Investing can be complicated, but it doesn't have to be. I like to take a simple approach by finding the stocks of companies with great track records of creating shareholder value over time, and that look likely to continue to do so well into the future.
Buying these types of stocks can help investors weather volatility and tune out the day-to-day noise of a bear market. Here are three examples of such stocks that you can feel confident about buying now and holding forever.
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1. Texas Instruments is a strong semiconductor play
Creating value for shareholders is exactly what Texas Instruments (TXN 1.29%) has done under the leadership of Rich Templeton. Since Templeton took the reins as CEO of the analog semiconductor giant, Texas Instruments has used share buybacks to reduce its shares outstanding by 46%.
This has created tremendous value for shareholders by taking nearly half of the company's shares off the open market and increasing both earnings per share and free cash flow per share over time. The company has also grown its dividend payout at a 25% compound annual growth rate (CAGR) since 2004.
Shares of Texas Instruments are down 15% in 2022 because the semiconductor industry is working through oversupply issues. But over time, there will be no shortage of demand for Texas Instruments' analog and embedded chips. It sells these chips to a diverse group of customers in the industrial, automotive, and personal electronics markets. The company has over 100,000 customers, giving it tremendous diversification and removing single-customer or single-industry risk.
As cars and industrial machinery grow increasingly connected, demand for Texas Instruments' analog chips will grow, as all devices that contain digital chips need analog chips to supply power and monitor signals from the outside world.
Texas Instruments sees enormous long-term potential in its industrial and automotive end markets, where "customers are increasingly turning to analog and embedded technology to make their end products smarter, safer, more connected and more efficient." According to Texas Instruments, "[t]hese trends have and will continue to result in growing chip content per application."
While shares are down this year, Texas Instruments is a long-term winner that has rewarded investors with a gain of nearly 500% over the past decade. Shares trade at under 20 times forward earnings, which isn't necessarily cheap, but isn't unreasonable for a business of this quality.
Between the long-term demand for analog chips and the company's stellar track record, Texas Instruments is a stock investors can buy and hold forever. Investors can view this year's pullback as an opportunity to buy the stock.
2. Coca-Cola is more than just a 'Dividend King'
There are many reasons investors can buy and hold Coca-Cola (KO) forever. It's a Dividend King that has increased its dividend payout for 60 years in a row. Shares of the Atlanta-based company now yield an attractive 3%.
Coca-Cola also holds appeal because of its defensive value -- in a year when the S&P 500 and Nasdaq have fallen into bear market territory, its stock keeps chugging along, with a roughly flat return year to date. In other words, Coca-Cola shareholders are in far better shape than investors in the broader market.
But Coca-Cola is much more than a defensive dividend stock. It may be 130 years old, but it's still growing at an impressive rate. During the most recent quarter, Coca-Cola grew organic revenue by 16%. That's an impressive growth number given the size of its business. Coca-Cola keeps finding new ways to grow -- for example, its Coke Zero Sugar product is a smash hit that saw an 11% increase in volume over the past quarter.
Shares of Coca-Cola currently trade at about 23 times next year's earnings. While this isn't cheap, it isn't a prohibitive valuation for a company with Coca-Cola's proven ability to grow over the long term and protect investor capital during a challenging time. With these attributes and 60 straight years of dividend increases under its belt, Coca-Cola is another stock investors can feel good about buying now and holding for the long term.
3. Salesforce has plenty of room for growth left
Salesforce (CRM 0.26%) has compiled an enviable track record since going public in 2004. Since its IPO, Salesforce has given investors gains of more than 3,400%. The company has increased its revenue for 73 quarters in a row, making it one of the bluest of blue-chips.
While the stock has provided its shareholders with incredible gains since that point, it's down 42% year to date, as rising interest rates and recessionary fears have tempered investor appetites for growth stocks.
However, the customer relationship management (CRM) software giant is better positioned for an economic downturn than meets the eye. Its tools like Sales Cloud help increase the efficiency and productivity of its customers' sales departments. This means it drives revenue, which is of paramount importance in a downturn, making Salesforce one of the last expenses businesses want to cut.
Salesforce still has plenty of room for growth ahead as businesses around the world continue pursuing digital transformation. It forecasts that its total addressable market will be $290 billion by 2026, meaning it has only captured about 10% of this market so far based on its revenue. Its goal is to grow revenue to $50 billion by 2026, which would be nearly double today's revenue of $26 billion.If it can achieve this milestone, the stock should be worth considerably more than it is today.
Investing in stocks can be challenging, especially during bear markets like the one we're currently navigating. But by focusing on blue-chip companies with strong histories of value creation and strong prospects for continued growth in the future, investors can feel confident that their portfolios will grow over the long term.
