Buying and holding high-quality stocks for the long term is the best way to predictably beat the market. And we're not talking about trading stocks after owning them for weeks or months; we advocate that you consider finding businesses you're comfortable owning for years.
To that end, we asked three top Motley Fool contributors to each find a stock that they believe you can safely own until the year 2030. Read on to learn why they like iQiyi (NASDAQ:IQ), Kroger (NYSE:KR), and Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL).
The Disney of China
Steve Symington (iQiyi): iQiyi shareholders have had a wild ride since the company spun off from parent company Baidu earlier this year. After declining modestly from their IPO price of $18 per share in late March, shares had nearly tripled by mid-June as investor enthusiasm for the so-called "Netflix of China" hit a fever pitch. Now shares have plunged more than 30% from those highs, both as traders take profits and given broader concerns over tariffs and a potential trade war between the U.S. and China.
All the while, though, iQiyi has been steadily expanding its scope as it chases its broader ambitions for -- as CEO Tim Gong Yu has teased in recent months -- growing beyond its streaming-video roots to achieve a level of scale and diversity closer to that of Disney than Netflix. In May, for example, iQiyi not only kicked off an ambitious physical movie theater expansion, it also jumped on news that over a million people had signed up for a new cross-platform membership program with Chinese e-commerce leader JD.com.
If that wasn't enough, last month, iQiyi marked its entrance into the mobile gaming space by acquiring game publisher Skymoons. Then last week, it followed by unveiling a new partnership with Ctrip to provide exclusive travel benefits to its VIP-level subscription users.
Of course, that certainly doesn't mean all of iQiyi's irons in the fire will succeed, but it's evident that the company's ambitions are much greater than most investors are giving it credit for. As its reach continues to grow while it simultaneously fosters its thriving video-streaming business, I think that will result in astounding gains for patient investors willing to buy and hold the stock.
A cheap supermarket chain
Demitri Kalogeropoulos (Kroger): The supermarket industry is getting pinched by several unfavorable trends these days, including higher food costs and rising competition from e-commerce rivals. But Kroger is likely to still enjoy a thriving retailing business in 2030 despite these challenges.
The supermarket chain has sailed through periods of cost inflation before, after all, with help from its massive national sales presence. That scale allows Kroger to keep prices low while still churning out significant profits. The retailer also benefits from popular in-store brands like Simple Truth that have attracted market share from Walmart, its main competitor.
As for e-commerce sales, CEO Rodney McMullen and his team see more opportunities than threats from the demand shift toward digital selling channels. It will widen Kroger's ability to market prepared foods, for example, so it can make a legitimate push into the casual dining sector over the next few years.
Yes, Kroger's annual growth rate has slowed to around 2% from the 5% figure shareholders had seen up until 2015. And earnings are likely to fall this year as it pours cash into building out its e-commerce infrastructure. But investors' risk in owning this stock has dipped, too, since they can buy it today for around 10 times earnings rather than the P/E of 20 that Wall Street assigned shares just a few years ago.
Two great attributes of a stock to buy and hold
Keith Speights (Alphabet): In May, I listed Alphabet as one of three growth stocks that I plan to hold onto no matter how bumpy the market gets. That's still my view, and I really don't see it changing anytime between now and 2030.
Why should Alphabet inspire such confidence? First, the company enjoys a solid moat. Second, Alphabet has optionality, which basically means the company has plenty of ways to generate growth.
As for Alphabet's moat, what would you estimate the probability is that another company will knock Google out of its top spot among search engines over the next 12 years? What about displacing YouTube for video search? It could happen, but I suspect most would agree the odds are heavily against these core Alphabet products losing their competitive positions. That means the company should continue to practically mint cash because of the online advertising dominance these platforms give it.
Each of these products provides growth opportunities for Alphabet. But the company also has a plethora of other ways to grow. I'd put its Waymo self-driving car subsidiary high on the list. Alphabet is stepping up its game in the cloud platform market. It could even become a leader in healthcare, with multiple initiatives under way for its Calico and Verily units.
In my opinion, a moat and optionality are the two best reasons for buying a stock. I also think they're the best reasons for holding a stock. Few, if any, companies are as strong as Alphabet on both fronts.
The bottom line
A lot can happen in 12 years, so we certainly can't guarantee that something won't happen to disrupt these three businesses in that time. But given iQiyi's ambitious expansion plans, Kroger's industry leadership and attractive valuation, and Alphabet's massive moat and optionality, we think chances are high that they'll be able to endure -- and handsomely reward shareholders in the process.