In this article, we will discuss the 12 best forever stocks to buy now.
The S&P 500, NASDAQ, and Dow indices have experienced a significant dip since the start of 2022, providing attractive investment opportunities to long-term investors. Jeremy Siegel, a renowned finance professor at Wharton Business School, believes that some of the best long-term stocks are trading at very cheap valuations in the market currently. He believes that the raging inflation, hovering around a four-decade high, can be expected to come under control as the housing market is cooling down. Since the start of the COVID-19 pandemic, the US government has increased the money supply by 40%, and historically, earnings have increased with an expansion in the money supply. Mr. Siegel observed that, at one point, numerous established stocks saw a surge of 50% to 55% compared to their levels before the pandemic. However, the recent weakness in the stock market has pulled back these gains to around 20% only, bringing down the valuation of companies.
It is widely believed that the majority of the wealth created in the stock market is due to the success of the best long-term stocks, such as Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOGL). A study conducted at the business school of Arizona State University concluded that over 55% of the stocks listed in the US and 57% of the stocks listed in other leading stock markets globally underperformed in comparison to the relative performance of risk-free US Treasury bonds during the three-decade period between 1990 and 2020. Meanwhile, over $75 trillion of the global wealth created in the stock markets was due to the strong performance of only 2.4% of the stocks listed on these exchanges. This makes it necessary to undertake careful research to identify the best long-term stocks and avoid underperforming stocks that are in the majority.
Photo by Marga Santoso on Unsplash
Our Methodology
We have shortlisted the best long-term stocks after looking into the past performance of these companies and the future prospects being offered. While these stocks might not have experienced the highest stock price appreciation in the recent past, they have been able to generate significant shareholder wealth by offering healthy dividends and share buyback programs. The analyst ratings and hedge fund sentiment as of Q2 2022 have also been discussed.
12 Best Forever Stocks to Buy Now
12. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 67
Walmart Inc. (NYSE:WMT) is a Bentonville, Arkansas-based retailer that has the distinction of being the biggest retailer in the world. The company has over 10,500 retail locations and a headcount of over 2.2 million employees as of 2022.
In a research note issued on October 5, Hans Engel at Erste Group upgraded Walmart Inc. (NYSE:WMT) stock from a Hold to a Buy rating. The analyst believes that Walmart Inc. (NYSE:WMT) offers low but stable growth in sales and is one of the best long-term stocks in the consumer sector. Furthermore, Engel anticipates expansion in Walmart Inc.’s (NYSE:WMT) operating margin next year, along with a moderate growth trend in the coming years. Walmart Inc.’s (NYSE:WMT) top line is expected to surpass $600 billion by 2025 as the company is investing heavily to combat the rise of Amazon.
On October 6, Walmart Inc. (NYSE:WMT) revealed that it had finalized a deal to buy Alert Innovation, a provider of automated e-grocery fulfillment software. The acquisition is expected to increase the long-term operational efficiency of Walmart Inc. (NYSE:WMT). Walmart Inc.’s (NYSE:WMT) annual forward dividend yield stands at 1.74% as of October 10.
At the end of Q2 2022, Walmart Inc. (NYSE:WMT) was held by 67 hedge funds.
11. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
The Procter & Gamble Company (NYSE:PG) is a Cincinnati, Ohio-based consumer goods company.
Analysts think The Procter & Gamble Company (NYSE:PG) is one of the best long-term stocks to invest in as it is a defensive company that is expected to hold ground during uncertain macroeconomic times. The stock has a beta of only 0.39, implying low volatility in performance. In a research note issued to investors on August 2, Lauren Lieberman at Barclays increased the price target on The Procter & Gamble Company (NYSE:PG) from $154 to $157 and reiterated an Overweight rating on the stock. The analyst anticipates The Procter & Gamble Company (NYSE:PG) stock to outperform the broader market if the company markets its defensive nature efficiently.
