Holding a stock for decades, through brutal ups and downs, is hard. The temptation to sell when things take a turn for the worse can be overwhelming. But it's the holding, not the buying or selling, that creates wealth. That's why it's so important to have a long-term perspective.
Of course, holding on to the wrong stock for decades can be disastrous, so it's critical that you're picky about your long-term investments. If you're short on ideas, three of our contributors think Brookfield Renewable Partners (BEP 1.16%), Berkshire Hathaway (BRK.B -0.95%), and Booking Holdings (BKNG -2.13%) are fantastic options.
An investment in a cleaner future
Matt DiLallo (Brookfield Renewable Partners): The world has slowly started turning away from fossil fuels over the past decade, driven in part by growing climate change fears. Those concerns, along with falling costs, will likely spark continued investment in renewables over the next couple of decades, making clean-power-focused companies ideal options for those investing with a long-term time horizon. While several renewable options are worth considering, Brookfield Renewable Partners is among the best.
For starters, Brookfield's parent company has been in the power business for over 100 years and has built one of the largest renewable portfolios in the world. That company formed Brookfield Renewable Partners in 2012 to grow the platform, which it has done via a steady stream of acquisitions and expansion projects. While Brookfield Renewable's focus is on hydropower, which is among the largest portfolios in the world, the company has expanded into wind, solar, and energy storage in recent years.
That diversified platform provides Brookfield Renewable with multiple avenues to drive growth. In the near term, the company's focus is on building additional hydro and wind-generating facilities, primarily in Brazil and Europe. These expansions, along with the embedded upside of its current power contracts, position the company to deliver 6% to 11% annual cash flow growth for the foreseeable future. Add in the upside from acquisitions across the renewable energy spectrum, and Brookfield Renewable is an ideal investment vehicle for investors seeking an anchor holding to profit from the world's slow pivot toward a cleaner tomorrow.
The ultimate buy-and-hold stock
Tim Green (Berkshire Hathaway): Under Warren Buffett's leadership over the past five decades, Berkshire Hathaway has transformed from a failing textile manufacturer into a conglomerate valued at nearly $500 billion. The stock has returned 20.9% annually since 1965, trouncing the S&P 500 by a factor of two and making many people wealthy in the process.
It's unlikely that Berkshire will be able to repeat that record over the next 20 years, simply because of its size. The pool of opportunities large enough to move the needle at Berkshire is small because the numbers are so big. Another issue: Buffett is now 87 years old. New leaders will take the reins at Berkshire at some point and there's no guarantee they can match Buffett's acumen for deal-making.
None of this means that Berkshire isn't a solid long-term investment. Buffett's focus on acquiring companies with durable competitive advantages makes messing up Berkshire exceptionally difficult, even if the rate of mistakes goes up under new management. The company's vast insurance operations will continue to provide billions of dollars of float that can be invested, and other businesses like BNSF Railway and Berkshire Hathaway Energy should keep throwing off billions in cash for years to come.
Berkshire has been the ultimate buy-and-hold stock for the past 50 years. While the next 20 years probably won't be as lucrative for investors, Berkshire is still a great long-term investment.
20 years and still kicking
Nicholas Rossolillo (Booking Holdings): Back in 1997, still in the internet's infancy, a website called Priceline.com made its debut. The online travel site gained popularity from its "Name Your Own Price" tool, and while many dot-com era start-ups never reached profitability and failed, Priceline made it through.
Fast-forward more than two decades, and Priceline.com still exists. A holding company was created -- recently rebranded as Booking Holdings -- and houses Priceline.com, Asia-based travel site Agoda, KAYAK, Rentalcars.com, restaurant reservation site OpenTable, and the biggest brand, Booking.com. Online travel and accommodations search and booking has grown into a big industry, and Booking is the world leader. 2017 revenues were at $12.68 billion, an 18% increase over 2016, and company management thinks its double-digit growth trajectory will continue.
Interest in travel is on the rise, driven by generational changes in the U.S. -- the kids these days value life experiences over material possessions -- as well as rising wealth for countries around the world. Those trends provide a tailwind for Booking, but so does an increasingly connected world. As of the end of 2015, only 35% of global accommodations were booked online, according to market researcher Euromonitor. Thus, even if the travel industry stopped growing, Booking has plenty of work to do.
Additionally, the company has a track record of innovating new ways to discover vacation destinations and acquiring other fast-growing companies in travel and related industries. Booking Holdings has made it through thick and thin since its debut in the 1990s, and it looks like a solid company worth holding for another couple of decades, at least.