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3 Stocks to Hold for the Next 20 Years

By Rich Duprey, Neha Chamaria, and George Budwell – Dec 1, 2018 at 3:30AM

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When you invest in a business, you should expect to stay with it for the long haul.

The best investors don't enter the market looking to make a quick buck. That's the fastest way to lose your nest egg. A longer time horizon is necessary to reap the full value of your investment, with three to five years being the minimum and decades being best. As Warren Buffett has said, "The best time to sell is never."

Not even the Oracle himself follows that rule to the letter (he does sell stocks), but the idea is that you should only buy companies you're willing to be married to. Three Motley Fool contributors believe AcelRx Pharmaceuticals (ACRX -6.00%), Welltower (WELL 1.04%), and Stanley Black & Decker (SWK 3.63%) are businesses you can easily own for 20 years or more without regret.

Couple sitting on mountaintop watching sunrise.

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An underappreciated growth story

George Budwell (AcelRx Pharmaceuticals): If you're looking for a promising under-the-radar growth stock to buy and hold for the long term, AcelRx Pharmaceuticals is a company definitely worth checking out right now. The underlying reason is the recent approval of the company's sublingual opioid, Dsuvia, that's to be used exclusively in medically supervised settings in patients that cannot take medications either orally or intravenously.

While Dsuvia has attracted its fair share of critics because of its sky-high potency, it's important to understand that this powerful new opioid comes in a prepackaged, easy-to-use applicator, which should dramatically lower the potential for accidental overdoses. The fact that Dsuvia can only be administered in structured acute-care settings should also go a long way toward deterring abuse -- an issue that plagues the current standard-of-care acute pain relievers like morphine and hydromorphone. 

What's the main attraction for investors? Due to the high unmet medical need that Dsuvia addresses -- namely, a sublingual opioid dosed in precise amounts -- AcelRx thinks this drug can eventually generate more than $1 billion in annual sales. That forward-looking sales estimate absolutely dwarfs the company's present market cap of $262 million, implying that this stock is a downright bargain at these levels. 

What's the catch? Although AcelRx is slated to launch Dsuvia in the first quarter of 2019, Wall Street doesn't think the drug will get off to a blistering start commercially. The key concerns are AcelRx's need to build a sales force from the ground up, the company's inexperience in dealing with insurance companies in general, and of course, the uncertainty surrounding Dsuvia's real-world adoption rate among prescribers. 

The good news is that none of these issues are deal breakers. Over time, AcelRx should be able to cobble together a formidable sales team, as well as convince payers and prescribers alike of the drug's benefits over traditional acute pain medications -- especially for its intended target market. So while AcelRx's stock might not take off right away, it should turn out to be a stellar long-term biotech play.    

The next big trend to profit from

Neha Chamaria (Welltower): Demographic trends can offer some of the biggest investment opportunities in the form of stocks that are primed to exploit a trend. For instance, can you guess what industry or companies would benefit if I tell you that the U.S. Census Bureau projects the age 85-plus population will double in 20 years? You're right if you thought healthcare.

An aging population should not only push healthcare spending but drive demand for senior housing and healthcare facilities, especially residential care for people with diseases like dementia. That's precisely what Welltower specializes in. Welltower is the largest publicly listed healthcare real estate investment trust (REIT) in the U.S. It acquires and leases properties for senior housing, postacute care, and outpatient medical solutions, currently operating more than 1,500 properties.

Welltower projects annual demand for senior housing units to nearly quadruple by 2030-2035, positioning the company well to take advantage of the boom given that it gets the bulk of its revenue from senior housing. At the same time, outpatient is another massive market that's only set to grow bigger in coming years.

In recent years, Welltower has markedly rejigged its portfolio to increase the share of private-pay properties, diversify within the senior housing segment, and expand into upscale urban markets such as Manhattan, London, and Toronto. A notable recent move was Welltower's joint venture with health system ProMedica and the venture's subsequent acquisition of Quality Care Properties and its principal tenants for $4.4 billion.

These growth moves should drive Welltower's margins higher, which should eventually be reflected in its share price. Add to it the company's strong dividend payout and yield -- Welltower currently yields a hefty 5% -- and patient long-term investors could make solid money owning the stock two decades from now.

Hammering home the value

Rich Duprey (Stanley Black & Decker): October was a horrible month for toolmaker Stanley Black & Decker, as a combination of macroeconomic headwinds, Sears Holdings' (NASDAQOTH: SHLDQ) bankruptcy, and a weaker-than-expected third-quarter earnings report caused shares to fall 20% for the month.

But November was much better. The stock has bounced 13% higher, no doubt thanks to investors realizing this remains a quality business that got punished too severely. With shares still down 25% for the year, there's plenty of opportunity to ride Stanley higher for the rest of the year and the next 20 years to come.

A good portion of the blame for Stanley's lackluster earnings report can be laid at the feet of President Trump, whose tariffs on imported steel and aluminum have ignited a trade war that has raised costs for the toolmaker. With rising raw material costs, tariff woes, and currency fluctuations, net income fell 10%, leading management to initiate a round of cost-cutting measures.

Because of the way Stanley structured its acquisition of Craftsman tools from Sears, the exposure to the retailer's bankruptcy was minimal, with only some $50 million in sales coming from Sears. It still owes Sears $250 million in 2020, even if Sears ends up liquidating, but accounting gymnastics will allow Stanley to benefit from the agreement.

It may get hit with more tariff-related expenses next year if Trump imposes the next round of duties on imports, but Stanley is enjoying sustained demand from consumers, whose confidence remains at record highs.

Many of these concerns are transitory in nature. The company is solid financially, and its track record of paying a dividend to investors for 141 consecutive years is not in any danger. Better yet, Stanley Black & Decker belongs to that rarefied group known as Dividend Kings, having raised the payout for 51 straight years. With a yield of 2.1%, the toolmaker is a stock you can buy and confidently hold for the next two decades or more.

George Budwell has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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