10 Stocks I Will "Never" Sell

Author: Chuck Saletta | August 10, 2020

Warren Buffett smiling

Source: The Motley Fool

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Advice from the Oracle

Warren Buffett has famously said that his favorite holding period for a stock is forever. This is because Buffett understands that a stock is nothing more than an ownership stake in a business. Companies that look capable of generating the most cash from here on out are simply worth more than those that don't have quite as bright a future or whose best days are behind them.

Of course nothing lasts forever and even once-great companies can stumble. Still, in the absence of an unexpected meltdown in a company or massive unforeseen degradation in your own finances, you could do far worse than following Buffett's guidelines on this one. In that vein, I'm a proud partial owner of several companies that I hope to never sell, and the following 10 stocks are on that list.

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Rows of pipelines with setting sun in the background.

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No. 1: North America's largest energy infrastructure company

Enbridge (NYSE: ENB) is in the business of moving oil and natural gas from where it's produced to where it's needed for consumption. Even amid the COVID-19 pandemic, its services remain in demand, driven by the essential businesses that are still operating and people that still need energy to run their homes and get to where they need to be.

On top of its essential operations, the company is very friendly to its shareholders, seeking to distribute somewhere in the neighborhood of 65% of its cash flows to its owners in the form of dividends. When combined with shares that have fallen along with the overall energy sector on fears of a slowing global economy, that translates to recent yield of around 7.5%.

Still, at some point either an effective treatment or sufficient herd immunity will emerge to reduce the threat that COVID-19 presents. With its large existing infrastructure and still-solid cash flows, Enbridge looks capable of surviving the near-term threat and being well positioned to prosper once it passes. That's a great set of features to have in a company you're considering holding forever.

ALSO READ: Where Will Enbridge Be in 5 Years?

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Rock of Gibraltar.

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No. 2: A rock-solid insurer

Prudential Financial (NYSE: PRU) cares so much about its financial strength that it uses an actual rock -- the Rock of Gibraltar -- as its corporate logo. Insurance is the business of pricing risk, and a smart insurer keeps a solid balance sheet as its own insurance against things going worse than it initially expected.

On that front, Prudential does a pretty good job of living up to its logo. The company entered the COVID-19 pandemic with around $61 billion in net equity on its balance sheet. That means that the company can see a lot of losses above and beyond what it's already planning on and still wind up okay. In uncertain times with an unknown future, that balance sheet stands up as a great reason to believe why Prudential should have staying power.

Prudential also offers its owners a decent dividend, recently sitting at around a 6.9% yield. That yield is well covered by its expected earnings for 2020 -- even amid the COVID crisis -- and Prudential had been on a decent streak of increasing its dividend before the pandemic hit.

Overall, Prudential has great hallmarks of a company with staying power that rewards its shareholders for the risks they take by investing. That's not a bad combination to look for in a business you'd like to hold onto for the long haul.

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Computer networking equipment and cables.

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No. 3: A technology infrastructure titan

As rough as the economic slowdown from the measures put in place to combat COVID has been, a great number of people are able to keep working and be productive from their homes. Imagine how much tougher it would have been if these restrictions had been mandated 30 years ago before the internet was widespread and integrated in our daily lives and work.

Cisco Systems (NASDAQ: CSCO) has been an instrumental part of driving the networks that connect the computers that make all that possible. Not only is it ubiquitous in networking on the planet, it has even taken part in tests to provide network capabilities in outer space. That broad base of business in such an essential industry positions Cisco to do fairly well throughout the pandemic -- and gives it plenty of opportunity to continue to do well long beyond its end.

In addition to being a core part of our everyday lives and work these days, Cisco also sports a very solid balance sheet. It has more cash and short-term investments on hand than it has total debt, which positions it very well to manage through an economic and financial crisis. On top of its long-term potential growth, Cisco offers its shareholders a yield of around 3%, which is better than long-term Treasuries these days.

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Garbage truck unloading trash at a dump.

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No. 4: Where things go when their time has come

Ultimately, all good things must come to an end. When that time comes for most objects, chances are that Waste Management (NYSE: WM) or another waste processing company will play a part in either disposing or recycling them. As the largest waste handler in the United States and one of the largest in the world, Waste Management is well positioned to handle whatever the future may bring.