The Procter & Gamble Company (NYSE:PG) offers an annual forward dividend yield of 2.94% as of October 10, translating into an annual payout of $3.65. The company generated solid shareholder returns in 2022 with share buyback programs of $10 billion and total dividends higher than $9 billion. Analysts think The Procter & Gamble Company (NYSE:PG) is currently trading at a discount of nearly 42% to its fair value.
10. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA) is one of the most prominent names in the electric vehicle (EV) segment as a vertically integrated EV corporation under the leadership of Elon Musk.
On October 6, Vijay Rakesh at Mizuho gave positive comments on Tesla, Inc. (NASDAQ:TSLA) stock. The analyst believes that the company’s Q3 2022 results were in line with expectations. Although the EV industry is continuing to face challenges related to supply chain and logistics, the demand side is showing very few signs of weakness as a shift towards electrification is under process in China and other leading countries of the world. The analyst gave Tesla, Inc. (NASDAQ:TSLA) stock a Buy rating with a target price of $370.
On October 9, The China Passenger Car Association (CPCA) revealed that Tesla, Inc. (NASDAQ:TSLA) sold a record 83,135 EVs in China in September. This reflected an increase of 8% from the sales made in August. Analysts think that Tesla, Inc. (NASDAQ:TSLA) offers an optimistic growth story and is likely to observe an increase in per-unit margins due to its advanced manufacturing abilities. The company’s solid operations merit its inclusion among the best long-term stocks to buy.
Fiduciary Management shared its outlook on Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter. Here’s what the firm said:
“Remarkably, the Nasdaq-100 and Russell 2000 indices are up 6.25% and 3.90% through 3/31/22, respectively, since the war started. Tesla, Inc. (NASDAQ:TSLA) went up 57% from its low on February 24 ($700) to the close on March 29th ($1099), which equates to an advance of $413 billion. To put that in perspective, the 24-trading day gain in Tesla was greater than the entire market value of Walmart, Inc.! Tesla trades for 120 times estimated 2022 GAAP2 earnings, compared to Walmart’s (NYSE:WMT) 21.8 multiple (1/2023 fiscal year).”
9. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 72
Exxon Mobil Corporation (NYSE:XOM) is a Texas-based diversified energy giant that is considered by analysts as one of the best long-term stocks to hold.
In a research note issued on September 22, Neil Mehta at Goldman Sachs reiterated a Buy rating on Exxon Mobil Corporation (NYSE:XOM) stock with a target price of $112 following a meeting with CEO Darren Woods and other members of the senior management. The analyst believes that Exxon Mobil Corporation (NYSE:XOM) has an important role to play in the transition towards renewable energy as the company is focusing on projects that are related to biofuels, hydrogen, and carbon capture and storage (CCS). Mehta also added that Exxon Mobil Corporation (NYSE:XOM) could repurpose its crude oil refining facilities into biofuel, chemical, lubricant, and plastic recycling facilities.
Exxon Mobil Corporation (NYSE:XOM) has generated returns of over 60% in the last year. The company is undertaking initiatives to optimize its costs and is expected to surpass the profit margin expectations for this year. Exxon Mobil Corporation (NYSE:XOM) has a forward dividend yield of 3.48% as of October 10.
Here’s what First Eagle Investments said about Exxon Mobil Corporation (NYSE:XOM) in its Q2 2022 investor letter:
“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
As of Q2 2022, Exxon Mobil Corporation (NYSE:XOM) was held by 72 hedge funds.
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 72
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Hsinchu, Taiwan-based leading semiconductor manufacturing company that has a wide range of applications in the electronics industry.
Rick Hsu at Daiwa upgraded Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) from a Buy to an Outperform rating on September 14. Despite an expectation of an industry-wide correction, the analyst believes that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) will experience top-line growth as it continues to gain market share and more pricing power.
