Investing for retirement can be intimidating, especially if your goal is to have at least $1 million saved when you retire. Most people opt to buy index funds because they don't feel like they know enough to pick the best individual stocks themselves. That can work too, but sometimes you need the performance of individual stocks to help you outpace the index funds and give your retirement fund a much-needed boost.
Finding great individual stocks to buy and hold for the next few decades gets easier if you keep a few things in mind like growth opportunities, network effects, strategic position, and cash flow generation (see below). Here are four stocks I think would make great buy-and-hold candidates to get your retirement fund above that magical $1 million threshold: Alphabet (GOOG 9.96%) (GOOGL 10.22%), Airbnb (ABNB 0.75%), MGM Resorts (MGM -2.58%), and Disney (DIS -0.04%).
Let's find out what makes these four individual stocks worth further consideration.
1. Alphabet is so much more than search
We all know about the Google search business, but Alphabet is now so much more than that. It has YouTube, a huge cloud business, and is one of the leading companies in artificial intelligence. Those businesses generate revenue, but the cloud is barely profitable, AI is losing money, and from what we know YouTube isn't a big profit center. This means there's an opportunity to grow in all three.
Even with those growth opportunities, investors are getting a reasonable value. You can see in the chart that shares trade for 26.5 times trailing earnings, and Alphabet has been a compounding machine for decades.
GOOG Revenue (TTM) data by YCharts
There's not a lot that can knock off a big tech company like Alphabet, and with so many businesses that can still grow from their current base, this is a great company to simply hold for the next few decades.
2. Airbnb's emerging dominance
Airbnb pioneered the idea of short stays in a spare bedroom, but the company has become so much more than that. It's now a full platform for short and long-term rentals, and has become a verb for users in the process.
Given the network effect in listing and renting spaces, I don't see anyone knocking Airbnb off, but what's most impressive from an investment standpoint is the company's cash and deposits (which collect interest), free cash flow, and the reasonable multiple shares trade at.
ABNB Total Current Assets (Quarterly) data by YCharts
There's competition in this industry, but I think Airbnb is well-positioned to be a long-term winner as the network effects it built continue to take hold. A decade or two from now, it may be in many more geographies and adjacent services that allow the company to keep growing.
3. MGM Resorts is a cash machine
MGM Resorts is known as a gambling company, but well over half of the company's revenue in the U.S. comes from services off the casino floor. This is a destination and entertainment company at heart, and that's something I think will have value for a very long time.
What's changed about MGM Resorts in the last decade is the company moving to a more mature phase, where it's generating cash flow and buying back stock. Now, it's a money-making machine.
MGM Free Cash Flow data by YCharts
There are still growth opportunities though. Macao has not fully recovered from the pandemic, and an approved casino in Japan likely won't open until late this decade.
In the meantime, MGM Resorts has become a great cash flow business, and with more people seeking out entertainment destinations, I think the company is a great buy and hold long term.
4. Disney's comeback (again)
This isn't the first time Disney has gone through turmoil. The company's studios went through a drought in the early 1980s and again in the late 1990s and early 2000s. And through it all, Disney has thrived.
DIS Total Return Price data by YCharts
What makes Disney attractive today is its value and strategic position. Shares trade for just 21.4 times forward earnings estimates, and we are just seeing the beginning of the company's turnaround. In fiscal 2023, experiences generated $9 billion in operating profit, and linear TV generated $6.7 billion. What offset that was $2.6 billion in operating losses for streaming, but that's likely to turn around in the next year as costs come down, the subscriber base grows, and prices go up.
Decades from now, I think Disney will be one of the leading streaming companies, and it'll still have the massive parks and cruise business we know today. If you're holding for decades, Disney is a top stock to have in your portfolio.
Great buy-and-hold stocks
Decades from now, I think Alphabet, Airbnb, MGM Resorts, and Disney will all be profitable and relevant. Companies with this kind of staying power can drive your portfolio into retirement.
