It's easy to buy and hold a stock during a bull market, but it's much tougher to stick with that mantra when the dreaded bear bites. However, investors who ignore the noise and stay invested often net higher returns than those who try to time the market.
Yet finding a stock to hold for decades is easier said than done. Brands that dominate in one decade might fizzle out during the next. The foundations of established companies can crumble during disruptive industry shifts, while weak management can wreck well-run companies.
To find a stock that can be held for the next 50 years, investors should look for companies with widely recognized brands and wide moats that have irons in the fire for future growth. Let's take a look at three stocks that pass those tests: Disney (DIS -0.28%), LVMH (LVMUY 0.82%), and Alibaba (BABA -0.62%).
The House of Mouse
Disney is one of the world's largest entertainment companies. Its empire includes Marvel, Pixar, and Lucasfilm; TV networks like ESPN and ABC; most of Fox's media assets; a dozen theme parks across six resorts; and four cruise ships. It also owns the streaming platforms Disney+, ESPN+, and Hulu.
Disney went public in 1957 at $13.88 per share. A $1,000 investment in its IPO would be worth $3.9 million today and be paying out nearly $50,000 in annual dividends. Disney probably won't replicate that gain over the next 50 years since it was a much smaller company back then.
However, Disney's massive media portfolio includes evergreen franchises that will likely produce new movies, shows, and other content for generations to come. Its theme parks will attract new generations of kids, and lock them into Disney's sprawling ecosystem of characters and content. Disney+, which already gained 26.5 million paid subscribers since its launch last November, will gain traction and keep it relevant in the post-network era.
Disney's stock will inevitably be rocked by macro headwinds over the next 50 years, but I'm confident that its core business model, which revolves around universally recognized franchises and inter-generational entertainment, will lift it higher.
The world's largest luxury company
LVMH, the world's largest luxury company, owns 75 storied brands like Louis Vuitton, Dior, Fendi, Loewe, Hennessy, Bvlgari, and Sephora. It also plans to close its takeover of Tiffany & Co. in mid-2020.
LVMH was founded 33 years ago, but many of its top brands are much older. Its namesake house Louis Vuitton was founded 166 years ago, while Hennessy cognac was first sold 255 years ago. These iconic brands weathered wars, plagues, recessions, and depressions -- and they'll likely keep growing through the next 50 years.
But LVMH doesn't just own classic brands. It launched new beauty and fashion products with Rihanna, owns a stake in Stella McCartney's eponymous brand, and uses its investment arm, LVMH Luxury Ventures, to acquire stakes in growing brands.
LVMH's stock has surged more than 150% over the past five years, and I believe that it will be trading much higher in 50 years. It might struggle with near-term headwinds like the coronavirus outbreak in China and a potential trade war between the U.S. and Europe, but its top fashion houses have withstood much fiercer headwinds before.
China's e-commerce and tech behemoth
China's economy is growing at its slowest rate in three decades, and the coronavirus epidemic will likely exacerbate that slowdown and flush out weaker Chinese companies. Yet Alibaba, the country's largest e-commerce and cloud-platform company, will likely emerge from the near-term chaos even stronger than before.
Alibaba's Taobao and Tmall marketplaces controlled 56% of China's crowded e-commerce market last year, according to eMarketer. Alibaba Cloud controlled 47% of China's high-growth cloud-platform market, according to Canalys.
It also owns streaming media services, a film-production studio, a mobile search engine, smart speakers, and investments in a wide range of businesses. Its affiliate AliPay holds a near-duopoly in China's digital payments market with Tencent's WeChat Pay.
China's e-commerce market is maturing but will inevitably expand and boost Alibaba's e-commerce revenues as average incomes rise across lower-tier cities. Alibaba Cloud will benefit from consumers accessing more cloud services, digital media, and games and from companies migrating their data to the cloud.
These long-term tailwinds will likely lift Alibaba's stock -- which already tripled since its IPO in late 2014 -- even higher in the coming decades.