A long-term investor's ideal stock is one that can be expected to produce decades of strong returns without much of a need for maintenance. We asked three of our Fool.com contributors to discuss stocks they'd be most confident buying and leaving alone for years. Here's why they said Berkshire Hathaway (BRK.A -0.17%) (BRK.B -0.22%), Walt Disney (DIS -1.39%), and Starbucks (SBUX -0.86%) are three great examples.
An amazing business with potential for market-beating returns
Matt Frankel, CFP (Berkshire Hathaway): In the 55 years since Warren Buffett took the helm of struggling textile company Berkshire Hathaway, the results have been nothing short of phenomenal. Through the end of 2018, Berkshire's share price has grown at an annualized rate of 20.5% -- more than twice the S&P 500's growth rate.
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The formula is simple: Acquire great businesses and common stocks for less than their intrinsic value and use the capital these investments generate to acquire even more. Over the years, Berkshire has grown into a collection of more than 60 subsidiaries including GEICO, Duracell, and BNSF Railroad, and boasts a stock portfolio worth more than $200 billion. Plus, Berkshire has $112 billion in cash sitting on the sidelines just waiting to be put to use.
One natural question to ask is: "Berkshire is great, but what happens when Buffett isn't in charge anymore?"
While there's nobody I'd rather trust to make investment decisions with my money than Warren Buffett, it's important to point out that Berkshire is set up to perform just fine no matter who is in charge. Buffett is almost 90, but his two stock picking lieutenants have shown excellent judgment so far, most of Berkshire's acquired companies retain their pre-existing management teams, and potential Buffett successors Ajit Jain and Greg Abel are doing a masterful job overseeing all of Berkshire's subsidiaries.
While Berkshire's size essentially guarantees that the next 55 years won't be nearly as great for the company as the previous 55, there's no reason Berkshire shouldn't be able to deliver market-beating returns for decades to come.
Invest in the House of Mouse
Matthew Cochrane (Walt Disney): If content is king, Disney rules the universe. The entertainment conglomerate now owns much of the world's most beloved intellectual property, including everything from Star Wars and Mickey Mouse to Frozen and the entire Marvel Cinematic Universe (MCU). After its massive $70 billion-plus acquisition of Twenty-First Century Fox properties is complete, Disney will not only add more popular properties to its entertainment arsenal (e.g., The Simpsons), but also Hotstar, India's top streaming service.
What makes this a particularly exciting time to invest in Disney is the pending debut of its streaming service, Disney+. The service, which launches in November, is priced at just $6.99 -- intentionally cheap to entice more subscribers. Eventually, it will not only feature Disney's entire content library, but also original content inspired by some of its most treasured properties, including MCU, National Geographic, and Star Wars. Even better, the company is already considering bundle options that will pair Disney+ with ESPN+ and Hulu, its other domestically available streaming services.
In Q2, Disney's revenue inched forward, increasing 3% year over year, while adjusted earnings per share (EPS) and free cash flow actually decreased by double digits. With new streaming services launching and coming park attractions (e.g., Star Wars: Galaxy's Edge), however, investors can afford to look past any occasionally lumpy results. Disney's content will transcend whatever medium is popular with consumers for years to come, making it a company that is virtually impossible to disrupt.
A piping-hot stock for the ages
Dan Caplinger (Starbucks): The coffee craze shows no signs of slowing down worldwide, and having played an instrumental role in getting the coffeehouse trend started decades ago, Starbucks remains a leader in the fast-growing industry. Even though financial planners have singled out the high-priced latte as the public enemy of people's budgets, customer lines at Starbucks' stores and kiosks remain long.
It might seem in the U.S. that there's a Starbucks on every corner, but across the globe, there's still plenty of room for expansion. Even with competition rising in key growth markets like China, Starbucks has stayed on the offensive, and its brand recognition makes its products aspirational for the rising consumer class in many emerging markets. Meanwhile, innovations closer to home to keep up with the pace of technological advances, such as online ordering and delivery, are keeping loyal Starbucks customers coming back for more.
With the share price already up 30% so far in 2019, Starbucks shareholders might think that a pause in the stock's advance is inevitable. That might come at some point in the short term, but the company's long-term prospects remain extremely favorable. Absent an unexpected abrupt shift in consumer preferences toward coffee and the other beverages it offers, Starbucks will stick to its core business model and should produce significant growth for years to come.
