As the S&P 500 hovers near its all-time highs, we should recall that Peter Lynch once said, "Everybody in the world is a long-term investor until the market goes down." So when the market inevitably pulls back, you shouldn't panic and forget your own long-term goals.
A simple way to tune out that near-term noise is to invest in evergreen stocks that can create generational wealth for their patient investors. These three blue chip giants fit that description: Berkshire Hathaway (BRK.A +0.05%) (BRK.B +0.01%), American Express (AXP +0.62%), and Alphabet (GOOG +1.61%) (GOOGL +1.75%).
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Berkshire Hathaway
Berkshire Hathaway was a struggling textile maker before it was taken over by Warren Buffett's fund in 1965. Under Buffett, Berkshire divested its textile business; acquired cash-rich insurance, energy, railroad, retail, and consumer companies; and accumulated a massive portfolio of stocks that now accounts for 29% of its market cap of $1.09 trillion.
NYSE: BRK.B
Key Data Points
Buffett will retire at the end of this year, but Berkshire is still an evergreen investment for three simple reasons. First, its core insurance subsidiaries (GEICO, Gen Re, Berkshire Hathaway Reinsurance Group, and others) are well insulated from economic downturns because their clients usually won't cancel their policies just to save a few dollars. Berkshire then uses the cash generated by those insurance premiums to invest in additional companies or expand its stock portfolio.
Second, Berkshire has outperformed the S&P 500 ever since Buffett took the helm. Past performance never guarantees future gains, but its scale, diversification, and constant expansion give it a great shot at outperforming the broader market. Lastly, its massive stock portfolio -- which houses blue chip giants like Apple, American Express, Bank of America, and Coca-Cola -- should continue growing and outpacing inflation over the next few decades. Simply put, Berkshire is still one of the simplest ways to profit from the long-term growth of the U.S. economy -- and it could easily generate lasting wealth over the next few generations.
American Express
American Express, Berkshire's second-largest holding, is another evergreen investment. Unlike Visa and Mastercard, which only process payments instead of handling the actual bank accounts, American Express is both a card issuer and a bank. That business model might seem riskier, since it's responsible for any delinquent accounts, but it also forces it to be more selective with its card approvals. That focus on quality over quantity exposes it to fewer at-risk clients and reinforces its reputation as a card for affluent customers.
NYSE: AXP
Key Data Points
It's also better insulated from interest swings than stand-alone payment processing companies or banks. When interest rates are higher, its banking business can generate higher net interest income to offset the impact of slower consumer spending on its payment processing business. When those rates decline, higher consumer spending can offset its lower interest income.
That's why American Express' earnings per share (EPS) grew at a steady compound annual growth rate (CAGR) of 10% from 2014 to 2024, even as the pandemic, geopolitical conflicts, inflation, soaring interest rates, and other macro headwinds rattled the global economy. So if you're looking for a reliable stock that can beat the market over the next few decades, American Express checks all the right boxes.
Alphabet
Alphabet, the parent company of Google, was also recently added to Berkshire's portfolio. Its core strengths are obvious: Google is the world's top search engine, Chrome is its most popular web browser, Android is its leading mobile OS, and YouTube is the biggest streaming video platform. Furthermore, Google Cloud is the world's third-largest cloud platform, Gemini is gaining ground against OpenAI's ChatGPT in the generative AI race, and it's invested in the nascent autonomous driving, quantum computing, and AI-powered healthcare markets.
NASDAQ: GOOGL
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Alphabet faced plenty of regulatory, competitive, and macro challenges over the past decade. But from 2014 to 2024, it still grew its EPS at a CAGR of 23% as it continued to expand its ecosystem, lock in more advertisers, and upgrade its cloud-based services. It also recently withstood demands from regulators to spin off Chrome and share its data with its industry peers.
Google still generates most of its revenue from ads, but its massive reach helps it hold a near-duopoly with Meta Platforms in the digital ad space across many markets. That higher-margin revenue subsidizes its lower-margin ecosystem-expanding projects.
Google still faces intense competition from OpenAI, which is challenging its core search engine with ChatGPT; ByteDance's TikTok, which is pulling younger viewers away from YouTube; as well as tech giants like Amazon and Microsoft in the cloud platform market. Yet betting against Alphabet has constantly been the wrong move over the past few years -- and the stock could still deliver even bigger market-beating gains over the next few decades.
