In my search for great companies, I have, in hand, a long laundry list of requirements. As a long-term buy and hold investor, I look for solid companies with durable competitive moats, stellar track records and great long-term growth prospects. These are the types of businesses that are strong enough to weather crises and can allow you to sleep soundly at night.
Granted, there aren't many companies that can even qualify for this list. Being stringent is important, as it helps to filter out the great companies from the merely good ones. The problem with great companies is that they are often accompanied by high valuations as other investors also recognize their quality. The current sell-down due to the COVID-19 virus outbreak offers a golden opportunity for investors to pick up shares in quality companies that have been sold down indiscriminately.
Here are two companies that will allow investors to sleep soundly at night for many years to come.
Nike (NYSE:NKE) is a global household name when it comes to sports apparel and footwear. The company, set up in 1980, has been at the forefront of innovative footwear and has been sponsoring top athletes in sporting events ranging from the Olympic Games to tennis tournaments such as Wimbledon.
The company has designed its new Vaporfly and Alphafly running shoes to deliver a performance boost to athletes, while also supporting sustainability efforts by using 75% recycled manufacturing waste for the newest version of its new Vapormax sneaker.
With COVID-19 raging through the world right now, Nike has made the difficult decision to close its shops in multiple countries, including the USA, Canada, Western Europe, Australia, and New Zealand, from March 16 through March 27. This move will undoubtedly place a significant strain on the company's revenue and net income, but is necessary given this unprecedented event.
Nike's stock price has tumbled 35% from its all-time high of $104 due to the ongoing bear market. This offers investors a fantastic opportunity to buy into this solid company at beaten-down valuations. It's still unclear how the COVID-19 situation will be resolved at this point, but I am confident that Nike has the resources and strength to get through this crisis.
Visa (NYSE:V) is a global payments technology company that connects businesses and individuals using digital currency. Visa is one of the most recognized payment companies and is accepted in over 200 countries and territories worldwide.
The company has been growing its payments volume over the years, with its recent first-quarter fiscal year 2020 volume growth registered an 8% year-over-year increase. Net revenues grew by 10% year-over-year while earnings per share improved by 12% year-over-year. Investors need to note, however, that there is a high risk that a recession is around the corner, caused by the economic fallout from the closure of industries and businesses arising from the COVID-19 pandemic.
It's almost a certainty that Visa's business will be negatively affected, as people who are locked down in their houses end up spending less. Economies around the world are grinding to a shuddering halt due to unprecedented travel bans put in place by countries to halt the spread of the bug.
Visa's share price has already fallen 30% from its all-time high. Though there may be much more short-term pain to come, investors need to remember that the company's strong franchise will stand it in good stead to weather this crisis. The trend is shifting toward online payments, and I believe that this downturn is merely a temporary setback for the company. Once this downturn abates, Visa can continue to grow once again.
Buy and hold is not dead
Investors need to remember that tough times don't last, but tough investors do. Buy and hold is not dead, but investors need to tolerate significant short-term volatility in share prices if they wish to attain their long-term investment goals.
Here are two stocks that an investor can buy and keep for life. Though short-term challenges such as COVID-19 may depress sales and net income, I believe these companies are strong enough to survive and, coupled with their strong brand equity, can go on to do well in the long term.