Creating wealth in the stock market can be as simple as owning pieces of the world's most powerful corporations and letting them compound for decades. But you can't pick just any stock; most won't cut it over the long-term.
Sometimes if it's broken, don't fix it. Some companies have been compounding for decades, and are still going strong today. If you're looking to put your hard-earned money into stocks that you can sleep well at night owning and that will still keep growing your wealth, listen up. Here are five winners to consider.
1. Berkshire Hathaway
Investing in holding company Berkshire Hathaway (BRK.B 0.16%) means trusting your money with investing legends like Charlie Munger and Warren Buffett, who still run the ship there to this day. The company's built an extensive portfolio of private businesses, including Geico, Duracell, and Fruit of the Loom, and has stakes in public companies like Apple, Coca-Cola, and American Express.
Berkshire has for decades steadily grown its book value (which is the total value of the company's assets minus its obligations such as debt) and the price of its shares has followed. Over time, the stock has generated immense wealth for investors, returning more than 20% returns per year from 1964 to 2018. With more than $144 billion in cash and short-term investments on the company's balance sheet, Warren Buffett will be ready for Berkshire's next Apple-like opportunity.
Paint and coatings manufacturer Sherwin-Williams (SHW 1.03%) sells more than one-in-four cans of paint in North America. Its products sell under various brand names in retail stores and its name-brand store network. Whether you're a homeowner remodeling or slapping an annual coat of stain on a deck, or a contractor with commercial projects, you're buying Sherwin-Williams' products over and over again.
Sherwin-Williams makes nearly $0.17 of free cash flow on every dollar in revenue and sends a lot of it back to shareholders through dividends. Moreover, the company is a Dividend Aristocrat with 43 consecutive annual payout increases, and the stock's returned more than 85,000% over its lifetime. The business has grown revenue an average of 9% yearly over the past decade, so there seems to be growth left in this proven compounder.
3. Home Depot
Homeowners are undoubtedly familiar with Home Depot (HD -0.20%), where they've probably spent weekends buying appliances, tools, or garden plants for countless home projects. The company's brand power, large store footprint, and product selection have helped it grow in the face of competition from e-commerce companies like Amazon. Revenue's increased an average of 7% over the past decade.
The stock's been a longtime winner, minting millionaires who made even small investments in its IPO and held over the decades. But Home Depot's success story might not be over yet. The company's trailing 12-month revenue is $147 billion, and Bank of America estimates the home improvement market's total value at $767 billion with room to grow to more than $1 trillion in time. Home Depot should have growth opportunities to take market share and benefit from increased home-improvement spending moving forward.
4. Abbott Laboratories
Healthcare is an evergreen industry; there's a constant need to keep people healthy and cure the world's many diseases. Abbott Laboratories (ABT -0.87%) is a healthcare conglomerate that sells consumer products, medical devices, and generic pharmaceutical drugs. The company retooled itself over the past decade after spinning off most of its pharmaceutical business as AbbVie in 2013.
Its 2016 acquisitions of St. Jude Medical for $25 billion and Alere for $5.8 billion positioned Abbott to focus on medical devices for cardiovascular applications, diabetes, and diagnostics. The company's revenue has been flat over the past decade, but has grown 11% annually on average over the past five years, so it looks like Abbott's moves to generate growth are working. Abbott also has a storied dividend history -- it's a Dividend King, offering a 1.6% dividend yield for those looking for some income from their investments.
Technology conglomerate Microsoft (MSFT 0.58%) touches virtually every corner of the tech world, including PC operating systems, enterprise software, gaming hardware, and software, and is one of the three major public cloud platforms. It's grown into one of the world's largest companies over the years as well -- as of today, its market cap is $2.1 trillion.
Microsoft continues to thrive despite its size; revenue growth has averaged 14.5% annually over the past five years. Azure, the company's cloud platform, could drive growth for Microsoft moving forward. It grew 46% in Microsoft's most recent quarter, which ended December 31. According to Research & Markets, there's a secular shift from on-premise servers to public cloud platforms, and the global cloud industry could approach $1 trillion in value by 2027.