The Motley Fool has always been a proponent of long-term investing. Ride the market's ups and downs over the long haul, avoid knee-jerk reactions and attempts to time the market, and you'll likely find yourself much wealthier when it's all said and done. But picking a company built to survive, and hopefully thrive, over the next five decades is incredibly difficult. So here are three intriguing suggestions from Motley Fool contributors: Aptiv (NYSE: APTV), Alphabet (GOOG 4.16%) (GOOGL 4.20%), and Walt Disney (DIS 3.51%).
Driving the future megatrend
Daniel Miller (Aptiv): Finding a stock you're comfortable with holding over the next five decades is no simple task, because the world will evolve so much over that time frame. However, Aptiv offers investors a safer way to ride the oncoming wave of driverless vehicles. Rather than owning shares of an individual vehicle manufacturer or technology company, some of which will likely go bankrupt competing for their share of the market, Aptiv develops safer, greener, and more-connected technology solutions that will enable the future of mobility. So it's well positioned for the future of driverless vehicles -- whichever manufacturers ultimately win the vehicle development battle -- because it develops the "nervous system" of the vehicles.
To further explain how Aptiv's business is poised to thrive in the years ahead, let's look at how its revenue is generated. In 2018, 72% came from its signal & power solutions segment, which specializes in engineered components, data, and power distribution for highly automated vehicles. The remaining revenue was generated by its advanced safety & user experience segment, which covers active safety products, infotainment and user experience solutions, mobility services, connectivity, and security.
It's easy to imagine automakers needing Aptiv's engineered and electrical components as the number of driverless vehicles increases, but there's also a growth story in safety and infotainment solutions. For example, if a fully autonomous vehicle is driving you to work, the vehicle's infotainment system and connectivity to the world around you becomes far more important. And that means more Aptiv products in vehicles. In fact, the markets for active safety, vehicle electrification, and vehicle connectivity are expected to post compound annual growth rates of 15%, 20%, and 17% through 2025, respectively.
Here's what we know for sure: Driverless vehicles and electrified vehicle fleets are part of our future. We don't know what companies will come out on top and dominate the market, but Aptiv is well positioned to thrive regardless. That's why it's a stock you can buy and hold for 50 years.
From A to Z
Jordan Wathen (Alphabet): If you're looking for a company worth buying, holding, and otherwise ignoring, Alphabet must be in the conversation.
When thinking long term about Alphabet, many investors look at its Other Bets portfolio, which includes its "moonshot" wagers on things like self-driving cars or a cure for aging. But these are perhaps less impressive than its core businesses of search and advertising, which are still growing at a double-digit clip even as they produce more than $100 billion of revenue on an annual basis.
The core search business is the Yellow Pages of the modern era, a cash cow that can and will generate reliable cash flows from advertisements placed within organic search results. Google's ancillary products like GMail, Android, and Chrome help the company learn more about its users, showing them the most valuable advertisements. Not only does Google have the best search results; its treasure trove of data on its users enables it to earn more on every click than a competitor could. The search business may be better insulated from competition than any other business on the planet.
One could get comfortable with Alphabet's valuation based solely on the potential for its search and advertising businesses to grow at a double-digit clip over the next decade, even if the Other Bets portfolio continues to be a multibillion-dollar drain on operating income, as it has been in recent years.
A timeless entertainment machine
Jeremy Bowman (Disney): The last four years have been frustrating for Disney investors. The stock has essentially gone nowhere as worries about cord-cutting and declining subscribers at its cash cow ESPN have stymied the stock.
However, Disney finally seems like it's ready to put those difficult years behind it. The company just closed on its acquisition of Twenty-First Century Fox's entertainment assets, giving it a range of new intellectual property to work with, as well as new movie and television studios and cable networks. With the expected launch of Disney+ later this year, the company will have three streaming services by the end of 2019, including its now-majority control of Hulu. That, and its vast library of content and characters, put it in a strong position to capitalize on the transition to internet TV.
Meanwhile, its other businesses like theme parks and movies are firing on all cylinders, with profits in those segments up 18% and 27%, respectively, last year. Disney continues to pass along price increases at parks like Disney World annually, demonstrating its pricing power. And it has another likely hit parade of movies coming this year, including Dumbo, Aladdin, The Lion King, Toy Story 4, and Frozen 2. If you're noticing that those movies are all sequels or remakes of a sort, that's no accident. It's part of the beauty of Disney's business: It can tap into the same characters to entertain new generations of kids.
Unlike other entertainment companies, Disney benefits from a flywheel effect as characters in its movies lead to toy sales and rides at its theme park, which all reinforce one another into a single Disney brand. That model should still be thriving 50 years from now as Disney's characters -- as well as those from Marvel, Star Wars, and Pixar -- have proven to be timeless.