I own about 30 stocks in my personal portfolio (you can see the entire list on my author profile page), but not all of them are "forever stocks." For example, I own a few stocks for their growth potential over the next several years or even over the next decade. On the other hand, some of these stocks work well in any economy and for investors of any age, and I could see myself holding on to them forever.
With that in mind, here are the three stocks in my portfolio that I'm most confident will still be in my portfolio for decades into the future.
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If I could only own one stock...
I've written before that if I could only own a single stock in my portfolio, it would be Berkshire Hathaway, the conglomerate run by Warren Buffett. Simply put, Berkshire is like a diverse portfolio of high-quality investments all in one stock.
Here's a quick rundown of Berkshire's business. At its core, it's an insurance company, with subsidiaries such as Geico and General Re. However, over the years it has grown into so much more. Berkshire's collection of about 60 subsidiaries includes such household names as Duracell, Dairy Queen, and Pampered Chef, and massive businesses such as Precision Castparts, BNSF Railroad, and Clayton Homes.
In addition, Berkshire Hathaway has a closely followed stock portfolio worth more than $200 billion, featuring massive stakes in Apple, American Express, Kraft Heinz, Coca-Cola, Bank of America, and Wells Fargo, as well as dozens of smaller stock positions.
Finally, Berkshire has more than $111 billion in cash on its balance sheet, which should help it continue to expand its operations as opportunities arise. Plus, I can't think of people I trust more making investment decisions than Warren Buffett and his team.
A unique, long-tailed real estate opportunity
Howard Hughes Corporation is the least recognizable company on this list, but I find its business model to be extremely attractive, especially from a long-term perspective.
Spun off from General Growth Properties (NYSE: GGP) in the wake of the financial crisis, Howard Hughes is a real estate company (but not a REIT) that specializes in master planned communities, or MPCs. An MPC is a large residential development full of amenities and could often be accurately described as a city within a city. The Summerlin community in Las Vegas is an example of one of Howard Hughes' MPCs.
In a nutshell, here's how Howard Hughes' MPCs work and why they're such a great long-tailed investment opportunity. The company obtains a massive plot of land -- say a few hundred thousand acres. Then it sells a small amount of this land to homebuilders, who create residential neighborhoods. These residential neighborhoods then create demand for commercial properties, which Howard Hughes builds and leases to tenants to generate income. The presence of these commercial assets makes the surrounding land more valuable to homebuilders, and the process repeats.
The process of building out an MPC can take decades, and Howard Hughes can effectively control the supply and demand dynamics of its land. Over time, this results in more and more income from land sales, and a growing stream of income from commercial assets. And I plan on holding on to the stock as this development plays out.
In addition to its MPCs, Howard Hughes has a growing portfolio of other valuable real estate assets, such as the recently revitalized Seaport District in New York City and a Class-A office building in Chicago that's under construction.
A well-run bank with a bright future
When I first purchased shares of Bank of America a few years after the financial crisis, I didn't intend for it to be a forever stock. Shares were simply trading at a substantial discount to their book value, and I thought they were a good value at the time.
In the years that followed, something happened that made me change my investing thesis. Bank of America transformed itself from a bank that struggled through the financial crisis into a rock-solid financial institution that now ranks among the highest-quality U.S. banks.
It's difficult to overstate how impressive Bank of America's transformation has been. Profitability has steadily risen and is now in excess of the industry benchmarks for return on assets and equity. Thanks to smart investment in technology and an emphasis on cost controls, Bank of America's efficiency has steadily improved and is now among the best of the brick-and-mortar big banks. And asset quality has improved tremendously, thanks to management's responsible growth strategies.
In a nutshell, Bank of America is now in the upper echelon of U.S. banks, and to borrow a phrase Warren Buffett has used in the past when discussing Berkshire Hathaway's Bank of America investment, it is an investment that I value highly.
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Matthew Frankel owns shares of American Express, Apple, Bank of America, Berkshire Hathaway (B shares), and The Howard Hughes. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.