian Stoffel (Amazon): It might be exciting to introduce you to a small-cap stock with booming growth that could grow 100 times over. But I'm not going to do that, because one of the best growth stocks to buy and hold is sitting in plain sight: Amazon.
More than anything else, investors with a 50-year time horizon need to remember Amazon's mission since day one: "To be earth's most customer-centric company." This helps the average investor understand how a company that was simply selling books 20 years ago has evolved into the e-commerce- and cloud-computing-ruling, grocery-shopping-revolutionizing, health-care-disrupting behemoth that it is today.
Already, we've seen that, despite the company's size, sales show no signs of slowing down: Sales were up 38%, while operating income jumped almost 150%, during the holiday quarter, and management sees first-quarter sales growth as high as 42%. Half-a-trillion-dollar companies just aren't supposed to grow like that. But Amazon isn't your average company.
Perhaps the best way to view the next 50 years for Amazon is summed up by tech blogger Ben Thompson. Expounding upon the massive efficiencies of scale that Amazon offers through both its e-commerce fulfillment centers and its AWS offerings, Thompson concludes: "[Amazon's] future is to be a tax collector for a whole host of industries that benefit from the economies of scale. ... [Amazon] is effectively on its way towards collecting a tax on all of retail."
I'd want to own the rights to those massive tax levies in 2068.
40 years later it's still a growth stock
Brian Feroldi (Starbucks): I have no idea what life will be like in 2068. However, I'm quite certain that millions of humans will still need to get their caffeine fix every day. What how can investors benefit from that long-term need? The best answer is Starbucks.
But will Starbucks be able to pump out growth over the next 50 years? I think that the answer is yes. Here are some of the reasons why:
- Pricing power: Starbucks' brand is so strong that the company can regularly push through small price increases without consumers pushing back too hard.
- Food: The company has consistently grown over the last four decades without ever really getting food right. However, we've recently seen signs that the company is finally starting to offer food that is attractive to customers.
- Tea: Starbucks made a big push into tea a few years ago with its buyout of Teavana. The global tea market is huge and provides a way for Starbucks to services the billions of people who prefer tea instead of coffee.
- Asia: North America is still Starbucks' home base, but the opportunity ahead in Asia is massive. Longer term, management thinks that sales in China alone will outpace growth in North America.
- Consumer packaged goods: Have you noticed that Starbucks' products have started to find their way onto grocery and convenience store shelves? This allows the company to reach customers (like me) who love Starbucks products but don't visit the stores very often.
I'm confident that these factors will allow Starbucks to push its revenue and profits higher for decades to come. That makes Starbucks an ideal stock to own for the ultra-long term.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Amazon and Starbucks. Brian Stoffel owns shares of Amazon. Dan Caplinger owns shares of Berkshire Hathaway (B shares) and Starbucks. The Motley Fool owns shares of and recommends Amazon, Berkshire Hathaway (B shares), and Starbucks. The Motley Fool has a disclosure policy.