Hunting for a great investment idea is like piecing a jigsaw puzzle together. You take disparate pieces of information, collate them together, make sense of them, and then come up with an investment thesis. When all the pieces click into place, that's when you know you've found the right investment to park your money in.
Over the years, you'll realize that not many investments satisfy all the criteria you are looking for. Some of these include having a strong brand name and consistent track record of financial performance; catalysts that can allow the business to grow for many more years; and a great management team that has a knack for allocating capital adroitly and efficiently. A combination of the above attributes will spur me into action as I scour around for attractive investment opportunities.
Here are three companies I feel confident parking my money in for decades.
Mastercard (NYSE:MA) fits the bill when it comes to having a strong brand name and great track record. The company handles global payments, processes billions of transactions, and serves as a conduit between customers, financial institutions, and merchants. Its business has a global reach with around 2.6 billion cards issued worldwide to more than 210 countries and territories.
The COVID-19 pandemic has helped to accelerate Mastercard's digital-payments business as more countries shift to digital payments to avoid handling physical cash. Even though transaction volume was negatively impacted because of the recession triggered by the crisis, e-commerce and other forms of cashless payments helped to take up some of the slack. Operating metrics tracked by Mastercard also show that total transaction volume has improved by 5% year over year for the week ending Aug. 28, implying that a nascent recovery in spending is taking place.
Aside from the above long-term catalyst, management has also forged partnerships that help it to expand its offerings and widen its customer base. In late August, Mastercard partnered with retailers such as Circle K and Dunkin' to launch the Shop Anywhere platform that enables them to create customized shopping experiences for their consumers without infringing on their privacy. The company also partnered with TSYS, a payments company, in early September to enable customers to have the flexibility to choose when to take up an installment plan -- pre-sale, point of sale, or post-sale.
Facebook (NASDAQ:FB) has become synonymous with the term "social media." The company pioneered this industry and has become a magnet for advertisers with its targeted advertisements to users. In the first six months of this year, the social media behemoth generated around $35.8 billion in advertising revenue, up 13.4% year over year compared to $31.5 billion during the same period last year.
Facebook's competitive edge has been enhanced by its purchase of the chat program WhatsApp, and the photo and video social-networking service Instagram. The company still has many options as to how it can monetize these platforms. A trial was started in Brazil a few months back where users could send and receive money through Facebook Pay. With daily and monthly active users continuing to post quarter over quarter growth, this only serves to strengthen Facebook's dominance.
Now, the company may be planning to use both virtual and augmented reality to widen its product offerings to customers. Recall that Oculus VR, a leader in immersive virtual reality technology, was acquired by Facebook back in March 2014. Facebook is now leveraging Oculus technology in a partnership with Ray-Ban to release a new line of consumer smart glasses in 2021, which could be a new growth catalyst for the company. These glasses will be tested by employees and contractors first to iron out any issues before being released to the public.
American Tower (NYSE:AMT) is an owner, developer, and operator of wireless and broadcast-communications infrastructure in the form of communications towers. The company is structured as a real estate investment trust (REIT). Its portfolio contains around 181,000 sites that are leased to multi-national wireless carriers and telecommunication companies.
The company offers a great mix of long-term growth and rising dividends. COVID-19 has led to soaring demand for data usage, and carriers have to upgrade their network infrastructure to cope with the increased load. This will spur the telecommunication companies to allocate more capital expenditure to improve their network capabilities, which acts as a strong tailwind for American Tower.
Another catalyst is the inevitable shift from 4G to 5G networks which provide a leap in download speeds and significantly less lag. With more applications being developed that require continuous connections and no downtime, such as self-driving cars and the Internet of Things, the network operators need to incur heavy capital commitments to build the required infrastructure to transition to 5G. American Tower is a clear beneficiary of this future spending as this means their towers will be in high demand.