If the investment timeline is greater than 10 years, the best stock to buy and hold for a lifetime is arguably the SPDR S&P 500 ETF Trust (NYSE:SPY) as it is a low cost and popular way for investors to own the S&P 500.
By owning the SPDR S&P 500 ETF Trust for a decade or more, investors can benefit from secular trends such as population growth, productivity growth, and more.
If AI achieves its potential, overall productivity could increase substantially and considerably more goods and services could be produced. If considerably more goods and services are produced, GDP could increase meaningfully and the SPDR S&P 500 ETF Trust could benefit.
Having a long term investing timeline is an advantage as in the near term it is arguably harder for investors to benefit from secular trends.
In the near term, markets can also fluctuate substantially as valuations can change based on a variety of economic, industry, and corporate developments, all of which can be unpredictable.
Individual Stocks
In terms of buying individual stocks rather than the SPDR S&P 500 ETF Trust, the best stocks to buy and hold for a lifetime are arguably blue chips with substantial competitive advantages with growth potential in the future.
Some leading blue chips in technology, also known as big tech, can do well in terms of artificial intelligence if they continue to innovate and gain meaningful market share in the big markets in the future. Companies like Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) can benefit from the rise of AI from more demand for cloud processing, for instance.
One example of big tech benefiting is OpenAI’s ChatGPT. Although it still makes plenty of mistakes, the growth in the AI application ChatGPT has been unparalleled as ChatGPT has surpassed 100 million users in two months since its launch. Given ChatGPT uses Microsoft Corporation’s cloud for processing, Microsoft Corporation has benefited from the rise in popularity of the app both as an investor in OpenAI and as a provider of cloud processing for OpenAI’s ChatGPT.
For those of you interested, check out 10 High Growth AI Stocks to Buy.
Some leading blue chips in finance can do well if the overall economy does well. If AI increases productivity, the overall economy could grow. If the overall economy grows, some of the leading finance blue chips such as leading big four American banks could do well from more potential loans and more potential deposits. With more business, they could potentially have more earnings poewr.
In the near term, the market is uncertain. On one hand, the unemployment rate in the U.S. economy is low and U.S. GDP is expanding. On the other hand, the Federal Reserve is expected to raise interest rates further. If the U.S. central bank raises interest rates too much, the economy could slowdown substantially or enter into a recession.
Given the market is always uncertain, it could be a good idea for long term investors to own a well versified portfolio of leading stocks across many different sectors.
Pixabay/Public Domain
Methodology
For our list of 10 Best Stocks to Buy and Hold for a Lifetime, we selected 10 blue chips with competitive advantages and long term growth potential. We ranked them based on the number of hedge funds in our database of 943 funds that owned shares of the same stock at the end of Q4.
10 Best Stocks to Buy and Hold for a Lifetime
10. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 49
BlackRock, Inc. (NYSE:BLK) is the world’s largest asset manager with AUM of $8.594 trillion at the end of 2022. If the overall market grows in the long term, BlackRock, Inc.’s AUM could also grow in the long term assuming the company maintains its market share. If that happens, the company’s profits could increase further in the next 10 years. In Q4, BlackRock, Inc. reported adjusted EPS of $8.93 on sales of $4.34 billion versus the consensus of $8.09 on revenue of $4.25 billion.
As it stands, the stock trades for a fair valuation with a forward P/E ratio of 17.44. BlackRock, Inc. also has a dividend yield of 2.87% as of 2/22. In addition to paying a dividend, the company also bought back worth of $1.9 billion of shares in 2022.
Alongside Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc., and Microsoft Corporation, BlackRock, Inc. is a company with competitive advantages that’s worth potentially buying and holding for a lifetime.
9. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 74
Goldman Sachs Group, Inc. (NYSE:GS) is a leading investment bank that recently dropped plans for a Goldman-branded credit card for retail customers given a shift in strategy. For Q4, the company also reported EPS of $3.32 on sales of $10.59 billion versus the consensus of $5.48 on revenue of $10.83 billion given near term headwinds. Although the near term is uncertain, Goldman Sachs Group, Inc. has substantial long term earnings potential given its quality business and its position as the top Wall Street bank. Of the 943 hedge funds in our database, 74 owned shares of Goldman Sachs Group, Inc. at the end of Q4, ranking #9 on our list of 10 Best Stocks to Buy and Hold for a Lifetime.
8. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 84
Johnson & Johnson is a leading healthcare conglomerate that has raised its annual dividend for 61 consecutive years. Although shares are down 10.77% year to date given various headwinds, analysts see Johnson & Johnson’s EPS continuing to increase in the future. In terms of current estimates which can change from time to time, they have $10.51 per share for FY2023, $10.89 per share for FY2024, and $11.28 per share for FY2025. They also had $10.05 for FY2022 as a basis of comparison as that fiscal year is already complete. In terms of guidance, Johnson & Johnson guided for FY23 adjusted operation EPS of $10.50 in 1/24.
7. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 100
JPMorgan Chase & Co. is one of the largest banks in the United States with substantial earnings power. In Q4, the company reported EPS of $3.57 on revenue of $34.5 billion versus the consensus of $3.07 on sales of $34.34 billion. Combined credit and debt spend increased 9% year over year and the company expects to resume share repurchases this year. 100 hedge funds in our database owned shares of JPMorgan Chase & Co. at the end of Q4, ranking #7 on our list of 10 Best Stocks to Buy and Hold for a Lifetime.
6. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 100
Bank of America Corporation (NYSE:BAC) is another big four American bank with considerable scale. Although the bank could face downside if the economy weakens or the U.S. enters into a recession, Bank of America Corporation has long term growth potential if the U.S. economy expands over the next 10 years. As of 2/22, shares trade for a forward P/E ratio of 9.37 and have a dividend yield of 2.55%. 100 hedge funds in our database owned shares of Bank of America Corporation at the end of Q4.
Like Bank of America Corporation, Meta Platforms, Inc., Amazon.com, Inc., and Microsoft Corporation are companies with competitive advantages that are worth potentially holding for a lifetime.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) ranks #5 on our list of 10 Best Stocks to Buy and Hold for a Lifetime given 135 hedge funds in our database owned shares at the end of Q4. Given its huge scale, Apple Inc. has substantial competitive advantages given its strong brand and immense financial resources. Apple Inc. is also working on future products such as autonomous vehicles and mixed reality that could help it eventually diversify from the iPhone if they are successful.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Before ChatGPT launched, Alphabet Inc. (NASDAQ:GOOG) has widely been regarded as one of the AI leaders. With ChatGPT’s substantial growth, however, and the app’s integration into Bing, Alphabet Inc. now faces a challenge in its core search business. Nevertheless, ChatGPT makes mistakes and Alphabet Inc. has its own version of ChatGPT that the company will need to figure out how to monetize successfully. If Alphabet Inc. can maintain its search profitability and launch new AI products, the stock has upside given its forward P/E ratio of 15.07 as of 2/22. If Alphabet Inc. fails to maintain its existing profitability in search, the stock might be the riskiest on our list even if it is a blue chip.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Meta Platforms, Inc. is a social media giant that’s in the news given a Washington Post article on Wednesday saying it is planning more job cuts. In November, the company laid off 13% of its workforce as Meta Platforms, Inc.’s profitability has decreased from 2021 given its substantial investments in the metaverse. Although its profitability in 2022 is lower than what it was in 2021, Meta Platforms, Inc. has long term potential given its billions of users and its AI potential in the future.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. is an e-commerce and cloud leader that could benefit from AI by the technology potentially making the company’s operations more efficient and by increasing demand for cloud processing. According to the Financial Times, Amazon.com, Inc. is also planning to expand its physical stores in the future that could help it sell more groceries. Amazon.com, Inc. has more growth potential in the future if it maintains its market share in e-commerce and the cloud.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation ranks #1 on our list of 10 Best Stocks to Buy and Hold for a Lifetime given 259 hedge funds in our database owned shares at the end of Q4. Microsoft Corporation has potential in the long term given it could benefit from AI’s growth with more cloud processing demand. Microsoft Corporation also could potentially gain market share with Bing even if AI still is inaccurate in many instances.
Polen Global Growth Strategy commented on Microsoft Corporation in a Q4 2022 investor letter,
In the case of Microsoft Corporation, the company is performing very well. Azure now represents nearly 25% of the total business and continues to compound at a higher rate. Although growth is moderating a bit recently (as it is for AWS and Google Cloud Platform as well), these three platforms collectively generated more than $140 billion in revenue during the last 12 months and are still growing at a healthy rate. Further, Microsoft Cloud, or commercial cloud (which includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other cloud properties) continues to grow roughly 30% and is now about half the business. Mathematically, commercial cloud could decelerate to 20% growth with all other segments decelerating to zero growth and total company revenue growth would still be at least double digits. We believe Microsoft is positioned to compound underlying earnings per share at a midteens rate over the next five years. At 22x earnings, we felt the valuation was attractive and that it should be a large position.
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originally published on Insider Monkey.
