In the world of investing, 20 years might as well be an eternity. Some companies don't even last that long, while others are disrupted and begin to fade during a much shorter time frame.
The concept of buying a stock with the intention of holding for 7,300 days may seem like a fool's errand, yet it's well established that the surest way to make money in the stock market is to buy quality companies that can stand the test of time and hold them through thick and thin.
While there are certainly no guarantees, there are a number of ways investors can increase the likelihood that they will succeed over the course of decades. Buying a company that boasts a vast array of intellectual property, a business that has proved it can change with the times, or a company that can successfully expand beyond a single blockbuster product might hold the key to decades-long investing success.
Let's look at why robotic surgery pioneer Intuitive Surgical (ISRG -0.50%), media giant Disney (DIS -1.01%), and technology gadget creator Apple (AAPL 0.52%) might just fit the bill.
Image source: Getty Images.
The future of medicine
Intuitive Surgical was founded in 1995 with the goal of creating "innovative, robotic-assisted systems that help empower doctors and hospitals to make surgery less invasive than an open approach." The company's da Vinci became the first such system approved by the Food and Drug Administration to help doctors perform general laparoscopic surgery.
In the 24 years since, the robotic surgical specialist has placed nearly 5,000 of its systems in hospitals around the world and assisted with more than 6 million surgical procedures.
Even for all its success, however, the best may still be to come. It's estimated that only about 2% of surgical procedures currently performed enlist the aid of a robotic system. While not every procedure lends itself to a robot, this illustrates the enormous opportunity that remains. Even as rivals have been working to develop a competing product, Intuitive Surgical has more than two decades of experience and intellectual property to help protect its lead.
A look at the company's recent results tells the tale. For the first nine months of 2019, Intuitive Surgical's revenue of $3.2 billion grew by 20% year over year, while earnings per share of $8.86 also climbed 20%. During the same period, worldwide procedure growth increased 18%, while the installed base of da Vinci systems increased 12%.
One of the more impressive aspects of Intuitive Surgical's opportunity is the recurring revenue model. Each new procedure needs the requisite instruments and accessories, and over the past several years, the company has begun offering an operating lease program for its systems, which has helped boost its growth.
The pole position, decades of intellectual property, and recurring revenue show why Intuitive Surgical is positioned to succeed for years to come.
Image source: Disney.
Ever evolving
Disney has been entertaining children and families for generations, but the company wasn't always the media powerhouse investors know today.
After years of making animated shorts, founder Walt Disney went deep into debt to create the first full-length animated movie (widely derided as "Disney's folly" at the time) as naysayers warned that audiences wouldn't sit though a feature-length cartoon. That movie? 1937's Snow White and the Seven Dwarfs, which remains one of the top-grossing films of all time (adjusted for inflation).
Disney took another big chance with the development of Disneyland, experiencing one setback after another to build the monolithic theme park. He struggled to obtain the needed financing and the space necessary, as many considered the venture a massive financial risk. Even when the park opened, it was plagued with problems. Counterfeit tickets were rampant, flooding the park with more than five times the number of guests expected on the first day. Food and drink ran out, rides broke down, and general chaos reigned. Disneyland soon recovered and remains one of the most popular theme parks worldwide, hosting more than 18 million visitors in 2018.
Why should this matter to today's investors? Even back then, Disney was able to adapt, overcome, and change with the times. Many felt the company paid far too much when it acquired Pixar in 2006, and similar questions arose again in 2009 and 2012 with the purchases of Marvel and Lucasfilm. No one is questioning those decisions now, as Disney has produced six films this year that topped $1 billion at the box office -- not counting Star Wars: The Rise of Skywalker, which has just arrived.
Disney has continued to evolve with the recent acquisition of Fox and the debut of it's long-awaited streaming service Disney+. Many wondered if the company's direct-to-consumer effort would be too little, too late, but early indicators point to a roaring success. Add in ESPN and Hulu, and Disney is an immediate power in the streaming wars with a strong foothold in the future of entertainment.
With its theme parks, movie studios, cable and broadcast networks, retail stores, and now streaming services -- and a history of evolving -- Disney has what it takes to stand the test of time.
It's not just about the iPhone anymore. Image source: Apple.
More than just the iPhone
It wasn't all that long ago that Apple investors and critics alike were wondering where the company's future growth would come from. Sure, CEO Tim Cook had promised to double services revenue, but that would hardly make up for the massive contribution from the iPhone, which accounted for more than half the tech giant's revenue in fiscal 2019.
In-the-know investors have been watching closely as the company has been making good on Cook's prediction: Services revenue has grown 82% since early 2017, and now accounts for 20% of Apple's total revenue. There's likely further growth ahead, as Apple Arcade, Apple News+, Apple Card, and Apple TV+ have only been live for several months, scarcely long enough to build a loyal following.
Let's not forget the company's newest growth engine, the wearables, home, and accessories segment, which grew 54% year over year during Apple's fiscal fourth quarter. The segment now accounts for 10% of total sales.
Even as sales have slowed, the iPhone isn't going anywhere anytime soon. The coming 5G upgrade cycle may encourage the Apple faithful to trade in their older devices for models that can take advantage of the increased speeds that the next-gen mobile technology will offer.
With multiple avenues for growth, Apple still has decades of success ahead.
20 years is a long time...
Stocking your portfolio with time-tested and innovative companies is just the first step on the road to successful investing, and there are simply no guarantees that every choice will pan out. Legendary investor Warren Buffet has long said his favorite holding period is forever, but that doesn't mean that investors should stick their head in the sand. Even the Oracle of Omaha has been known to sell a position in a company that fails to deliver on the promise it once held.
Each of these companies has a competitive advantage that their rivals simply can't match, and each has shown they have what it takes to thrive for decades to come. Turns out 20 years may not be so long after all.