Experts see the revenue of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to be counter-cyclical due to the company’s advanced technical capabilities leading to its dominance. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is also in discussion with Apple regarding the production of 2 nm chips, as the maker of the iPhone is interested in integrating the smaller chips into its products in the future. Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) bright growth prospects make it one of the best long-term stocks to invest in.
RiverPark Funds discussed its stance on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2022 investor letter. Here’s what the firm said:
“Taiwan Semiconductor detracted from performance despite a business performance that saw revenue accelerate to over +30% growth. The Company is one of the few fabs in the world that is capable of manufacturing leading-edge integrated circuits (IC). The Company’s leading-edge capacity is being absorbed by high-performance computing applications, particularly by Apple, which has become an integrated circuit powerhouse over the past decade.
The Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries should continue to foster a superior competitive position and attractive long-term growth.”
7. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is a New Jersey-based healthcare company with a rich history of over 135 years. The company has a headcount of over 140,000 employees.
Joanne Wuensch at Citi gave Johnson & Johnson (NYSE:JNJ) stock a target price of $198 and maintained a Buy rating in a research note issued on October 5. Ahead of Johnson & Johnson’s (NYSE:JNJ) Q3 results, the analyst shared a bullish take on the company’s device utilization levels, along with improved pricing for the medical supplies and technology segment. Wuensch thinks that the best outcome for Johnson & Johnson (NYSE:JNJ) would be to post inline delivery numbers and reiterate its 2022 forecasts. Johnson & Johnson (NYSE:JNJ) is spinning off its consumer healthcare segment to focus more on the pharmaceutical and medical technology business.
Johnson & Johnson (NYSE:JNJ) is on the Dividend Kings list, implying that the company has raised its dividends for the last 50+ consecutive years. The company marked its 60th consecutive year of dividend growth in April this year, with a 6.6% increase in the quarterly dividend. Furthermore, Johnson & Johnson (NYSE:JNJ) has seen its free cash flow grow steadily to almost $20 billion over the last ten years. These fundamentals reflect the company’s consistent growth, making it one of the best long-term stocks to buy now.
Distillate Capital Partners LLC shared its stance on Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter. Here’s what the firm said:
“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”
Fisher Asset Management raised its stake in Johnson & Johnson (NYSE:JNJ) by 798% during Q2 2022.
6. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 104
JPMorgan Chase & Co. (NYSE:JPM) is one of the most prominent firms in the global financial services industry. The biggest bank in the US in terms of assets has incorporated 1,200 financial institutions in its portfolio.
Keith Horowitz at Citi added JPMorgan Chase & Co. (NYSE:JPM) stock to a “positive stock watch” list on October 4, prior to the company’s Q3 2022 results. The analyst has assigned JPMorgan Chase & Co. (NYSE:JPM) stock a target price of $135 and a Buy rating. Horowitz is forecasting that JPMorgan Chase & Co. (NYSE:JPM) will surpass the consensus revenue estimates for the period, revise its 2022 guidance and assume an improved run rate next year.
Analysts think the current economic situation provides an opportunity for investors to look for solid ‘contrarian investments.’ JPMorgan Chase & Co. (NYSE:JPM) fits this criterion as it is amongst some of the leading banks with high dividend yields trading at very low valuations. JPMorgan Chase & Co. (NYSE:JPM) has generated strong returns on equity (ROE) consistently and is well-positioned to continue this trend.
Ariel Investments shared its stance on JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2021 investor letter. Here’s what the firm said:
“In our view, inflation will not just be a 2021 phenomenon. Inflationary expectations are only now working themselves into the labor market with historically low unemployment, resurgent labor unions, and higher wages. These labor cost pressures are only starting to show up in the Consumer Price Index. The most recent Producer Price Index showed a +9% year over year increase, the highest since it was created in 2010. Higher input prices generally lead to rising consumer prices.
“In our view, inflation will not just be a 2021 phenomenon.”
