Let's get this out of the way up front: Forever is a very long time. It seems almost flippant to use such a time frame when talking about the vagaries of the stock market. Truth be told, no one can truly tell how a company will be doing in one year's time, let alone five years, ten years, or forever. Not every stock pick will make it over the long term, but that isn't necessary for an investor to succeed.
With that said, there are several criteria that can be used to increase the likelihood of choosing a stock that will succeed for decades to come. Buying a company with many years of continued success, an industry leader with a groundbreaking product, or one with a vault full of intellectual property can all provide for a successful outlook. Read on to see why I think Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Apple (NASDAQ: AAPL), and The Walt Disney Company (NYSE: DIS) fit the bill.
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Decades of success
The biggest benefit to owning a company like Berkshire Hathaway is that you aren't getting just one company, but dozens. At last count, the conglomerate owned more than 60 subsidiary companies. In addition to those, Berkshire currently hold stocks in more the 40 publicly traded companies. The wide breadth of businesses provides an investor with instant diversification, reaching into every sector of the economy. The company has holdings that extend to transportation, manufacturing, technology, energy, banking, and consumer products.
That isn't the only reason to own stock in the company helmed by legendary investor Warren Buffet. Berkshire Hathaway's record of success is enviable. Between 1965 and 2016, the company achieved compound annual gains of 20.8%, more than doubling the results of the broader market. Its overall gain during that time was an astonishing 1,972,595%!
Some worry about what will happen when the Oracle of Omaha eventually relinquishes the mantle. At 87 years old, there are concerns about the future of the company he so successfully directed. Over the years, though, Buffett has hired like-minded managers and trained them in the "Buffet way." This should ensure that the company continues to produce market-beating results for many years.
The Apple of my eye
Apple is one of the very few technology companies owned by Berkshire, which is particularly curious since Buffett is well-known for being technology-averse. So, why has he strayed from his standard practice? It's important to note that one of his lieutenants, not Buffett himself, made the purchases, but Buffett said he approves of the holding:
While some may worry about the slowing growth of Apple's flagship iPhone, there are still plenty of reasons to like the company. Rumors of the iPhones death are greatly exaggerated, as evidenced by the demand for its latest model, the iPhone X. Some believe the device will even produce record-setting sales when Apple releases its financial results for the fiscal 2018 first quarter.
Analytics company IHS Markit predicts that adoption of the iPhone 8 and X models will lead to an all-time record of 89 million phones shipped during the quarter and posits that Apple will achieve year-over-year growth in each of the next four quarters. Consumers will continue to upgrade for the iPhone X's state-of-the-art artificial intelligence, facial recognition, and virtual reality features.
There are other reasons to like Apple. The company's ecosystem works seamlessly, with integrated devices that provide users with little reason to change. The company is also well on its way to achieving CEO Tim Cook's goal of doubling revenue from the services segment by 2020. In its post-holiday press release, Apple reported App store sales of more than $300 million on New Year's Day 2018, and over $890 million during the week that began Christmas Eve.
A hot product, a sticky ecosystem, and a rapidly growing services business all point to continued momentum now and for years to come.
The House of Mouse
Disney's stock has been range-bound over the last two years as the company struggles with cord-cutting that threatens its flagship ESPN sports network and its media networks which produce the lion's share of Disney's top and bottom lines. For fiscal 2017, the segment generated 42% of the company's revenue and 46% of its profits. The advent of streaming has eroded the company's dominant position as consumers increasingly adopt over-the-top choices as their primary source of entertainment.
Disney isn't resting on its laurels waiting on the continuing decline in viewers. The company plans to buy Twenty-First Century Fox (NASDAQ: FOX) (NASDAQ: FOXA) in a deal valued at $52.4 billion. The acquisition of Fox's film and television studios will increase Disney's treasure trove of intellectual property while giving it majority control of streaming service Hulu, boosting its ownership stake to 60%. Add this to Disney's 75% interest in streaming technology company BAMTech, and what emerges is a company in a position to challenge the streaming incumbents.
Disney has plans for two new streaming channels, one for family-friendly entertainment and one that caters to sports, as a companion to ESPN. Hulu represents the third member of the trifecta, which will be home to edgier, more adult-centric fare.
With decades of intellectual property, the addition of Fox's programming vault, and newer content being created every year, Disney will be in a unique position to compete in the changing paradigm of streaming television.
But really, forever?
It's important to note that even choosing solid businesses with great opportunities provides no guarantees that the companies will continue to be worthwhile investments. Buffet himself has said that his favorite holding period is forever, but even the storied investor occasionally sells positions in companies he owns.
It doesn't pay to bury your head in the sand, and even the best investor doesn't have a perfect record. That said, each of these companies has an ongoing trend or catalyst that should reward them for years to come -- and enrich investors along the way.
Find out why Berkshire Hathaway (B shares) is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. (In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the market!*)
Tom and David just revealed their ten top stock picks for investors to buy right now. Berkshire Hathaway (B shares) is on the list -- but there are nine others you may be overlooking.
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Danny Vena owns shares of Apple and Walt Disney and has the following options: long January 2018 $80 calls on Walt Disney. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Walt Disney. 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 has a disclosure policy.