Forever's a long time. And certainly no stock is going to go forever without at least a few ups and downs. But most of us don't want to be checking our portfolios constantly, so trying to identify stocks that we can buy and hold for long periods of time with minimal worry is essential.
To be considered worthy of being held forever, a stock should have a good track record. It should have a solid business model that isn't likely to become outdated or disrupted. And it should have good prospects for the future...if not forever, at least for a few decades down the road.
Three stocks that fit the bill are Berkshire Hathaway (BRK.A 0.81%) (BRK.B 0.64%), Brookfield Infrastructure Partners (BIP 0.70%), and Waste Management (WM 0.98%). Here's why they're good candidates for your "forever" portfolio.
Berkshire Hathaway: Strong even without Buffett
Conglomerate Berkshire Hathaway is synonymous with its CEO, master investor Warren Buffett. The Oracle of Omaha has been one of the most savvy investors of all time. However, Buffett is now 89 years old. His right-hand man at Berkshire, Charlie Munger, is 95. Berkshire may be around forever, but Buffett and Munger won't be -- at least, we assume not. (Buffett has certainly defied the odds before!)
Luckily for Berkshire investors, the company's business model is strong. Its core insurance businesses -- including GEICO -- churn out a reliable and large stream of cash. Management uses that cash to invest in other businesses, sometimes through buying shares of their stock and sometimes through buying the companies outright. Berkshire's holdings are incredibly diverse. Among its fully owned companies are Dairy Queen, Fruit of the Loom, and railroad BNSF. Its stock holdings include dozens of heavy hitters like Apple, American Express, and Kraft Heinz.
All this diversity is excellent for a forever investment, guaranteeing that weakness in one sector doesn't have an outsize impact on the company as a whole. True, Berkshire is going to need another good (if not great) CEO to keep the good times rolling. But it has a number of up-and-coming business analysts who've spent years under Buffett's tutelage to help the company continue to deploy its cash effectively even when he passes the reins. Investors should feel secure buying into Berkshire today.
Brookfield Infrastructure Partners: Safety in numbers
Speaking of well-managed diversified companies, master limited partnership (MLP) Brookfield Infrastructure Partners owns one of the most diversified collections of infrastructure assets you'll find under a single roof...er...ticker symbol. The MLP -- which is controlled by the well-managed Brookfield Asset Management (BN 1.57%) -- owns telecom towers in India, railroads in Brazil, pipelines in the U.S. -- as well as ports, toll roads, real estate, and other infrastructure assets across the globe.
Brookfield Asset Management controls multiple MLPs, each with a different focus. While all of them are worth a look, I'm picking Brookfield Infrastructure for a forever portfolio thanks in part to the diversity of its holdings, but also because it's uniquely "recession-proof." According to management, only about 5% of the partnership's earnings come from recession-sensitive assets. The vast majority of Brookfield Infrastructure's holdings -- representing about 95% of its cash flow -- are either governed by contracts or regulatory frameworks, making them incredibly stable.
The partnership has seen double-digit organic growth in cash flow in recent years, with acquisitions providing additional growth. The MLP is now starting to fund high-potential acquisitions by selling mature assets rather than issuing debt or additional units. This should take Brookfield Infrastructure Partners down the path to long-term financial stability and reward investors handsomely in the process.
Waste Management: The gift that keeps on giving
Our last company doesn't get its strength from diversity. Instead, its strength comes from the perennial nature of its singular focus: trash. Like death and taxes, trash is going to be around forever, which means that companies that haul it away and put it somewhere are good candidates to be around forever as well.
Waste Management, the largest waste hauler and landfill operator in North America, just keeps on growing. In its most recent quarter, Q3 2019, organic revenue was up 5.3% over the prior year, reflecting higher volumes of trash. In fact, revenue has been consistently growing since 2016 on a trailing 12-month basis. Net income and free cash flow have grown as well, although it's been a bit lumpier. But volumes keep going up, and the business has a very high barrier to entry.
Another trend affecting Waste Management is the increasing number of natural disasters -- including wildfires, floods, and hurricanes -- that are related to climate change. When a community is hit by a disaster, debris and contaminated items need to be hauled away to the landfill. That benefits whichever company holds the local contract for trash hauling and landfills. Often, that's Waste Management.
As the population continues to increase, Waste Management will be there to keep cleaning up after it.
Nothing lasts forever
At some point, something's sure to happen that will fundamentally affect the investment theses for Waste Management, Brookfield Infrastructure Partners, and Berkshire Hathaway. Perhaps in 2200, teleportation will be invented, rendering Brookfield's toll roads obsolete, or perhaps we'll discover how to vaporize trash, removing the need for Waste Management's landfills.
The good news is, to be a buy-and-hold investor, you won't have to hang on to these shares forever. But if you had to pick stocks to last that long, Berkshire, Brookfield, and Waste Management are good bets to help your portfolio outperform for years to come.