Many investors fall into the trap of having short-term thinking, jumping in and out of overhyped stocks at the worst possible times. The most successful investors, however, think in terms of years rather than days, and they focus on the companies that have the potential to produce fundamental growth in their sales and earnings for a decade or longer. Companies like Nike (NYSE: NKE), Philip Morris International (NYSE: PM), and Visa (NYSE: V) have already demonstrated their ability to produce strong returns even in challenging times, and below, we'll look more closely at them to see why they might be great picks to own for the next 10 years.
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Nike keeps running ahead
Nike has been a pioneer in the athletic footwear and apparel business, and it has produced strong growth over the course of its long history. Long-term investors in Nike have enjoyed average annual returns of 18% over the past 35 years, and throughout that time frame, Nike's business model has continued to develop and strengthen. By using the power of endorsements from top-performing athletes like Michael Jordan, Nike has built a world-renowned brand identity that keeps customers paying substantial premiums for footwear and apparel compared to many of its competitors.
Recently, Nike's stock has suffered a hiccup, losing ground over the past year as investors fear that the recent push toward healthier lifestyles will prove to be a short-term fad. However, demographic factors still favor Nike and the athletic apparel industry, and the fact that the company has managed to grow so strongly even during a period of foreign currency-related headwinds speaks well to its ability to keep boosting sales once macroeconomic conditions normalize worldwide. For investors who like bargains, Nike looks like a good prospect for a comeback over the next decade.
Philip Morris looks to innovation
Many investors see Philip Morris International as a mature player in a declining industry. It's true that cigarette smoking has become less popular over time, and even though that trend is more evident in the U.S. than in certain other countries, Philip Morris has seen those trends internationally in the downward trajectory of its shipment volume numbers. Yet investors have still enjoyed great success, with average annual returns of 16% over the past eight years.
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Philip Morris has two things going for it to foster future growth. First, it has the power of the Marlboro brand and the pricing power that the brand's popularity provides, and Philip Morris has been able to implement strong pricing measures to offset the downward impact of falling demand and keep its sales and earnings rising in local-currency terms. As the rise in the U.S. dollar has slowed, Philip Morris sees earnings growth returning to more normal levels in the future.
More importantly, Philip Morris has embraced the need for innovation in looking toward reduced-risk products that could eventually replace traditional cigarettes. Its iQOS system incorporates proprietary heat-not-burn technology to offer a similar experience to regular cigarette smoking while offering reduced exposure to toxicants that could be harmful to health. Even after just a couple of years, consumers are embracing iQOS, with the product showing impressive market share gains in the early test market of Japan. As reduced-risk products gain in acceptance, Philip Morris is positioning itself as a first mover in a way that could reenergize the tobacco giant going forward.
Visa wants to be everywhere
The electronic payments business has been a major growth driver recently, as more people across the globe turn away from cash-based transactions. Visa has been a pioneer in the credit and debit card business, and it has built up a payment processing network globally that stands to capture a huge chunk of the expansion in the industry worldwide. The company hasn't been public very long, but Visa has produced average annual returns of 30% over the past five years.
Looking ahead, Visa has two main catalysts for growth. First, Visa has maintained more of a focus on its domestic business within the U.S. than some of its primary rivals, and that could give Visa a competitive advantage if the U.S. economy continues to outperform nations around the world. Yet at the same time, Visa certainly isn't giving up on the international markets. In particular, its recent purchase of the Visa Europe unit reunites major pieces of the global puzzle and promises to bring greater efficiency and scale to the overall business.
Short-term trading appeals to the get-rich-quick mentality that many people have, but long-term investing is the better path to success. Look more closely at Visa, Philip Morris International, and Nike, and see whether you agree that they have strong prospects in the decade to come.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nike and Visa. 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.