Companies with a market capitalization above $1 trillion form a highly exclusive group. But in the next decade or so, at least several more corporations will likely join them. And some of these stocks should be able to generate solid returns even beyond that time period.
Let's consider several companies that fit this description: Johnson & Johnson (JNJ -0.46%), Visa (V -0.23%), Mastercard (MA 0.07%), and Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%). And here's one thing they have in common: They all have a vote of confidence from Warren Buffett, arguably the greatest investor of all time, who has famously said that his favorite holding period is forever.
Johnson & Johnson
Buffett's Berkshire Hathaway owns shares of Johnson & Johnson although it makes up a tiny percentage of the conglomerate's portfolio. The drugmaker's market cap currently tops about $400 billion, making it one of the largest healthcare companies in the world. It must register a compound annual growth rate (CAGR) of 10.7% to become a trillion-dollar stock by 2032. Johnson & Johnson can pull this off.
Few pharmaceutical giants can rival the breadth and depth of the company's portfolio, which boasts dozens of drugs across several therapeutic areas. That's to say nothing of the healthcare giant's medical devices business. Johnson & Johnson routinely records consistent revenue and profits, has a rock-solid balance sheet -- as evidenced by its AAA credit rating -- and constantly develops newer medicines and devices.
Here's one more aspect of Johnson & Johnson's business that will help boost its returns: the dividend. J&J is a Dividend King, having raised its payouts for 61 consecutive years. Dividend reinvestment can substantially boost a stock's return, so this is an important factor.
Although Johnson & Johnson has encountered some legal and regulatory issues, the company's robust business, innovative potential, and solid dividend profile should allow it to join the exclusive clique of trillion-dollar corporations by 2032. That makes it an excellent stock to buy now, especially for income-seeking investors.
Visa and Mastercard
Visa and Mastercard practically form a duopoly in their niche of the financial services industry. Both help facilitate credit card transactions through their payment networks. Visa and Mastercard should continue growing in the years ahead. Here is why. First, they benefit from a solid economic moat through the network effect and their valuable brand names.
Second, there is still plenty of room to grow in this industry. While card transactions seem ubiquitous nowadays, both Visa and Mastercard have argued that cash and check ones aren't dead yet -- far from it. As more financial exchanges switch away from cash, both Visa and Mastercard will benefit.
This is where we can highlight some differences between these two companies. Visa is the larger of the two, boasting more transactions, cards in circulation, and payment volume. For instance, in 2021, Visa had a total of 244 billion transactions compared to Mastercard's 140 billion. However, the latter has greater exposure to international markets where there is arguably much more room to grow.
In Europe, and in countries in much of Africa, the percentage of people with at least one credit card is lower than it is in the U.S. and Canada. But Visa generates more of its revenue from these North American regions, where the credit and debit cards markets are more mature. Perhaps that explains why Mastercard's stock market returns have been better than Visa's in recent years.
V Total Return Level data by YCharts
Still, Visa's performance has been nothing to sneeze at -- and both companies are worth investing in. That's why Berkshire Hathaway's portfolio features both. Visa's market cap currently sits at $501 billion to Mastercard's $389 billion. They need to register a CAGR of 10.4% and 14.4% (respectively) to become trillion-dollar corporations by the end of 2030 -- in my view, they can get it done by the end of the decade.
Berkshire Hathaway
Berkshire Hathaway has delivered incredible returns over the past few decades. The worldwide conglomerate is the parent company of several well-known brands, including the insurance giant Geico and the battery company Duracell. Berkshire Hathaway is practically a tiny industry in and of itself. The many businesses it holds in various sectors of the broader economy grant it a degree of diversification.
However, Berkshire Hathaway's greatest asset has been its leadership team, with Warren Buffett as its CEO and Charlie Munger as his second-in-command. That may be a problem as both are well into their 90s, and it isn't clear how much longer they will be around. However, Buffett and Munger have created and nurtured a culture within their company that they are confident will live on after they are gone. Buffett's successor has already been handpicked.
The lucky (or unlucky, depending on how you look at it) chosen one is Gregory Abel, who is currently in charge of Berkshire Hathaway's non-insurance division. So, investors shouldn't worry too much about the future of Berkshire Hathaway. With a market cap of $786 billion, the conglomerate needs to grow at a CAGR of 3.5% to achieve trillion-dollar status by 2030. This should be an easy task for the corporation.
Berkshire Hathaway can deliver much stronger results than those, and it is definitely a stock worth holding on to for good.
