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Not everyone has the desire to follow the ups and downs of the stock market. Thankfully, there are a handful of companies out there that investors can safely take a hands-off approach to owning. Want proof? Here are two stocks that I think are great buy-and-hold candidates for shareholders who don't want to constantly watch the markets.
Riding the demographics trend
Every day roughly 10,000 baby boomers turn 65, which is a trend that is expected to persist for the next 13 years. Numbers like that should keep the demand for prescription drugs rising for decades to come, which is a great reason to buy shares of CVS Health (NYSE: CVS).
Most investors are aware that CVS Health operates one of the largest chains of retail pharmacy stores, but the lion's share of the company's revenue actually comes from its pharmacy benefits management(PBM) division. This business acts as a middleman between organizations that provide healthcare coverage -- think unions, employers, governments -- and drug companies. In exchange for a small fee, CVS uses its immense bargaining power to negotiate deep discounts from drug makers, and then passes the savings along to its customers.
This business is booming for CVS, with sales growing by double digits. What's more, the company sports a customer retention rate of 97.5%, which speaks volumes about how valued its services are. In today's environment of ever-rising drug costs, demand for the PBM business is likely to remain strong for years to come.
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Image source: CVS Health.
Beyond the PBM business, CVS Health also has a number of initiatives in place to continue to make its retail stores even more profitable. A good example of this is its nationwide rollout of "MinuteClinics," which are in-store clinics that provide basic healthcare services for a fee that is usually much lower than a trip to the emergency room or doctor's office. These clinics are a big hit with customers and are driving incremental visits to the stores, which is helping to drive same-store sales ever higher.
Add it all up and CVS has multiple growth drivers in place that should keep profits growing for years on end. That makes this stock an ideal choice for shareholders who don't want to have to follow the company's every move.
The house that Buffett built
Perhaps the ultimate example of a stock that you can take a hands-off approach to owning is Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B). This company is so big and so well diversified that buying shares can be likened to owning a diversified mutual fund with a terrific manager at the helm.
The long-term thesis for owning Berkshire is simple enough to understand -- over time, the company's various businesses will churn out copious amounts of cash flow that management will then use to buy even more businesses. This simple playbook has helped grow Berkshire's book value substantially over the last few decades.
While growth by acquisition can be a risky strategy, Berkshire has a strong history of bringing new businesses into the fold without missing a beat. How? The secret is that Buffett lets the acquired companies continue to function as independent entities. His philosophy is to simply buy great businesses that are led by great managers and then stay out of their way. That's how Berkshire is able to own dozens of businesses that collectively employ more than 360,000 people while only maintaining a staff of 25 people at its headquarters.
Shareholders who take the long view should be able to count on Buffett and company continuing to add more and more businesses to the empire. In turn, the company's book value should march steadily higher for decades to come.
The Foolish bottom line
These two stocks are great examples of businesses that can be safely owned with minimal amounts of homework. My suggestion would be to buy each, and then briefly read through their quarterly reports to make sure the long-term thesis for each is still on track. That's about as hands-off as it gets.
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Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.
The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends CVS Health. 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.