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3 Stocks to Buy and Hold for Decades

By Travis Hoium, Leo Sun, and Todd Campbell – Updated May 9, 2019 at 8:23AM

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These companies focused on genetics, glamor, and gaming are worth considering for the long haul.

At The Motley Fool, we are all about buy-and-hold investing. Stocks that gain value over time allow you to grow your portfolio without the stress, volatility, or cost of trading. And ultimately, buy-and-hold investing has proven to be the best way to beat the market.

We asked three of our contributors what stocks they would buy and hold for decades, and Illumina (ILMN 2.91%), LVMH (LVMUY 1.11%), and Las Vegas Sands (LVS 0.03%) made the top of the list. Here's why.

A bonsai tree trimmed into the shape of a rising arrow.

Image source: Getty Images.

A DNA dynamo

Todd Campbell (Illumina): If you believe, like me, that everybody will have access to their genetic profile in the future, then you absolutely ought to be an Illumina shareholder.

Illumina is the largest (by far) maker of systems used to unlock secrets contained in DNA, the blueprint of all organisms. By its estimates, its gene-sequencing systems have been used to obtain 90% of genetic insight gleaned so far. Its systems are being used to identify genetic mutations that contribute to disease and to develop gene therapies that can overcome those mutations. They're also being used to learn if the genetic makeup of a patient means they'll respond better to one treatment than to another and to inform prenatal and neonatal health.

Potential insights aren't limited to human health, either. These sequencing systems are being used by genealogy companies to help people understand their ancestry and by companies interested in providing insight into consumer traits, such as tastes. Gene sequencing is also unlocking important data for farming, pest management, and animal husbandry.

The ever-increasing use of gene sequencing means Illumina's already producing significant revenue and profit for investors. In 2018, revenue rose 21% to $3.3 billion, and net income jumped to $850 million from $591 million. The company has delivered 20 consecutive years of revenue growth, and given the opportunities ahead, I think it could deliver another 20 years or more of improving financials, making it a top long-haul stock to consider for portfolios.

The biggest luxury company in the world

Leo Sun (LVMH): LVMH is the world's biggest luxury company, with 70 houses of fashion and leather goods, wines and spirits, perfumes and cosmetics, watches and jewelry, and upscale retailers. Its top brands include Louis Vuitton, Dior, Fendi, Loewe, Hennessy, Bulgari, TAG Heuer, and Sephora.

It seems risky to invest in a luxury-goods company when economists are warning of a recession in the near future, but high-end luxury companies like LVMH, which never discount their products, are generally more recession resistant than "affordable luxury" brands like Tapestry's (TPR 1.92%) Coach or Capri Holdings' (CPRI 2.15%) Michael Kors. Its Louis Vuitton and Sephora brands are also locking in plenty of younger shoppers, according to Piper Jaffray's latest "Taking Stock with Teens" survey.

LVMH's organic sales grew at all six of its main business units last year, with its fashion and leather, perfumes and cosmetics, and watches and jewelry divisions all generating double-digit growth. Its total organic sales rose 11% for the year, and its operating margins expanded across all six businesses. It also recently expanded into the hospitality market by buying Belmond Group, which operates 45 hotels, trains, and river cruises across 24 countries.

LVMH's portfolio is built to last for decades, if not centuries, and its collection of iconic brands constantly attracts new shoppers in countries with surging wealth levels like China. Its business is well diversified across Europe, the U.S., Japan, and the rest of Asia, and all four markets posted robust sales growth in 2018. All those factors make LVMH an ideal stock to buy and forget.

A regulated cash flow machine

Travis Hoium (Las Vegas Sands): The gaming industry often gets a bad rap for being associated with highly leveraged and therefore high-risk investments. The industry in 2019 has lower risk than it has had in decades, and Las Vegas Sands is now a cash flow and dividend generator.

You can see in the chart below that the company invested billions in new resorts from 2005 to 2013, expanding in Macau and building one of only two resort casinos in Singapore, and is now maintaining most of those properties. That reduces capital expenditures and leaves more excess cash to pay down debt or pay dividends.


LVS EBITDA (TTM) data by YCharts.

EBITDA is a proxy investors can use for cash flow from resorts. The $4.8 billion of EBITDA in the last year that you see above compares to just $7.9 billion of net debt on the balance sheet, an extremely reasonable level of debt for such a strong-cash-flow business.

If you take a step back and think about it, gaming companies are cash flow machines, and in markets like Macau and Singapore, they have limited competition because gaming is so tightly regulated. That's the kind of company I want to hold onto for decades, and the 4.6% dividend yield is a nice icing on the cake.

The easiest way to invest

Each of these companies comes from a different industry, but they all have staying power for their own reasons. It's that staying power and ability to generate strong margins that has them on this list of stocks to hold for decades.

Leo Sun owns shares of LVMH Moet Hennessy L.V. (ADR). Todd Campbell owns shares of Capri Holdings. Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Illumina and Tapestry. The Motley Fool owns shares of Capri Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Las Vegas Sands Stock Quote
Las Vegas Sands
$39.67 (0.03%) $0.01
Illumina, Inc. Stock Quote
Illumina, Inc.
$189.47 (2.91%) $5.35
LVMH Moët Hennessy - Louis Vuitton, Société Européenne Stock Quote
LVMH Moët Hennessy - Louis Vuitton, Société Européenne
$586.26 (0.85%) $4.96
Capri Holdings Limited Stock Quote
Capri Holdings Limited
$39.49 (2.15%) $0.83
Tapestry, Inc. Stock Quote
Tapestry, Inc.
$29.18 (1.92%) $0.55
LVMH Moët Hennessy - Louis Vuitton, Société Européenne Stock Quote
LVMH Moët Hennessy - Louis Vuitton, Société Européenne
$117.50 (1.11%) $1.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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