Waste is a business where scale matters. After all, people don't like having garbage dumps near their homes, which makes it hard for new entrants in the market to compete with established players. In addition, as regulations increase as people better understand the long-term consequences of landfills, larger players are better able to handle the increased costs of operating that often implies.

Even as recycling increases, Waste Management is positioned to do well. It claims to be the largest collector of recycling materials in the United States and Canada. The reality is that as long as there's collection and transportation involved in recycling, the same scale that helps Waste Management in trash should help it in recycling as well. That bodes well for the company's longer-term prospects.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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A large oil refinery.

Source: Getty Images

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No. 5: The world's largest independent refiner

When it comes right down to it, raw crude oil is not all that useful until it gets refined. It's that act of refining it that creates all the useful forms of energy and other products that we know and use in our everyday lives. It's in that space of refining oil into useful products that Valero Energy (NYSE:VLO) shines. As the world's largest independent refiner, it excels in converting oil into its more useful forms.

It's that fact that oil isn't worth much until it's refined that Valero leverages in its operations. It makes its money off something known as the crack spread -- the difference between what oil costs and what the products made from oil are worth. That gives it an opportunity to generate cash whether oil prices are low or whether they're high. As long as there's demand for refined products, there's a good chance that the crack spread will be positive.

Of course, since oil prices can be volatile, Valero can still get affected by them. For instance, if it pays a lot of money for oil just before oil prices drop substantially, it's possible that by the time it refines that material, it will have invested more than it can get out of it. That's where the $2.3 billion in cash on its balance sheet can come in handy, as it gives it the flexibility to work through those market dislocations.

Although the near term may be rough as demand remains soft in the wake of the COVID shutdowns, the structural benefits from focusing on refining provide a great reason to consider holding for the long haul.

ALSO READ: Why I'm Betting on Valero's Management

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Two slices of bread with peanut butter spread on one and grape jelly on the other.

Source: Getty Images

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No. 6: A company that fuels you -- and your pets

When you think of comfort foods, you probably think of things like peanut butter, jelly, and coffee. If you own a pet, whatever type of food you feed them may be high on your list, too. While it's not exactly the most exciting set of business lines in the world, JM Smucker (NYSE: SJM) operates in all those spaces. Brands like Jif, Smucker's, Folgers, and Meow Mix appear in its roster, making it a leading company in that critical industry.

In ordinary times, that may seem boring, but in a world where people are spending more time at home and adopting more pets due to social distancing, that type of company can start to look attractive. For a business you're potentially considering as a "forever" investment, knowing it has a market even during a pandemic that locks down much of the economy certainly acts as a point in its favor.

As befitting a company in an ordinarily-boring industry, JM Smucker has a solid balance sheet without too much debt on it. The company's debt-to-equity ratio around 0.7 and current ratio above 1.2 speak to its ability to keep on keeping on, even during a temporary downturn. Still, there's nothing boring about cold, hard cash -- which JM Smucker both generates through its operations and shares with its owners through a dividend yield that recently sat near 3.2%.

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Pipelines with oil rig off in the distance.

Source: Getty Images

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No. 7: A pipeline giant that learned from its mistakes

Energy pipeline giant Kinder Morgan (NYSE: KMI) got itself in some hot water with bond ratings agencies back in 2015. The company over-extended its balance sheet to take on a larger stake in the struggling Natural Gas Pipeline Company of America. That action caused Kinder Morgan's debt to be reviewed for a possible downgrade into junk bond status, which would have made its financing more expensive and difficult to manage.

While that may not sound like a solid foundation for a company to consider holding forever, what Kinder Morgan did when faced with that risk did give reason to believe it could be worth holding onto. The company slashed its dividend, sold off under-performing assets, and used the improved cash flow to clean up its balance sheet. That set of actions showcased to investors -- both stock and bond investors -- that it was serious about sticking around for the long haul.

Once its balance sheet got stabilized, the company began restoring its dividend. Although its current quarterly dividend of $0.2625 is below the $0.51 it paid in late 2015, it has more than doubled when compared to the $0.125 it paid immediately after it slashed its payment. Perhaps best of all, thanks to its improved balance sheet, its dividend is much better supported now than it was back then.

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Basketball players on the court during a game.

Source: Getty Images

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No. 8: The house of the mouse and so much more

The Walt Disney Company (NYSE: DIS) may have started out in the animation business, but the entertainment juggernaut has expanded to become so much more than just cartoons. These days, it's even the primary reason the NBA is even having a season, thanks to its ESPN Wide World of Sports facility.