Consumer balance sheets are in excellent shape with lower unemployment and banked stimulus checks. A recent analysis from JP Morgan Chase (JPM) showed average checking accounts have 50% higher balances than pre-Covid. The U.S. money supply as measured by M2 (a calculation that includes cash, checking accounts, and “near cash” such as money market securities) is up +38% versus year-end 2019. Higher consumer cash holdings and higher money supply mean more spending and demand for goods. Some emphasize supply issues to explain current inflation. Going forward, we see very strong demand as well, too much money chasing too few goods.”
In addition to JPMorgan Chase & Co. (NYSE:JPM), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOGL) are also some of the best long-term stocks trading at attractive valuations currently.
5. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 109
Berkshire Hathaway Inc. (NYSE:BRK-B) is an Omaha, Nebraska-based conglomerate with a diversified range of businesses ranging from insurance, banking, and railroad services. Furthermore, the company has taken a significant stake in the leading corporations of the world through its investment arm.
The company is led by Warren Buffett, who is considered a wizard in finding the best long-term stocks by employing the philosophy of value investing. On September 21, James Shanahan at Edward Jones upgraded Berkshire Hathaway Inc. (NYSE:BRK-B) stock from a Hold to a Buy rating.
Between 2016-2021, Berkshire Hathaway Inc. (NYSE:BRK-B) has observed its operating cash flow rise at a compound annual growth rate (CAGR) of 3.8% from $32.64 billion to $39.41 billion. The stock currently trades at 1.5x book value and 2.6x sales. Keeping these factors in consideration, analysts think Berkshire Hathaway Inc. (NYSE:BRK-B) should be trading at more than double its current share price. Over the next five years, Berkshire is expected to expand its annual revenues by 10% each year due to growth in its energy and manufacturing businesses.
Here’s what Berkshire Hathaway said about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q4 2021 investor letter:
“BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Charlie Munger, my long-time partner, and I have the job of managing a portion of your savings. We are honored by your trust.
Our position carries with it the responsibility to report to you what we would like to know if we were the absentee owner and you were the manager. We enjoy communicating directly with you through this annual letter, and through the annual meeting as well.
Our policy is to treat all shareholders equally. Therefore, we do not hold discussions with analysts nor large institutions. Whenever possible, also, we release important communications on Saturday mornings in order to maximize the time for shareholders and the media to absorb the news before markets open on Monday.
A wealth of Berkshire facts and figures are set forth in the annual 10-K that the company regularly files with the S.E.C. and that we reproduce on pages K-1 – K-119. Some shareholders will find this detail engrossing; others will simply prefer to learn what Charlie and I believe is new or interesting at Berkshire.
Alas, there was little action of that sort in 2021. We did, though, make reasonable progress in increasing the intrinsic value of your shares. That task has been my primary duty for 57 years. And it will continue to be.
What You Own
Berkshire owns a wide variety of businesses, some in their entirety, some only in part. The second group largely consists of marketable common stocks of major American companies. Additionally, we own a few non-U.S. equities and participate in several joint ventures or other collaborative activities.
Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers…” (Click here to see the full text)
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) is a California-based tech giant that has emerged as the biggest publicly listed company in the US.
Apple Inc.’s (NASDAQ:AAPL) current stock price of $140 represents that the stock is trading close to 20x its forward PE ratio. Given the company has a 100% return on capital employed (ROCE), this is an attractive valuation. The company is also transitioning from being a provider of hardware to a provider of subscription services through its various platforms. Since the start of this year, Apple Inc. (NASDAQ:AAPL) has added over 30 million paid subscribers to its various platforms. The revenue growth of the subscription business is faster than the overall revenue growth of Apple Inc. (NASDAQ:AAPL). Analysts term Apple Inc. (NASDAQ:AAPL) as one of the best long-term stocks due to the company’s proven record of consistent growth and strong operations.
