One reason that long-term investing is so effective is that successful businesses are built for the long term themselves. Companies need time to execute their strategies and wait for them to bear fruit. And when their management is adept at deploying capital to generate high rates of return, they can enjoy many years of sustained growth. Investors who remain patient throughout the process can watch their portfolio compound at healthy rates over the course of years.
It's a good idea to select companies that can benefit from long-term trends and catalysts. Business development efforts centered on such catalysts can help to raise revenue and earnings over many years, while conferring a degree of resilience in case any crisis unexpectedly erupts.
Here are three stocks you can consider buying and owning for at least the next 10 years.
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American Tower
American Tower (AMT 2.17%) is one of the largest owners and operators of communication towers in the world. This real estate investment trust (REIT) has a large asset base backed by physical assets and has been growing its dividends at an average rate of 20% per year. Many countries are now planning to upgrade their network infrastructures from 4G to 5G, potentially increasing connection speeds by a factor of 100.
This tailwind is beneficial for American Tower's business, as wireless carriers and telecommunication companies will require even more communication towers as they build up their infrastructure requirements. The COVID-19 pandemic has also acted as a strong catalyst for the digitalization of businesses and driving up data downloads and usage, thereby increasing demand for connectivity and reduced lag times. The REIT is well-placed to grow over the long term, as lessees should continue to sign long-term leases to utilize its towers.
In early November, American Tower announced an agreement to acquire InSite Wireless Group for $3.5 billion. This acquisition will add a portfolio of around 3,000 communication sites in the U.S. and Canada to the company's portfolio and marks the REIT's first foray into Canada. American Tower was able to borrow at very cheap rates, with its 2024 notes having a coupon rate of just 0.6% and the 2028 Notes having a coupon rate of 1.5%. These low rates should allow the company to earn a very attractive return on these assets as demand rises globally for communication sites.
Mastercard
Holders of Mastercard (MA +0.79%) credit and debit cards are probably hunkering down for now as the pandemic sweeps across the globe. In the third quarter, this resulted in a temporary but sharp dip in net revenue of 14% year over year. Although the gross transacted value and volumes are up 1% and 5% year over year, respectively, cross-border volume was still down 36% year over year for the quarter as countries restricted travel and tourism due to the coronavirus.
But there are encouraging signs pointing to a slow but sustained recovery. For the week ending Oct. 21, transaction volume rose 5% year over year, up from the 3% year-over-year increase for July. Company president Michael Miebach, who will replace Ajay Banga as CEO effective Jan. 1, noted during the earnings conference call that e-commerce levels should remain elevated in the future because of long-term changes in consumer behavior. The company's research shows that 60% of consumers intend to use less cash and switch more to electronic methods of payment even after the crisis subsides. This shift bodes well for the company, as Mastercard continues to forge partnerships to spur more businesses to transition to digital payments.
Mastercard has added an account-to-account (A2A) payments functionality recently to help businesses modernize their payment systems. The A2A functionality helps to automate payments and also eliminates the need for sharing sensitive bank account information, thereby increasing security for all parties. And recently, the company has also partnered with 10 financial technology companies to help build solutions for digital payments to deal with customer pain points.
PayPal Holdings
PayPal (PYPL +1.25%) is a payments facilitator that has acted as an effective and secure intermediary for global money transfers. The company reported one of the strongest quarters in its history when it announced its third-quarter earnings, as net revenue jumped 25% year over year. Total payment volume through PayPal's platform surged 36% year over year to hit $247 billion, while 15.2 million net new active accounts were added, an increase of 55% year over year.
CEO Dan Schulman announced in early November that the company intends to create a digital wallet that encompasses a variety of different digital currencies and allows it to effectively bridge the physical and online worlds. More than a week later, PayPal reported that users can now buy, sell, and hold cryptocurrencies such as bitcoin, Ethereum, and Litecoin. Venmo, the company's digital wallet service, will also offer this service from next year onwards.
The tailwinds of digitalization and rapid adoption of online payments will continue to buoy PayPal's earnings for many years to come, making it an excellent choice for investors to include in their portfolios for the long term.
