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4 Long-Term Investments You'll Thank Yourself for Later

By James Brumley – Dec 29, 2021 at 5:55AM

Key Points

  • Not every high-growth story is coming from an industry, area, or premise you'd expect.
  • Despite being ages old, the mutual fund business remains highly fragmented, with plenty of new business to be won.
  • Richer valuations typically aren't impediments to long-term performances from quality stocks.

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Some things are absolutely worth the wait.

Are you actually a buy-and-hold (and hold some more) kind of investor? Or, do you find yourself tempted to lock in profits after a stock rally or wait for big pullbacks to step into the names on your watch list? Many of us often slip into the latter mindset, even if we know the former approach ultimately bears more fruit.

If you want to try the former, here's a rundown of four great stocks that would be a good fit for nearly any portfolio. The catch? Each of them truly requires a multi-year holding period to overcome their current relatively rich valuations and get the most out of them.

A long-term calendar marked by push pins looking out to 2060.

Image source: Getty Images.

1. BlackRock

You may not have heard the name BlackRock (BLK 0.53%), but you probably are familiar with at least one of its biggest businesses. BlackRock is the company behind the iShares family of exchange-traded funds (ETFs); it also manages traditional mutual funds and serves as the backbone for many institutional retirement plans.

It's an incredibly competitive arena. Data from the New York Stock Exchange suggests there are nearly 2,700 ETFs listed in the United States alone, while there are around 8,000 mutual funds. BlackRock is a leader rather than a follower in this arena though, growing its asset base from less than $4 trillion in 2012 to $9 trillion now.

And yet this growth still only scratches the surface of the company's opportunity. BlackRock says that exchange-traded funds only account for about 3% of the world's total invested assets, and that the five biggest asset management (fund management) firms only collectively control about 11% of the market. BlackRock is the biggest of these five, earning about 3% of the industry's annual revenue. It simply needs time to keep growing its business.

2. Microsoft

Software giant Microsoft (MSFT -1.49%) doesn't need much in the way of an introduction. It's largely responsible for making the personal computer market what it is today, as its Windows OS and Office software suite are used by a majority of computer owners. The company reports more than 1.3 billion devices are now powered by Windows 10, and the use of older versions of the operating system could push that figure much, much higher. Numbers from GlobalStats indicate a version of Windows is installed on 74% of the world's desktops and laptops.

The company isn't just about software anymore, however. Video gaming, personal productivity, and cloud computing services are some of the other revenue-bearing businesses in its wheelhouse. None of its three major arms generates more than 37% of its sales or of its operating income. And, given how much diversity you'll find even within each of those three arms, it's safe to say no single operation makes up more than a fifth of the company's total top or bottom lines. All of them continue to grow steadily too.

To be clear, it's not always rapid growth. That's the downside of sheer size -- it's difficult to add new customers when you're already doing so much business.

Little can stop this behemoth, however. Ever since Microsoft turned up the heat on its cloud-based software-as-a-service (SaaS) back in 2017, sales and earnings have never failed to improve in any quarter.

3. MercadoLibre

MercadoLibre (MELI 0.38%) may not be a household name in North America. Ask a handful of South American consumers if they're familiar with the company, and the vast majority of them will say yes.

That's because MercadoLibre is considered (and often called) the Amazon of South America, though the description doesn't quite do it justice. In addition to an online marketplace, MercadoLibre also operates an online auction platform akin to eBay and a digital payments service much like PayPal. The company facilitated $20.9 billion worth of payments last quarter alone and served as the middleman for sales of $7.3 billion worth of physical merchandise. The two figures were up 59% and 30% year over year, respectively, extending long-standing growth trends.

There's plenty more such growth in the cards too. South America's consumer market is still in the early stages of digitalization. Mobile-telecom industry association GSMA estimates the number of Latin American mobile internet users will swell from 2020's final count of 358 million to 423 million by 2025. This growth prediction is good, even if not great.

Just bear in mind that many of the continent's already-existing internet users have yet to fully utilize the web's e-commerce offerings. Americas Market Intelligence says Latin America's e-commerce market will grow 29% from 2020's levels by 2024, with three-fourths of that business being done on a mobile device. The trend plays right into the hand MercadoLibre is holding.

4. Boot Barn Holdings

Finally, add Boot Barn Holdings (BOOT -0.21%) to your list of long-term investments you'll be glad you bought now.

Contrary to common rhetoric, brick-and-mortar retail isn't dying. That headwind is almost exclusively blowing at department stores and a handful of mall-dependent venues. More accessible, more specialized shops, like most of those you'll find at a neighborhood strip mall, are doing surprisingly well.

Enter Boot Barn. The chain of 288 stores has successfully tapped into the country's less-urban (or at least less metro-minded) consumer base, offering them a variety of boots, denim, and other typical country/western wear.

This sizable market is growing too, if Boot Barn's historical results are any indication. The top line has improved every single fiscal year since 2013's $233 million to $893 million for fiscal 2021 ending in March. Fiscal 2022 is setting up to be just as impressive, even after factoring in last year's pandemic-driven business lull.

There's more of this sort of growth in store to boot (sorry!), as the retailer delves deeper into its omnichannel effort and exclusive brands. These initiatives, paired with new-store growth of about 10% per year, lead the company to project annual per-share earnings growth of more than 20% for the foreseeable future.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon, MercadoLibre, Microsoft, and PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, short January 2022 $1,940 calls on Amazon, and short January 2022 $82.50 calls on eBay. The Motley Fool has a disclosure policy.

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