2 Great Stocks You Can Buy and Hold Forever

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A stock to buy and hold forever should be financially sound today and have clear avenues of growth that will last long into the future. Two stocks that fit that profile to a "T" are Facebook (NASDAQ: FB) and Microsoft (NASDAQ: MSFT).

What makes Facebook so remarkable, and a great stock you can buy and hold forever, is that its outstanding growth each quarter has come without tapping into some of its most prized assets. In Microsoft's case, CEO Satya Nadella has executed a transition to burgeoning markets in nearly record time. Better still, Microsoft is just scratching the surface in multiple billion-dollar-plus market opportunities.

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You can't have too many friends

It's been nearly six years since CEO Mark Zuckerberg took Facebook public. Yet with each passing quarter, Facebook's financial results are akin to an upstart in hypergrowth mode. Last quarter's $10.14 billion in ad sales was a jaw-dropping 49% jump year over year. Operating income soared 64% to $5.12 billion, and operating margin rose six percentage points to 50%.

Despite a 34% increase in expenses, which was expected as Facebook ramps up its data analytics capabilities and enhances the user experience, earnings per share jumped 77% to $1.59, obliterating last year's "meager" $0.90 a share. So why were Facebook shares down in early Jan. 12 trading?

Zuckerberg's plans to improve the user experience by targeting more content from a user's friends and family and less business content has pundits scrambling. Thing is, underestimating Zuckerberg is nothing new. When Facebook plunked down $1 billion for that little photo-sharing site called Instagram nearly five years ago, the moans from the Street were audible.

At last count, Instagram boasts over 800 million monthly average users (MAUs) and will probably hit 1 billion before the year is out. Though Facebook doesn't disclose Instagram revenue, one estimate suggests it generated over $3.6 billion last year in mobile advertising alone. Acquiring WhatsApp was another "bad decision" Zuckerberg made, according to some. Now, with over 1 billion MAUs, WhatsApp represents yet another limitless revenue generating opportunity.

A few years ago, Facebook's poor mobile ad presence also took center stage, at least for bearish analysts. Last quarter, Facebook generated 88% of its ad revenue from is mobile-using 2.07 billion MAUs. Toss in the more than 1 billion Messenger MAUs who have yet to be monetized, and Facebook's multiple avenues of growth make it a great stock you can buy and hold forever.

How'd he do that?

Four years may sound like a long time, but successfully transforming a company the size of Microsoft in such a short period of time -- as Nadella has done -- is nothing short of impressive. It wasn't long ago that Microsoft was wading through the minefield that was former CEO Steve Ballmer's last hurrah: the $7.6 billion Nokia (NYSE: NOK) acquisition miscue.

Today, Microsoft is a global leader in the cloud -- more specifically, software-as-a-service (SaaS) and business-process-as-a-service (BPaaS) solutions. SaaS and BPaaS are particularly important, because by most estimates the two are expected to be the leading revenue generators in the years ahead. BPaaS and SaaS are expected to drive $45.8 billion and $58.6 billion in revenue this year, respectively.

Only cloud advertising, which Microsoft also has a hand in through its Bing search and LinkedIn assets, offers more upside than service-related cloud sales. And Microsoft is already delivering where it counts. Last quarter's $20.4 in trailing-12-month cloud annual recurring revenue (ARR) positions it as a global leader, and its Azure cloud platform revenue skyrocketed 90% year over year.

Commercial Office 365 sales, delivered via the cloud, rose 42% compared with a year ago and Microsoft's once struggling Dynamics CRM jumped 69%. Cloud server product revenue climbed 17% and even Microsoft's Xbox and Surface device manufacturing units grew 21% and 12%.

The end result of Microsoft's across-the-board improvements was a 12% increase in total revenue to $24.5 billion. With more than $20 billion in cloud ARR, Microsoft has built a foundation of stable revenue investors can rely on for years into the future. Thanks to relatively minor increases in spending, Microsoft's $0.84 EPS was a 17% improvement over a year ago. Toss in its 1.9% dividend yield along with forays into artificial intelligence, analytics, and augmented reality, and Microsoft is a stock to hold forever.

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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.