Sometimes in investing, you make your own luck. That tends to happen when you have a chance to buy a stake in a business with tremendous long term prospects at reasonable prices and then just let the market and the company work their magic together over time. Even with the generally rough market we've had since the beginning of 2022, there are signs of the market's long-term resilience when patient investors find those great companies to hold onto.
With that optimistic mentality in mind, three Motley Fool contributors looked back over investments they made to showcase examples of buying parts of great businesses at good times and then letting the future play out on its own. They chose Charles Schwab (SCHW 1.24%), Alphabet (GOOG 1.75%) (GOOGL 0.44%), and Genuine Parts (GPC 0.49%). Read on to find out their thinking behind those choices and then decide for yourself if any of them might be the kind of business you'd like to see play a part in your own investing journey over time.
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A top name in finance
Eric Volkman (Charles Schwab): I've been a Charles Schwab shareholder for years now, and I'm not going anywhere.
One of the most recognized names in the finance sector, Schwab is a veteran company that has successfully transformed itself from a fairly straightforward advisory and securities brokerage into a large banking and financial-services business. Along the way, it's made billions of dollars and continues to pass along a chunk of its earnings in the form of dividends.
Schwab does a fine job bringing in the bucks from its various revenue streams, a talent that's been aided lately by the Federal Reserve's series of interest rate rises.
This helped the company notch new all-time highs for both annual net revenue (which came in at almost $20.8 billion) and GAAP net income ($7.18 billion) in 2022. Some back-of-the-envelope math shows us that the margin on that profit was over 34%, which would be the envy of even some of the best-managed companies in any sector you'd care to name.
Where profitability goes, dividends tend to follow. Chuck has been paying a shareholder disbursement every quarter for decades now, even though lean periods like the financial crisis of the late 2000s and the coronavirus pandemic. Recently, it's stepped up its pace of dividend raises, lifting the common stock payout three times in the space of less than a year and a half to the present level of $0.25 per share.
With inflation growth easing lately (at least a bit) and other indicators showing robust financial health, worries about the course of this country's economy are starting to melt. That should drive more activity on the markets, and business for the many financial instruments and services Schwab so effectively sells. I see quite a bright future for this company, and I believe it remains one of the most solid stock plays in all of finance.
There will never be a shortage of advertising
Parkev Tatevosian (Alphabet): One stock I'm glad I bought when I did is Alphabet. The advertising giant's stock crashed in March 2020, right around when the pandemic lockdowns started in the United States. It helps that I have a strong conviction about advertising. Not that I like it very much. In fact, I try to avoid it as much as I can.
Instead, I believe that businesses, institutions, and politicians are forever going to be interested in influencing people's decisions. Alphabet is arguably the most dominant advertising company worldwide. Google search and YouTube are used by billions of people. If you're someone who wants to influence people's decisions, there are few properties that offer the kind of influence as Google Search and YouTube.
Alphabet's stock is up considerably since I bought it in early 2020. I still own the stock, although my confidence has decreased as of late because of the rise of ChatGPT and the potential impacts on Google's search business. Nevertheless, I'm grateful I bought Alphabet stock when I did. Perhaps there's a lesson to be learned when the market is panicking and selling assets, and that is that it might be an excellent time for long-term investors to find bargain valuations.
A great company even in a not-so-great economy
Chuck Saletta (Genuine Parts): One of the best parts of a rough stock market is that it will often knock down the prices of strong businesses as well as weaker ones. When you have the opportunity to buy a great company at a good price, you just might be able to find a business you can hold on to even when you're still worried about what the market will do next.
Auto parts retailer Genuine Parts is just such a business. I took advantage of the chance to pick up shares of this superb dividend stock last May, when they traded at $131.55 each . At a recent price of $179.68, they've certainly recovered nicely since I bought them. In addition to that price recovery, the company has a 66-year history of increasing its dividend annually. Based on its recent trends with that payment, it may very well make it 67 annual dividend boosts in a row within the next week or so.
That's an astonishing track record -- and a great total return on investment. It's powered by a company with a straightforward business line that manages to be both critically important and somewhat economically countercyclical at the same time.
After all, cars are expensive pieces of equipment that tend to break down as they age. When people are worried about their finances -- such as during rough economic times -- they're more likely to keep their old cars longer, leading to a higher likelihood of repairs. That's a key reason Genuine Parts has been able to keep that astonishing track record of rising dividends alive for nearly seven decades.
It's also why I'm glad I was able to pick up shares when I did. I got shares of a great company at a good price, and because of what it does, it's one that looks worthy of holding on to even if the overall economy isn't as strong as we'd like it to be.
Now is a superb time to look for great businesses
The successes these Motley Fool contributors had with these investments boil down to finding a great company at a reasonable price, and then letting the market and the business behind that stock work their magic over time. Thanks to the market's overall decline since the beginning of 2022, chances are strong that there are more such opportunities out there, waiting for you to find them. By seeking them out now, and then having the patience to let the future play itself out, you too may be able to tell such stories in the future.
To have successes like these, though, you do need to take that first step to look for and buy those great businesses when you see them. Make today the day you start looking, and get yourself on the path to where you could soon have a similar story to tell.
