Trading in and out of stocks, attempting to time entries and exits into new positions, and letting emotions take over your portfolio are really great ways to... sabotage your wealth-building efforts. "Simply" buying and holding stocks for the long haul allows you to take advantage of the awesome power of compound interest. It may be boring and seem to take forever -- Warren Buffett didn't become a billionaire until age 66 -- but it's the best way to consistently grow your nest egg.
The trick is finding great businesses operating in important industries, whether that's flashy consumer electronics or water heaters. Individual investors looking for stocks they can buy and hold forever might want to take a closer look at renewable-energy holding company Brookfield Renewable Partners (NYSE: BEP) and collaboration and productivity software provider Atlassian (NASDAQ: TEAM)
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Hydropower today, wind and solar (and batteries) tomorrow
At first glance, Brookfield Renewable Partners doesn't really stand out. Unitholders have endured rough patches in 2013, 2015, and most recently in 2018, when shares lost 26%. The stock has delivered a five-year return of just 9% -- only after a sharp recovery in the first four months of this year -- although that rises to a more respectable 47% when distributions are included. Then again, the S&P 500 has delivered a 75% gain in that span when dividends are included.
The recent lackluster performance has been driven by portfolio reshuffling and volatile output from hydropower assets, which have endured both historic rainfall and historic droughts in the last decade. But Brookfield Renewable Partners appears to have finally turned a corner in 2018 thanks to rapidly increasing contributions from modern renewables: wind and solar.
Consider that the company's hydropower assets saw funds from operations (FFO) drop by $15 million year over year in 2018 following record rainfall in 2017. But that was more than offset by a $55 million increase in FFO from wind assets, a $70 million increase from solar assets, and even a $12 million increase from energy storage and other assets in that span. The emergence of modern renewables has led to rapid diversification for the business, dropping hydropower's share of total FFO from 84.5% in 2017 to 71.8% last year.
In other words, Brookfield Renewable Partners is becoming much more resilient to unpredictable rainfall in North and South America. Importantly, it doesn't plan on wasting the momentum earned since releasing full-year 2018 operating results earlier this year.
The business plans to repurchase 5% of outstanding units in 2019, invest up to $700 million per year in growth initiatives (read: gobbling up more wind, solar, and energy storage), and grow its distribution 5% to 9% per year for the foreseeable future. Simply put, the business is just embarking on a long-term growth opportunity provided by modern renewables that promises to handsomely reward unitholders who have a buy-and-hold mindset.
Growing and growing and growing and...
Atlassian sports a market cap of $27 billion and has seen its shares rise 90% in the last year. It also has an enviable problem: It can't stop growing. The collaboration-and-productivity software provider has consistently grown year-over-year quarterly revenue 40% since making its market debut in 2015, thanks to a steady stream of new product launches and acquisitions.
The latest example: the $166 million acquisition of enterprise planning software-developer AgileCraft. The company is only generating about $4 million in revenue per year, but if history is any guide, it should flourish in Atlassian's development ecosystem.
Successfully integrating past acquisitions helped the business to surpass $1 billion in revenue in calendar 2018 -- the first time it's achieved that milestone -- after delivering 39% year-over-year revenue growth in fiscal Q2 2019 (the period ended Dec. 31, 2018). The company reported 138,000 total customers across its network, including 65,000 for its flagship product, Jira.
If that's not impressive enough, then consider that Atlassian is achieving its trailblazing growth while sticking close to breakeven operations. The business reported an operating loss of just $3.4 million in the first half of its fiscal 2019, which should be refreshing to individual investors who have chased high-growth, money-losing tech companies in the past.
It's also important to consider that, while tangible factors such as acquisitions have powered its incredible growth, the company has also been fueled by intangibles such as a budding community of developers -- a big reason acquisitions have worked out so well. It's something that can't be easily quantified by investors but can't be overlooked, either. Simply put, Atlassian is a great stock for any portfolio subscribing to the buy-and-hold philosophy.
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