Warren Buffett once said that his "favorite holding period is forever." That long-term perspective has helped make Buffett one of the most successful investors of all time.
In this article, three Motley Fool contributors choose stocks they think are candidates to buy and hold forever: Bristol Myers Squibb (BMY -0.19%), Johnson & Johnson (JNJ -0.49%), and Vertex Pharmaceuticals (VRTX -0.79%).
An ideal long-term buy
David Jagielski (Bristol Myers Squibb): One stock that you can buy and hold for the long haul is Bristol Myers Squibb. It currently offers investors a strong dividend yield of 3.2% along with a solid business that is diverse and has many top-selling products contributing to its top line.
Through the first six months of this year, the company had seven different products that contributed more than $1 billion in sales, including blood clot medication Eliquis, which generated $6.5 billion. The key is that the business continually finds ways to develop new products and expand its pipeline. For example, just this month, the Food and Drug Administration approved psoriasis drug Sotyktu to treat adults with moderate to severe plaque psoriasis. At its peak, the drug could generate up to $4 billion in annual sales (when including all possible indications, such as lupus and psoriatic arthritis), becoming yet another blockbuster for BMS.
The company has also been bolstering its pipeline via acquisitions, the most recent being Turning Point Therapeutics, which it closed on last month. BMS says the acquisition will complement its oncology business. The key product picked up in this deal is repotrectinib, which can help treat patients with non-small cell lung cancer. The experimental drug has the potential to generate more than $1 billion in peak annual sales.
Bristol Myers Squibb is a growth machine that continually finds ways to get bigger and more diverse. In the 12 months ended in June, it posted a $6.6 billion profit on sales of $47.1 billion, for a profit margin of 14%. Free cash flow during that period totaled $14.3 billion. With strong numbers like that, investors don't have to worry about the company's future as it has plenty of money coming in to continue funding its growth. Bristol Myers Squibb is an easy stock to justify buying today and holding in your portfolio forever.
Hail to the king
Keith Speights (Johnson & Johnson): Johnson & Johnson ranks as a Dividend King with 60 consecutive years of dividend increases. Only nine companies in the S&P 500 can claim longer track records of dividend hikes, and none of them are in the healthcare sector.
Few companies can match Johnson & Johnson's business longevity, either. Three brothers founded the company way back in 1886. Since then, J&J has weathered depressions, recessions, world wars, and plenty of other crises.
Today, J&J stands as the second-largest healthcare company in the world based on market cap. It generated revenue of $95.6 billion over the 12 months ending in early July, with profits of nearly $18.4 billion during the period. The company ended the second quarter with a cash position of over $32.5 billion.
Developing biopharmaceutical products and medical devices requires major investments and solid scientific expertise. J&J's financial strength and reputation should enable it to retain a leadership position in both markets for a long time to come.
Admittedly, the company's revenue growth hasn't been overly impressive in recent years. However, look for J&J's momentum to accelerate with its planned spinoff of the slower-growth consumer health business next year.
Firing on all cylinders
Prosper Junior Bakiny (Vertex Pharmaceuticals): While the market is solidly in the red this year, biotech giant Vertex Pharmaceuticals is up by almost 30%. Perhaps it isn't wise to make too much of a mere nine months of market-beating performance, especially when considering stocks to buy and hold forever.
However, the drugmaker has beat the market in the past three-year, five-year, and 10-year periods. How has Vertex managed to accomplish that feat? The story starts with the company's portfolio of drugs that treat the underlying causes of cystic fibrosis (CF), a life-threatening condition that leads to a progressive decline in lung function.
Developing therapies for CF is challenging since it is caused by multiple mutations and Vertex markets the only medicines in this area. With no competition in this space, even with a relatively small market of 83,000 patients in the U.S., Canada, Europe, and Australia, the biotech has generated billions.
Vertex is seeking to reproduce its success in CF and is developing more therapies, primarily for illnesses for which there are few (if any) therapy options. The company's targets include type 1 diabetes, acute and neuropathic pain, and two rare blood diseases: sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT).
With regulatory submissions planned to be completed by year-end for exa-cel -- Vertex's curative therapy for TDT and SCD -- this treatment is likely to be the biotech's next launch. The company should have multiple data readouts in the next 12 months, which could eventually lead to other new approvals.
Vertex generates more than enough money from its CF business to push its current programs through the necessary clinical and regulatory steps. The biotech's proven expertise in developing groundbreaking therapies will serve it well over the long run. As a shareholder, I do not intend to close my position anytime soon.