2 Stocks to Buy and Hold for the Next Decade

Two things matter when you're considering a long-term investment: Does the company have durable advantages? And is the valuation reasonable?

For telecom giant AT&T (T 1.02%) and semiconductor manufacturer Intel (INTC -9.20%), the answers are "yes" across the board. Here's why investors should consider buying and holding these stocks for the long run.

AT&T

There are only three major wireless carriers in the United States, and that's unlikely to change anytime soon. Building out a wireless network and continually upgrading it to support the latest technology like 5G is a capital-intensive affair.

AT&T is one-third of the wireless triopoly, along with Verizon and T-Mobile. The company spent years and tens of billions of dollars trying and failing to turn itself into a media conglomerate. Through spin-offs and divestitures, AT&T is now back to being a pure-play telecom company, albeit with a legacy of debt from its misadventures in the media business.

Despite facing headwinds from a tough economic environment, AT&T is successfully adding wireless subscribers. The company had 70 million postpaid phone subscribers at the end of the first quarter, up 2.5 million from one year prior. Those subscribers are paying a bit more each month on average compared to a year ago, which helped to push up AT&T's mobility service revenue by 5.2% year over year.

Beyond wireless, AT&T's fiber internet business represents a long-term growth opportunity. The company had 7.5 million fiber customers at the end of the first quarter, up from 6.3 million at the same time last year. Importantly, fiber service demands a higher price than AT&T's legacy broadband business, and customers are happy to pay it to get lightning-fast internet speeds.

AT&T will certainly face some challenges this year as consumers pull back on spending. The company expects wireless industry growth to slow from the levels experienced in 2021 and the first half of 2022, although it still sees opportunities to pick up new customers. Even with more sluggish growth, AT&T is sticking by its outlook for at least $16 billion of free cash flow in 2023.

While AT&T's results will ebb and flow a bit, the stock is dirt cheap. With a market capitalization of $121 billion, shares of AT&T trade for just 7.6 times free cash flow guidance. Even if the company comes up short this year, there's a big margin of safety baked into the stock price. Add in a dividend yielding 6.5%, and over the next decade, investors buying today should do just fine.

Intel

Things are not going well for semiconductor giant Intel right now. Global shipments of PCs have plunged, the result of weak consumer demand coupled with excess channel inventories. In the data center, the company faces stiff competition from rival Advanced Micro Devices as it looks to get past a legacy of chronic delays getting products to market.

In the first quarter, Intel reported a 36% year-over-year decline in revenue along with a substantial net loss. Aggressive cost cutting is helping, but it will take a demand recovery for Intel's financial results to rebound.

While the short-term story at Intel is tough to get behind, the long-term story looks much better. In the PC CPU market, Intel's Raptor Lake chips beat out AMD's latest products in most areas. In the server CPU market, Intel has an aggressive product roadmap meant to reclaim its dominance, with multiple mainline launches through 2024 along with a new family of efficient, dense, cloud-first chips.

In manufacturing, Intel is investing heavily despite the current downturn for two reasons. First, the company must catch up to third-party foundry TSMC technologically. AMD is a TSMC customer, and a component of that company's comeback in recent years has been TSMC's cutting-edge manufacturing processes.

Second, Intel is aiming to build a foundry business of its own to rival TSMC. For this effort to succeed, the company's plan to bring five new process nodes online within a four-year period needs to remain largely on track. Intel recently announced a partnership with Arm to make its factories ready for any Arm-based chip designers starting with the company's 18A manufacturing process. If things go to plan, Intel could be a viable manufacturing option for smartphone chip designers in 2024 or 2025.

Obviously, Intel has a lot of work to do, and it's battling the worst market for its products in a very long time. But with the stock beaten down to historically low levels, betting on Intel today could lead to market-beating results over the next decade if the company's turnaround efforts pan out.