Finding great companies to buy is just half of the equation when it comes to investing. The other half is holding on to them through thick and thin as they go on to grow and compound your money over years, or even decades. A big problem I've noticed with many investors is their tendency to sell an investment that's been doing splendidly, only to regret their decision when the stock continues to make multiple new all-time highs as its business booms.
Granted, there may not be many companies out there that are worthy of long-term investment. With the world changing so quickly and technology enabling new business models to emerge, it can be tough to filter out businesses that can stand the test of time. Some attributes I look out for include a strong competitive moat, a recognizable brand, and a track record of adaptability and resilience during crises.
Here are two stocks that I believe possess the above criteria, and both have a great chance of posting consistent multi-year growth.
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American Tower
American Tower (AMT +1.43%), which is structured as a real estate investment trust (REIT), owns and operates a portfolio of around 181,000 communication towers that are leased to telecommunication companies and wireless service providers. The company has expanded its portfolio steadily over the years through a combination of acquisitions and organic growth, and has also posted consistent dividend growth of around 20% year over year in the last three years.
The driver for American Tower's growth is the capital expenditure incurred by network operators to increase their coverage and serve customers. With the proliferation of smart phones and mobile devices, these operators need to constantly upgrade their networks to ensure seamless connections. CEO Tom Bartlett mentioned in the company's recent conference call that network service providers in international markets where the REIT operates are expected to spend around $30 billion this year alone, effectively doubling the total addressable market for American Tower's U.S. market.
The coronavirus pandemic has accelerated the shift toward digital applications and led to significant strains on existing mobile networks due to a surge in data usage. American Tower expects to build around 500 new communication sites across Latin America to cater to this increase in demand, while India is expected to spend significant sums of money to improve its networks. These are just some examples of the strategic initiatives investors can look forward to.
And let's not forget that the installation of 5G networks is in the cards for many countries. With speeds up to a hundred times faster than current networks and promising much less lag, this next generation of internet connectivity will push telecommunication giants to incur tremendous spending in the next decade. American Tower is well-poised to enjoy the benefits from this trend and the conversion from 4G to 5G acts as a strong catalyst for the business to continue growing its earnings and dividends.
Mastercard
Mastercard (MA +1.52%) is a financial services giant with over 2.6 billion credit and debit cards in circulation globally. The company's strong brand name and dominance have allowed it to grow steadily over the years as one of the leading players in this industry. Although COVID-19 has led to a plunge in consumer spending since April, the company has been closely monitoring transaction levels on a weekly basis and saw a gradual but sustained improvement in total transaction volume in August.
The company is also pioneering contactless payments for those who are worried about catching the virus. By leveraging its Shop Anywhere technology platform, Mastercard is piloting programs at several well-known retailers to test if this method of payment helps reduce wait times.
Despite the crisis, the payments giant continues to forge partnerships and collaborations with different businesses to expand its reach and garner a larger customer base. In July, the company expanded its cryptocurrency program and invited crypto-card partners to join Mastercard's Accelerate program, giving them access to resources and benefits to enable them to grow. Last month, Mastercard and TransferWise expanded their existing partnership to allow for the company's cards to be issued anywhere around the world that TransferWise is licensed, helping to further broaden Mastercard's reach.
And in a canny move to introduce customized payment solutions for consumers, Mastercard partnered with TSYS, a global payments company, to allow the consumer to have much more flexibility in deciding when to take up an installment plan, be it pre-sale, point of sale, or post-sale. These strategic initiatives will take time to bear fruit, but they demonstrate management's commitment to growing the business steadily, giving investors a lot to anticipate.
