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2 Stocks You Can Buy and Hold Forever

By Matthew Frankel, CFP® – Feb 1, 2016 at 7:08AM

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Want stocks that you'll never have to sell? You can start with these two.

Stocks like these can help you plant the seeds for a multi-decade investment strategy. Photo: www.401kcalculator.org.

Warren Buffett has said "our favorite holding period is forever," and there is a valuable lesson to be learned in that statement. While it's impossible to know with certainty what it going to happen with a company in the future, it is a good practice to go into every investment you make with the intention of keeping it forever. With that in mind, here are two stocks trading at attractive prices right now that could stay in your portfolio for decades to come.

The best big bank in the U.S.
At first glance, US Bancorp (USB -1.01%) may appear to be expensive. After all, it trades at a significantly higher price-to-book valuation than the other big U.S. banks.

Bank

Price-to-Book Value

US Bancorp

1.70

Wells Fargo

1.45

JPMorgan Chase

0.95

Bank of America

0.59

Citigroup

0.59

However, you get what you pay for. US Bancorp is consistently more profitable and efficient than the others and has historically maintained a superior asset quality. US Bancorp produced the highest return on equity and return on assets of these five banks in its most recent quarterly report, and this is nothing new. In fact, as the following chart shows, US Bancorp (the blue lines) has consistently been the profitability leader.

USB Return on Assets (TTM) Chart

Not only does US Bancorp maintain a high-quality loan portfolio, but it has done a good job with growth as well. In 2015, the bank grew its loan portfolio by 4.2% year over year, including 9% growth in commercial loans and an impressive 13% jump in auto lending. Further, credit and debit card revenue increased by more than 8%, and with a new exclusive co-branding agreement with Fidelity, I believe the growth is just getting started.

I mentioned that US Bancorp may look expensive when compared with other (lesser-quality) banks, but when you look its own valuation history, shares look pretty cheap. The bank is trading at a valuation that hasn't been seen since 2011, when the stench of the financial crisis was still fresh in investors' minds.

USB Price to Book Value Chart

In other words, you now have an opportunity to buy one of the best-run banks in the world at a major discount.

Invest with the best
Since I quoted Buffett already in this article, it should come as no surprise that one of my favorite "forever stocks" is Berkshire Hathaway (BRK.A -0.06%) (BRK.B -0.95%). I really can't envision any scenario in which I would ever want to unload my Berkshire shares, and here's why.

When you buy shares of Berkshire Hathaway, you're not just buying one stock. You're buying a diverse assortment of subsidiary companies ranging from insurance to private jets. Just to name a few of the more recognizable Berkshire companies:

  • GEICO
  • BNSF Railroad
  • Clayton Homes
  • Helzberg Diamonds
  • Lubrizol
  • Fruit of the Loom
  • NetJets
  • Oriental Trading Company
  • Pampered Chef
  • Shaw Industries

In addition, you also get a piece of Berkshire's stock portfolio, which reads like a who's who of rock-solid U.S. corporations. As of this writing, Berkshire owns 45 different stocks, and major holdings include Wells Fargo, Coca-Cola, IBM, American Express, Wal-Mart, and the aforementioned US Bancorp.

So Berkshire Hathaway is like a pre-packaged diversified investment portfolio all in one stock. Plus, Berkshire's valuation is near its two-year low. Buffett has said that he would consider the stock to be seriously undervalued at 1.2 times book and would aggressively begin buying back shares at that point. That level is rapidly approaching:

BRK.B Price to Book Value Chart

How to find other "forever" stocks
These are just two examples of stocks that you can go into with a "forever" mentality, and there are many others to be found. Look for some of the characteristics mentioned here -- efficient operations and a strong history of growth and profitability, for example. And with the recent stock market correction, you should be able to get into some forever stocks at pretty attractive prices.

Matthew Frankel owns shares of American Express, Bank of America, and Berkshire Hathaway. The Motley Fool owns shares of and recommends Berkshire Hathaway. It also owns shares of and recommends Wells Fargo and has the following options on it: short March 2016 $52 puts. The Motley Fool recommends American Express, Bank of America, and Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$406,470.00 (-0.06%) $-230.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$267.02 (-0.95%) $-2.56
U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$40.32 (-1.01%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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