They say never say never, but I'll never sell the two stocks below. A buy-and-hold mindset offers investors the best opportunity for generating market-beating returns.
Adopting a set-it-and-forget-it approach to buying stocks has proven to be a valuable strategy, and though these two companies may not be forever holdings for every investor, you should definitely take a closer look at these top-notch investments to see why I say I'm never selling them.
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ABM Industries
I like Peter Lynch's idea of buying boring businesses because they tend to lull the market into ignoring them, and ABM Industries (ABM -0.45%) is a good example of a forgettable company.
Although ABM has been in operation for well over a century, it's a good bet many investors have not heard of this company. Those who have might think it makes anti-ballistic missiles rather than what it actually does: janitorial services and facilities management. See? You're already asleep.
Yet what it lacks in glitz it makes up for with steady-as-she-goes performance. That's not to say ABM's stock won't decline; last year, during the start of the pandemic, it suffered a dramatic drop when offices and companies were forced to close. Yet it has bounced back and is up 20% year to date, slightly ahead of the S&P 500's return. And there's good reason to believe it will continue on a similar trajectory going forward.
As a result of the coronavirus outbreak, ABM developed stringent cleaning protocols called EnhancedClean jobs that helped it more than double adjusted operating profits last year. With people back on the job, but COVID-19 variants wreaking havoc still, the need for sanitary cleaning practices is more important than ever.
Equally important has been ABM's willingness to reward its shareholders with a long track record of paying dividends and raising the payout each year. The cleaning specialist has paid a dividend for 56 years and raised it for 50 consecutive years, making it a Dividend King.
It's not a company that will wow you with meteoric stock moves, but ABM Industries is a business that has a steady hand on the wheel.
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Smith & Wesson Brands
A bit more volatile is iconic gunmaker Smith & Wesson Brands (SWBI -1.02%). Its stock can rise and fall based on perceived threats to gun ownership and regulation.
Despite the wild swings in its share price -- Smith & Wesson's stock doubled in value in a matter of weeks in June like it was some kind of meme stock only to return to its lower level over the next two months -- it has inexorably climbed ever higher as demand for firearms has grown unabated.
Over the past 20 years or so, Smith & Wesson has returned over 55,000% compared to a near-300% return for the broad market index. Since the beginning of 2020, the gunmaker has nearly tripled in value, and as society becomes ever more polarized and the desire for personal protection grows more acute, the forces pushing gun ownership higher will strengthen as well.
The National Shooting Sports Foundation reports over 8 million people bought their first firearm last year, and through the first six months of 2021, it estimates another 3.2 million individuals purchased their first gun. That's a third of the nearly 9.8 million background checks for a gun sale conducted by the FBI during that time.
Smith & Wesson is the largest gunmaker in the country, and though the rate of gun sales growth is slowing, it still remains elevated, with profits soaring year over year. Its reported net income for the quarter that ended July 31 jumped 77% to $76.9 million, or $1.57 per share, compared to last year's adjusted earnings of $0.83 per share.
Smith & Wesson also began paying a modest dividend last year to let investors share in its success. The payout currently yields 1.5% annually.
