When looking at businesses you might consider owning forever, a few important traits must be present. Investors should look for companies that provide superior products and services with a top-notch user experience. There should also be ample growth opportunities. And shares should be at an attractive valuation.
These are the necessary ingredients for outstanding returns over a long time period. With that being said, here are three stocks that I don't plan on ever selling.
1. Amazon
NASDAQ: AMZN
Key Data Points
Amazon (AMZN 0.38%) posted trailing-12-month revenue of $502 billion, but growth has surely slowed since the booming days of the pandemic. However, once the current macro headwinds abate, online shopping, still Amazon's bread and butter, will receive a boost again.
What's particularly appealing about investing in this company is that you also get to own Amazon Web Services (AWS), the largest cloud-computing platform in the world with 34% of the market. AWS generated revenue and operating profit of $20.5 billion and $5.4 billion, respectively, in the third quarter. Both figures were up by double-digit percentages year over year.
According to Grand View Research, the cloud-computing industry is expected to be worth nearly $1.6 trillion by 2030. And with an already big lead in the space, Amazon and AWS are sure to benefit tremendously.
Amazon's stock ended 2022 down 50% on the year. As a result, shares currently trade at a price-to-sales (P/S) multiple of 1.8, their cheapest valuation in about eight years.
There's no doubt that Amazon will continue to be a major player in key growth industries in the decade ahead, often dominating any market it enters. This easily makes it a buy-and-hold investment for my portfolio.
2. Alphabet
NASDAQ: GOOGL
Key Data Points
Alphabet (GOOGL 0.57%) (GOOG 0.20%) has taken a hit recently. Sales rose just 6.1% in the most recent quarter because of a softer digital advertising market in 2022.
But if we zoom out, there's still a ton of growth potential. The global digital ad market could be worth $1 trillion by 2027, according to Statista. And this places Alphabet in a prime position to benefit.
Shareholders get exposure to the Google Cloud Platform, the third biggest player in the cloud industry. Its third-quarter revenue was up 38% year over year, far greater than the gain posted by AWS. And based on third-quarter numbers, Google Cloud Platform's annualized run-rate revenue is $28 billion.
Alphabet's Other Bets segment includes Waymo, the company's self-driving unit. While Waymo is still in its early stages, it has the potential to be the main operating system for automobiles in the future. And this would give the company even more access to valuable data, something that will keep its flywheel going.
Alphabet had a rough year in 2022, finishing down 39%. The stock is now selling at a ridiculously attractive price-to-earnings (P/E) multiple of 17, compared to its trailing-10-year valuation, an average P/E of 29. Investors should pounce at this rare buying opportunity.
3. Block
NYSE: SQ
Key Data Points
Last on the list of stocks I will never sell is Block (SQ +0.17%), a leading business in electronic cash payments. Despite macroeconomic headwinds, Block's gross profit jumped 38% in the third quarter (ended Sept. 30) to $1.6 billion.
Both of its segments, Square and Cash App, posted strong growth, showing that the business has a long runway with merchants and individuals.
Block is an attractive investment for two main reasons. First, the company is riding the broad secular shift away from cash transactions to electronic payments. According to a Gallup poll, 64% of Americans anticipate that the U.S. will become a cashless society at some point in their lifetimes, which sets up Block to spearhead this movement.
Second, Block's focus on providing a wonderful user experience has been paramount to its success thus far. Square merchants benefit from a seamless all-in-one solution to accept card payments and better manage their small businesses, a target market that was largely ignored by traditional financial institutions. And 49 million monthly active Cash App users have an easy-to-use finance app that provides many services that a regular bank offers.
As of this writing, the stock traded at a P/S of 2.2, about one-third of its historical average valuation. Adding the company to your portfolio could boost returns over the long term.