Certainly, the temporary shutdown of its theme parks, of movie-making studios, and of sports in general has had a terrible near-term impact on its business. Still, the company is big enough and strong enough that it could survive a major, multi-month shutdown in many of its businesses and emerge as a clear driver of getting us closer to some sense of normal. That's a sign of a business that looks built to last and that may well be worth consideration for a very long-term holding.

Supporting its ability to survive the current mess is its balance sheet with a debt-to-equity ratio around 0.7 and a current ratio above 1.3. That combination means the business has the flexibility to handle a decline in its operations and near-term challenges in the financing markets, which adds to its staying power.

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Blue train on bridge.

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No. 9: More than 150 years of transportation infrastructure strength

Union Pacific (NYSE: UNP) can trace its roots back to 1862 and President Lincoln's signing of the Pacific Railway act. For the company to have survived more than a century and a half, it must be doing something right. Indeed, a big part of Union Pacific's success has been the strength that comes from owning its own infrastructure -- over 32,000 miles of track and around 7,700 locomotives.

With routes that stretch from the U.S.-Canada border to the U.S.-Mexico one and from the Pacific Ocean to the Gulf of Mexico, it hauls a large chunk of the freight that travels the western half of the country. Although the economic slowdown from the efforts to fight COVID-19 has negatively affected its business, it still is operating profitably.

That's a testament to the fact that railroads tend to be a less expensive way to move freight around than trucks. In tough times when every penny counts, the trains will likely still get some business as a result, helping keep revenue flowing across their tracks.

ALSO READ: The 10 Biggest Railroad Stocks

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Gas being pumped into a vehicle.

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No. 10: A company that supplies many of the other companies on this list

You may not know Dover (NYSE: DOV) by name, but if you've shopped in a grocery store, filled your gas tank, or had your garbage picked up, chances are that you've used one or more of its products. Dover makes refrigerated cases for grocery stores, pumps and fueling systems for gas stations, and even garbage trucks, along with many other products..

If those other businesses are essential enough to continue to operate even as much of the world shuts down for a pandemic, a key supplier is likely a critical part of keeping them operational. Indeed, even though revenue and profits were down in the June quarter of 2020 vs. the same quarter in 2019, Dover was still profitable amidst the pandemic.

Indeed, Dover actually recently increased its dividend in August of 2020. Granted, it was by $0.005 per share per quarter, but the company has a 65-year history of increasing those shareholder payments. That its operations remain strong enough even now to provide any increase to its dividend is a testament to the fact that its business is critical to so many other businesses. And that makes it a candidate worth consideration for a long-term holding.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Previous

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Concrete and steel unfinished construction.

Source: Getty Images

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Companies built to last

Although most of these companies generally operate across different business lines, the common thread that ties them together is that they are built to last. In some cases, it's because they operate critical areas of infrastructure. In others, it's because they provide basic goods and services that people and companies need no matter what. And in still others, it's because of very strong financial footing and/or a varied enough business line that it can adapt to handle the unexpected.

It's hard to truly say you'll hold on to a company's stock forever. Still, if any business is a candidate, it's one that is built to last and shows its staying power even as the world appears to be falling apart around it. These 10 are worthy of consideration and just might prove themselves to be worth holding onto for a very long time.

Chuck Saletta owns shares of Cisco Systems, Dover, Enbridge, J.M. Smucker, Kinder Morgan, Prudential Financial, Union Pacific, Valero Energy, Walt Disney, and Waste Management and has the following options: short January 2021 $18 puts on Kinder Morgan, short January 2022 $20 puts on Kinder Morgan, long January 2022 $20 calls on Kinder Morgan, long September 2020 $24 calls on Kinder Morgan, short September 2020 $80 puts on Prudential Financial, short September 2020 $110 calls on Prudential Financial, short January 2022 $100 puts on Prudential Financial, long January 2022 $100 calls on Prudential Financial, long January 2021 $110 calls on J.M. Smucker, short January 2021 $110 puts on J.M. Smucker, and short October 2020 $125 calls on J.M. Smucker. The Motley Fool owns shares of and recommends Enbridge, Kinder Morgan, and Walt Disney. The Motley Fool recommends Union Pacific and Waste Management and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

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