There's no disputing that buying and holding high-quality stocks is the best way to generate wealth over the long term. And we're not talking about holding for weeks or months. We advocate that investors should buy shares of businesses they'll be comfortable owning for years.
To illustrate that point, we asked three top Motley Fool investors to each pick a stock they think investors would do well to hang onto for the next 50 years. Read on to learn why they like Berkshire Hathaway (BRK.A 2.63%) (BRK.B 2.82%), Boston Omaha (BOC 4.39%), and Walt Disney Co. (DIS 4.44%).
Diversify with a single stock
John Bromels (Berkshire Hathaway) I get dizzy thinking about being locked into a single investment -- any investment -- for a decade, let alone half a century! Typewriter companies, for example, sure looked like stable long-term investments in the 1970s. That's why, over the long term, there's safety in diversity: Being invested in a wide variety of industries ensures that one small disruption (for typewriter companies, the PC) doesn't sink your entire portfolio.
Luckily for investors, it doesn't get more diverse than Warren Buffett's Berkshire Hathaway, which has holdings in industries as diverse as insurance (GEICO), railroads (Burlington Northern Santa Fe), and food (Dairy Queen, See's Candies), and many, many more, across a wide variety of industries. That makes the company just about the safest opportunity I can think of for an investor who intends to check his or her portfolio only occasionally.
Perhaps the company's greatest asset is its founder, the famed "Oracle of Omaha," 87-year-old Warren Buffett himself. And while he's unlikely to continue running the company for another 50 years -- although, frankly, I wouldn't put it past him -- he has left his stamp on the company, whose current holdings and asset management strategy will certainly endure without him. After all, his is a strategy that's produced returns that beat the market -- if only slightly -- over the past one-, three-, five-, and 10-year periods. Why not 50?
This mini-Berkshire could deliver life-changing gains
Steve Symington (Boston Omaha): There were several enormous conglomerates -- including Berkshire Hathaway -- that came to mind as I searched for portfolio candidates worthy of holding for the next five decades. But I decided to go out on a limb and pick Boston Omaha, a small, relatively unknown company with enormous long-term promise.
Incidentally, Boston Omaha only just held its initial public offering in June 2017. But it really started to make waves this past December, when The Wall Street Journal revealed that one of its co-CEOs, Alex Buffett Rozek, is the great-grandnephew of Berkshire Hathaway CEO Warren Buffett. However, while the elder Buffett noted that his younger kin has "a very good mind" and "good values," he made it clear that he (Warren) doesn't have anything to do with Boston Omaha's actual business.
Still, as I read through Boston Omaha's third annual letter to shareholders earlier this month, it became crystal clear that Boston Omaha is closely following Berkshire's proven capital-allocation style and approach to generating long-term shareholder value. As it stands, Boston Omaha still hasn't achieved sustained profitability, and its business is limited to billboard rentals, surety insurance, and investments in a couple of a smaller real-estate businesses.
But management is building the business to support much larger revenues -- both through organic and acquisitive growth -- going forward. And I think early investors who buy now and watch the company's strategy play out in the coming years will be more than happy with their decision.
An unrivaled entertainment legacy
Keith Noonan (The Walt Disney Company): When it comes to the entertainment industry, no company has a more impressive legacy than Disney. The business has been in operation for 95 years, and public since 1957. Its stock has delivered stellar returns across that latter stretch, though its share price is down roughly 5% over the last several years. Cord-cutting is casting a cloud over Disney's media networks segment -- a division that accounted for roughly 41% of sales and 30% of operating income last quarter.
These challenges have contributed to the recent stagnation and shares trading at just 14 times this year's earnings -- a valuation that looks attractive in the context of the company's strengths and historical resilience. Disney's parks and resorts segment has been helping to offset the networks issues, and the company is making adaptations to meet the shifting media climate -- recently unveiling its ESPN Plus streaming platform and readying its own film and television streaming service.
Consider that Mickey Mouse's animation debut in the classic Steamboat Willy cartoon occurred almost 90 years ago. Today, the character is still one of the world's most valuable entertainment properties and generates billions in annual retail sales. Disney has an unparalleled collection of entertainment properties, and it's set to make that advantage even more pronounced by acquiring Twenty-First Century Fox's film and character licenses. That should help the company continue to win at the box office, drive traffic at its parks and resorts, and compete in the streaming space.
Disney's dividend adds to its value as a long-term investment. The stock comes with a 1.7% yield, and with a payout ratio of just 24%, there's a good chance the House of Mouse will continue to deliver payout growth. For investors willing to weather some uncertainty as the company deals with some media networks turbulence, I think Disney is a stock that's worth owning on a 50-year timeline.