Personal finance

7 Stocks to Own for the Long Haul

Great stocks for buy-and-hold investors.

When the market gets unpredictable in the short term, smart investors look for stocks they can buy and hold for the long haul. Anything can happen in the volatile stock market in the short term, as investors in 2008 and 2009 learned the hard way. However, investors that bought high-quality stocks even at the 2007 peak have gotten rewarded handsomely in the 12 years that followed. The Morningstar analyst team recently looked at a combination of fundamental stock valuation, large economic moat and commitment to shareholders to determine which stocks investors should buy for the long haul.

Next:Berkshire Hathaway (ticker: BRK.A, BRK.B) Credit

(Jemal Countess/Getty Images for Time Inc.)

Berkshire Hathaway (ticker: BRK.A, BRK.B)

Morningstar analyst Greggory Warren says the first concern for Berkshire Hathaway, which is the fifth-largest company in the S&P 500 by market cap, is that the company will grow too large to outperform. The other concern is that Berkshire stock will get punished when 88-year-old Warren Buffett is no longer around. Warren says Berkshire is capable of growing book value per share in the double digits annually and maintaining its wide economic moat with or without Buffett. Morningstar has a “buy” rating and $360,000 fair value estimate for BRK.A stock.

Advertisement

Next:

Great stocks for buy-and-hold investors.

When the market gets unpredictable in the short term, smart investors look for stocks they can buy and hold for the long haul. Anything can happen in the volatile stock market in the short term, as investors in 2008 and 2009 learned the hard way. However, investors that bought high-quality stocks even at the 2007 peak have gotten rewarded handsomely in the 12 years that followed. The Morningstar analyst team recently looked at a combination of fundamental stock valuation, large economic moat and commitment to shareholders to determine which stocks investors should buy for the long haul.

Berkshire Hathaway (ticker: BRK.A, BRK.B)

Morningstar analyst Greggory Warren says the first concern for Berkshire Hathaway, which is the fifth-largest company in the S&P 500 by market cap, is that the company will grow too large to outperform. The other concern is that Berkshire stock will get punished when 88-year-old Warren Buffett is no longer around. Warren says Berkshire is capable of growing book value per share in the double digits annually and maintaining its wide economic moat with or without Buffett. Morningstar has a “buy” rating and $360,000 fair value estimate for BRK.A stock.

Anheuser-Busch Inbev (BUD)

Analyst Philip Gorham says Anheuser-Busch is one of the most efficient operators among consumer defensive stocks. The company has 18 different alcoholic beverage brands that generate $1 billion in annual revenue each. Anheuser-Busch dominates several Latin American and African markets, and Gorham says the strategy of making strategic acquisitions to boost growth, expanding the company’s distribution and aggressively cutting costs is a winner in the long term. In addition, Anheuser-Busch recently landed a cannabis beverage partnership with Canopy Growth Corp. (CGC). Morningstar has a “buy” rating and $118 fair value estimate for BUD stock.

Deere & Co. (DE)

The U.S. agriculture industry has been among the hardest hit by the trade war with China. Analyst Scott Pope says one of the biggest strengths for Deere is its 1,500 domestic U.S. dealers and 3,700 global dealers. These dealerships offer a one-stop shopping destination for farmers looking for parts, service, equipment and financing. Higher-margin precision agriculture sales has helped Deere offset trade war weakness in North America. Pope says the 2017 acquisition of Wirtgen also helped boost Deere’s global infrastructure business. Morningstar has “buy” rating and $159 fair value estimate for DE stock.

3M Co. (MMM)

3M is a global manufacturer that owns more than 500 U.S. patents and valuable brands such as Scotch, Post-It, and Thinsulate. As 3M’s primary international markets mature, analyst Joshua Aguilar says the company’s health care segment will take more of an important role in the overall business by adding meaningful revenue and operating income. 3M operating margins should also get a boost from the company’s 2019 restructuring plan, which involves cutting raw materials costs and reducing its global headcount by 2,000 employees. Morningstar has a “buy” rating and $187 fair value estimate for MMM stock.

Microsoft Corp. (MSFT)

Analyst Dan Romanoff says Azure and customer adoption of hybrid cloud environments are the core of the Microsoft bull thesis. Microsoft has a dominant share of on-premise architecture, allowing existing customers to transition to the cloud at their own pace. Cloud services adoption rate remains extremely high for Microsoft clients, and strong cloud revenue growth helps boost overall profit margins, while high switching costs discourage customer defections. Unfortunately, year-over-year comparisons for Microsoft’s intelligent cloud segment will be challenged given 10 consecutive quarters of acceleration. Morningstar has a “buy” rating and $143 fair value estimate for MSFT stock.

Philip Morris International (PM)

The tobacco industry is facing a potentially secular decline in sales volumes, but analyst Philip Gorham says Philip Morris is the top beneficiary from iQOS heated tobacco technology devices. Sales growth from iQOS helps offsets the sales weakness Philip Morris reported in the first quarter. Gorham says Philip Morris’ valuation premium is warranted given the company’s first-mover advantage in commercializing the iQOS system. However, he says Philip Morris will have to continue to innovate to offset the ongoing decline in combustible cigarette volumes. Morningstar has a “buy” rating and $102 fair value estimate for PM stock.

UnitedHealth Group (UNH)

Analyst Jake Strole says scale is the key to the UnitedHealth competitive advantage. UnitedHealth is the largest private health insurer, has a massive health analytics business and will soon be the second-largest pharmacy benefit manager in the U.S. This scale provides cost advantages for UnitedHealth that Strole says will allow the company to continue to underprice the competition as the health care market evolves. As a result, UnitedHealth should achieve superior growth and return on capital compared to other top health insurance companies. Morningstar has a “buy” rating and $300 price target for UNH stock.

Top stocks to own for the long term.

Berkshire Hathaway (BRK.A, BRK.B)Anheuser-Busch Inbev (BUD)Deere & Co. (DE)3M Co. (MMM)Microsoft Corp. (MSFT)Philip Morris International (PM)UnitedHealth Group (UNH)1 of 10

Wayne Duggan, Contributor

Wayne Duggan has been a U.S. News & World Report contributor since 2016. He is an expert at ...  Read more

The Most Important Ages for Retirement Planning

ad content by  FidelityInvesting for Retirement: How to Design A Plan that Anticipates the Unexpected

Retirement

The Most Important Ages for Retirement Planning: Age 50

Retirement

The Most Important Ages for Retirement Planning: Age 59 ½

Retirement

The Most Important Ages for Retirement Planning: Age 65

Retirement

The Most Important Ages for Retirement Planning: Age 66

Retirement

The Most Important Ages for Retirement Planning: Age 70 ½


Leave a Reply