Many successful investors will tell you that their biggest mistake involved selling a great company too soon. Indeed, no less of an investor than Warren Buffett has said that his favorite holding period is "forever". That showcases the incredible potential that long-term investors might find if they manage to simply hold on to the incredibly strong businesses that they already own.
Still, it can be tough to find companies that really seem worthy of holding onto for decades to come. With that in mind, three Motley Fool contributors searched their own investments for ones that seem like they could very well be among that elite cadre of investment. They picked MercadoLibre (MELI 3.09%), Apple (AAPL -0.35%), and Enbridge (ENB -1.21%). Read on to find out why, then decide for yourself if one or more of them deserves a place in your portfolio for the long haul.
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A trend that will last longer than me
Jason Hall (MercadoLibre): If there's one common thread that ties most of my investments together, it's trends. And no, I don't mean the latest fashion or other ephemeral shiny object; I mean real, lasting, durable trends that can take many years -- even decades -- to play out. And one that's likely to take more decades than I have left on earth is the economic development of Latin America. And this makes MercadoLibre exactly the sort of stock that I intend to own for the rest of my life.
First, why MercadoLibre. To start, its lead in Latin America, while not insurmountable, is significant. It operates in 18 countries in the region, and has a massive head start over the competition. It also operates Mercado Pago, an electronics payments platform, which actually does more transaction volume off its platform than on it; that's a very sticky platform used by millions of people to do things like pay bills, in addition to shopping with MercadoLibre.
And it's built these platforms profitably; over the trailing 12 months, MercadoLibre earned $757 in net income, and generated $4.1 billion in free cash flow. In other words, it's in a position to self-fund growth, without having to rely on fickle and expensive capital markets for funding.
Lastly, its prospects going forward are tremendous. The average American is almost 40, while the median age in Latin and Caribbean countries is 31. The demographic dividend is also delivering in much of Latin America: Median life expectancies are on the rise while fertility rates fall, resulting in more of the population joining the workforce for longer, generating more disposable income. Few companies anywhere are positioned as well as MercadoLibre to grow profitably for as many years to come.
A giant tech company that wins on both hardware and software transactions
Eric Volkman (Apple): Is there anyone in the stock investing universe who thinks Apple will stumble and fall? I sure don't. I bought into the company years ago, and as time has gone by, I've become more convinced that it will only grow its already massive footprint.
The beauty of Apple's business model is that there are numerous levers it can pull to keep pushing its results ever higher.
Its endlessly state-of-the-art products rightfully attract loyalists -- and I'm one of them, having owned and (over-) used iPhones since 2007. The upgrade cycle alone is enough to bring in waves of revenue every time it crests. Apple products are perennially hot items; witness the heavy demand for the recently launched iPhone 15.
The tech giant has also very cleverly positioned itself as a middleman in a great many transactions involving software produced for Apple devices by outside developers. Want that cool new game for your phone? Apple will typically take 30% of what you're paying the company behind it, thank you very much.
The services category continues to balloon for Apple. In the quarter that ended July 1 -- which many considered a disappointment due to continued (but minor) year-over-year revenue declines and other unimportant factors -- services revenue climbed to an all-time quarterly record. The category's take rose by almost 12% to $6.2 billion.
Meanwhile, Apple is pushing into other potential revenue-spinners, as it ever does. It's plowing much of its research and development into generative artificial intelligence (AI). Its home-cooked Apple GPT is already being harnessed by the company as a behind-the-curtain technology powering numerous functionalities.
Apple is a sure bet to continue drawing money from its already very deep and wide revenue streams. And it's got enormous potential in others that have only begun to flow. This stock is staying firmly anchored in my portfolio.
Love it or hate it, its services should still be in demand decades from now
Chuck Saletta (Enbridge): Enbridge is a Canada-based energy infrastructure titan that owns oil and natural gas pipelines that crisscross much of North America. Whether you love or hate the fossil fuel industry it serves, the reality is that it will be with us for decades to come.
The U.S. Energy Information Agency regularly publishes an energy outlook. In its 2023 edition, it forecasts essentially flat oil and natural gas demand in the United States through 2050. In essence, its projections call for renewables to basically cover the increase in energy demand over the next few decades. So while other energy sources will likely continue to grow over time, there is good reason to believe that the core demand will continue to be there for Enbridge to provide its energy transportation services.
In addition, while it is expensive and politically difficult to build new pipeline infrastructure these days, those challenges can actually work in favor of large, established players like Enbridge. After all, the fewer other pipelines get built, the more attractive Enbridge's existing infrastructure looks by comparison. With fewer alternate pipeline routes, Enbridge's competition becomes railroads and trucks, both of which tend to be costlier than pipelines where that infrastructure exists.
Thanks to that long-term structural demand, Enbridge can pay out a whopping 8% yield, on a dividend that consumes less than 60% of its operating cash flow. Not only can Enbridge pay that dividend, it also has a 28-year long streak of annually increasing that payment.
There are very few companies out there that look capable of potentially paying a high and growing dividend for many decades into the future. With its entrenched infrastructure, high likelihood of continued demand, and the expansion challenges that help keep competition at bay, Enbridge just might find itself on that list. That combination makes it a stock I hope to be able to hold onto for the rest of my life.
What do all three of these companies have in common?
While it may not seem like MercadoLibre, Apple, and Enbridge have a lot in common on the surface, what unites them is the fact that they have each built businesses that look like they can have legitimate long-term staying power. Should that anticipated future come to pass, decades from now, future investors might still be calling them companies worthy of being held for the long haul.
No matter what the future may bring, to get the potential rewards of long-term ownership, you first have to make that initial investment. There's no time like the present to take that first step toward owning companies you might want to hold onto for the rest of your life. Make today the day you decide whether one of these companies may very well be worthy of winding up a one-decision investment for yourself.
