The ideal holding period for a great investment is forever. If a business has a strong business model and continues growing steadily, then its profits and cash flows should continue their ascent as well. Share prices for that business should rise in tandem with the rise in net income and cash flows, and all of this should result in huge capital gains for the astute investor.
Admittedly, it can be tough to find such companies. Most companies face crisis situations at some point in their development that can cripple their business model, or even render them obsolete. It's instructive to observe companies over time to assess how they manage these crises. The ones that emerge unaffected and even manage to grow stronger during adversity are ideal candidates for a long-term buy-and-hold investor.
To help in the search, here are three companies that fit the criteria and would make great forever stocks for your investment portfolio.
Most people will think of Nike (NKE 2.70%) when the topic of athletic footwear or apparel comes up. The sporting giant has built up a strong and loyal following over its 57 years in operation and has also weathered multiple crises. Its recently released fiscal 2021 third-quarter results (for the period ended Feb. 28) showed that the company still has what it takes to generate continued growth despite the pandemic.
Overall revenue in Q3 inched up 3% year over year to $10.4 billion, with China, one of Nike's key markets, reporting a stellar 51% year-over-year revenue jump. Because of lower marketing expenses for the quarter, net income surged by 71% year over year to $1.4 billion. Reaction to the COVID-19 pandemic forced temporary closures for some of the company's stores but a successful pivot to online sales helped to sustain the company's growth momentum, with digital sales surging 59% year over year during the quarter.
With innovation being a distinctive hallmark of Nike, it has been consistently releasing new shoe designs even through the crisis. Last month, Nike released Go FlyEase, its first hands-free shoe, and its new Air Max shoes are slated for release on March 26 through its online store, SNKRS. CEO John Donahoe remarked that Nike had launched its first product drop via live streaming last quarter and expanded that service to countries such as Japan, Germany, and Italy.
Nike's strength in digital channels allows it to continue engaging its customer base, while its lineup of new products will continue to endear fans to its brand.
It can be quite relaxing to chill at a café sipping a cappuccino while surfing the internet on your laptop. Starbucks (SBUX 2.98%) boasts nearly 33,000 stores worldwide, many of which allow customers to do just that. The coffee giant has built up a reputation for providing a cosy ambience while serving up delicious beverages.
The pandemic forced the temporary closure of most of Starbucks' stores last year, but CEO Kevin Johnson said he believes that once the crisis is over, people will return in what he dubbed "the great human reconnection." People are inherently social creatures and have the desire to gather and mingle, and Starbucks management believes this is the main driving force for a strong recovery post-pandemic.
Although global comparable-store sales declined by 5% year over year during the company's fiscal 2021 first quarter (which ended Dec. 27, 2020), the company still went ahead with a 10% increase in its quarterly cash dividend to $0.45 a share, a sign of confidence in Starbucks' future. Sales recovery in the U.S. may take some time, though, with Johnson forecasting this to happen by the end of the second quarter.
Management outlined a bright vision for Starbucks at its recent biennial Investor Day event. It expects company-operated comparable-store sales to rise by 4% to 5% per year from fiscal 2023 onwards, while the company also expands its global store count by 6% per year from fiscal 2022.
3. Procter & Gamble
If you have washed your hair with Pantene shampoo, gargled an Oral-B mouth wash, or used a Gillette shaver, then you have contributed to Procter & Gamble's (PG 1.53%) revenue. The 184-year consumer goods behemoth distributes its thousands of products representing 65 brands in more than 180 countries. P&G's steady revenue stream has helped it generate an impressive 57 consecutive years of dividend increases, more than qualifying it as a Dividend King.
The company demonstrated its resilience during the economic recession that began in 2020 with net sales increasing 8% year over year to $19.7 billion in its latest fiscal 2021 second quarter. Gross profit margin improved from 51.4% to 53.1% while net income inched up 4% year over year. That's an impressive feat considering consumer sentiment was badly battered by the ongoing pandemic. In the latest quarter, all 10 of P&G's global categories enjoyed organic sales growth, while the company also grew its overall market share slightly.
Guidance for the full fiscal year 2021 is for overall sales growth of 5% to 6%, while earnings per share is slated to rise by 8% to 10% year over year. With the bulk of Procter & Gamble's product portfolio focused on daily essentials and necessities, the company's stable of brands should continue to resonate with customers, in good times and challenging times too.