5 stocks to own for decades
In 2008, two investment managers crunched more than 20 years of market data and produced findings that can only be called shocking.
Eric Crittenden and Cole Wilcox found that most stocks did significantly worse than the overall market averages over time, and an unexpectedly large number fell dramatically. These losses were offset by a few stocks that rose spectacularly.
Examining returns from 1983 to 2006, the two money managers found that 64% of stocks had a lower return than the Russell 3000 index (a measure approximating the entire U.S. market) over the full period. Some 18.5% of all stocks lost 75% of their value or more. On the other hand, 6% of stocks beat the Russell 3000 by 500% or more, and 25% of stocks accounted for all of the market’s gains.
On the theory that what goes up continues to go up, the two authors are believers in “trend following” — investing in assets with values that have been hitting new records. Wilcox wrote 10 years ago that if your portfolio were an NBA team, such a strategy would lead you to “own the LeBron Jameses, Kobe Bryants and Dwight Howards of the world. There are many able players in the NBA, but only a handful of difference makers.”
My view is that investors should search for the Golden 6% among companies that have the chance to achieve spectacular business success. Your targets are innovators with big ideas, adaptability and mammoth potential markets. I want to see concrete signs of success before buying potential outsize performers, and I want to
hold their shares for decades. Here are five candidates:
Tesla: The electric vehicle company has built the strongest EV brand in the world and is led by a dynamic CEO. The company sold 936,000 autos in 2021, a year when 66 million new cars of all kinds were bought worldwide. By the end of the decade, EVs should account for half of all car sales.
Uber Technologies: After hitting new highs in the first few months of 2021, the stock slid by more than 40% from its peak. Trend followers will be deterred, but I’m still convinced that ride-sharing is the future, and that smaller, ancillary businesses including food and freight delivery could grow into huge money-makers.
Nextdoor Holdings: With reader-generated content, Nextdoor seems to have figured out how to engage audiences where they live. The company went public through a special purpose acquisition company (SPAC) in November. Shortly
before that, Nextdoor reported that it had 33 million active users in the third quarter, with revenues of $52.7 million, up 66% compared with the same quarter last year.
LVMH Moet Hennessy Louis Vuitton: No other company comes close to matching the portfolio that CEO Bernard Arnaud has put together. Besides the eponymous leather goods and champagne firms, LVMH owns 75 prestigious global brands with 5,000 retail outlets, including Christian Dior, Givenchy, Tiffany and Dom Perignon. If you believe the world will keep getting wealthier, this is the stock to own.
Walt Disney: The stock had a rotten 2021, but with new leadership, a world learning to live with COVID-19, a dozen theme parks and brands that include Pixar, ESPN, Star Wars, the Muppets, ABC and Disney+, Disney is ready to accelerate.