The ability to identify great companies that can withstand and thrive for generations is critical to achieving long-haul investment success; just ask Warren Buffett. After all, his investment in Coca-Cola (KO 1.01%) is the gold standard for that type of long-term thinking. So we asked three of our top analysts to tell us what they think may be the best buy-and-forget companies to invest in for the next century. Read on to learn which three companies they picked.
Patrick Morris: There are a number of stocks I'd own for the next 100 years -- Coca-Cola is definitely on that list -- and another one worth mentioning is American Express (AXP 1.01%).
American Express falls into this category because of its incredibly successful closed-loop business model.
American Express makes money in two principal ways. Like Visa and MasterCard, merchants pay it a small fee when customers use their cards to pay, known as discount revenue.
But unlike Visa and MasterCard, American Express also makes money from issuing its credit cards to customers, Similar to the credit card businesses of banks like Capital One and Bank of America, American Express collects interest on loans as well as fees from customers who use its cards.
Warren Buffett once said, "A truly great business must have an enduring 'moat' that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business 'castle' that is earning high returns."
With its integrated global payments platform and closed-loop network, American Express has created a "moat" that will protect it no matter how the payment landscape evolves. And this should propel it to success in years, decades, and yes, even centuries to come.
And with that in mind, it should come as no surprise that Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) owns more than 14% of AmEx in a position worth nearly $14.5 billion.
While consumers may not be using physical credit cards 100 years from now, there's a good chance that they'll still be using American Express in one way or another.
Jordan Wathen: There are few financial companies -- and even fewer lenders -- safe enough to blindly hold for 100 years, but M&T Bank (MTB 2.02%) is one that makes the cut. It's been profitable in every quarter since the late 1970s, in a testament to its operating model.
What makes M&T Bank stand out is the combination of underwriting quality and efficiency. The bank historically spends just over $0.50 of revenue on expenses. And it's no slouch in the underwriting department, either. Net charge-offs just barely tipped over 1% at their peak in 2009, and the company has been adequately reserving for losses for much longer than that.
What makes it a good investment for the long run, though, is its size. M&T Bank has assets just over $91 billion, making it just a fraction of the size of the big four banks. It still has room to grow. And although regulatory issues have flared up as part of a recent acquisition, many attribute it to the CEO's outspoken style. He's been critical of regulators who have been just as tough, if not tougher, on quality banks than the failed institutions we lost in the downturn. That tends to attract a little extra attention.
As a simple deposit-gatherer and lender, M&T isn't as complicated as larger Wall Street banks. And its underwriting record suggests M&T can earn much better returns over many cycles than its larger rivals. That's why I think it's the perfect stock to buy and hold for a long time to come.
Todd Campbell: I agree with Patrick and Jordan that financials can prove to be a savvy bet for the long haul, but I'd also love to stash away shares in Johnson & Johnson (JNJ 0.98%) for my grandchildren's grandchildren. That's because few drugmakers have as good a track record for adapting to changing healthcare demands than J&J.
Make no mistake -- healthcare is going to change significantly in the next 100 years. Spending on healthcare is going to enjoy sizable global tailwinds as heavily populated emerging markets become developed nations and people across the globe live longer. That means that there will be billions of more people to treat and billions of dollars more of revenue opportunity for J&J.
Unquestionably, huge advances are likely to be made in the treatment of diseases that affect millions of people every year, such as cancer and diabetes -- and J&J is likely to be at the forefront of that innovation. The company is already a market leader in immunology, cancer, and neuroscience (all of which are big markets likely to get much bigger) and given its past R&D success, it stands to reason that J&J won't be left behind in these important markets. Of course, it also doesn't dent my enthusiasm that J&J has an enviable track record of returning money to investors in the form of dividends. Thanks to stock appreciation tied to earnings growth and dividend payments, investors who put $1,000 in J&J 25 years ago would have $27,000 today. That's a pretty remarkable return that suggests it may not be wise to bet against J&J over the next century.