Apple Inc. (NASDAQ:AAPL) was discussed in the Q2 2022 investor letter of Wedgewood Partners. Here’s what the investment management firm said:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 191
Alphabet Inc. (NASDAQ:GOOGL) is a Mountain View, California-based holding company that owns Google, YouTube, and several other subsidiaries.
In a research note issued on October 4, Justin Post at Bank of America gave Alphabet Inc. (NASDAQ:GOOGL) a target price of $114 and reiterated a Buy rating. In the current uncertain macroeconomic environment, the analyst anticipates the company’s EPS to remain resilient as Alphabet Inc. (NASDAQ:GOOGL) is working on controlling its costs. This is similar to what the company did in 2009 following the financial crisis of 2008. Mr. Post highlighted Alphabet Inc. (NASDAQ:GOOGL) stock as a top-value stock in the tech sector.
Around 90% of Alphabet Inc.’s (NASDAQ:GOOGL) revenue is generated from Google, which has a market share of 84% in the online search segment. Google is likely to sustain its leadership position in the industry in the long run. Alphabet Inc. (NASDAQ:GOOGL) is currently trading at its 10-year low P/E, allowing investors an attractive opportunity to invest in one of the best long-term stocks in the market.
Polen Capital shared its outlook on Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2022 investor letter. Here’s what the firm said:
“Alphabet, a large weighting in the Portfolio, was the top detractor during the period, as e-commerce growth slowed during the quarter on tough comps from the prior year. That said, Alphabet continues to deliver robust revenue and profit growth. Google Cloud Platform (GCP) continues to grow at a healthy pace, and we do not believe the share price decline was a reflection of weak business performance.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Amazon.com, Inc. (NASDAQ:AMZN) is a Seattle, Washington-based e-commerce giant that has ventured into cloud services, digital streaming, consumer electronics, and various other segments. The company has become a mainstay in the lives of the US consumer.
Amazon.com, Inc. (NASDAQ:AMZN) is gearing up for the holiday season as it intends to hire 150,000 employees across the US. Despite concerns related to retail spending and the growth of cloud services, JPMorgan highlighted Amazon.com, Inc. (NASDAQ:AMZN) as its top pick by a wide margin. The financial services firm thinks that Amazon.com, Inc. (NASDAQ:AMZN) will continue to experience YoY revenue growth, margin expansion, and moderation in capital expenditure in the coming years. These factors will provide a tailwind to the bottom line of the company. JPMorgan also anticipates Amazon Prime services to perform well in the upcoming quarters due to faster delivery times and better stocking levels.
Diamond Hill Capital Management also presented a long-term bullish outlook on Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN)’s shares underperformed as valuations of fast-growing companies continued to compress in Q2. Amazon’s growth investments over the past two years have pressured earnings as consumer demand has been weaker than anticipated. However, we believe the company will be able to grow into its infrastructure investments over time. These investments have obscured the magnitude of sustainable free cash flow as well as the attractive valuation of the business relative to peers.”
Hedge funds also consider Amazon.com, Inc. (NASDAQ:AMZN) as one of the best long-term stocks, as it is the second most popular company in Insider Monkey’s database of 895 elite funds as of Q2 2022.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based tech giant that was co-founded by Bill Gates. The company has dominated the hardware and software segment through its various offerings.
Microsoft Corporation (NASDAQ:MSFT) has continuously reinvented itself throughout the decades, and it seems that the company intends to leverage enterprise customers by offering cloud-based offerings like Azure and Office 365 to gain an advantage in this decade. Microsoft Corporation (NASDAQ:MSFT) has tried to gain leadership in the gaming industry by acquiring Activision Blizzard for a sum of $68.7 billion. The company is already home to Xbox 360, which is one of the leading gaming consoles in the world.
In a note issued on September 22, analysts at Morgan Stanley shared that Microsoft Corporation (NASDAQ:MSFT) stock offers an attractive risk and reward profile. On October 8, Microsoft Corporation (NASDAQ:MSFT) also announced a 10% increase in the quarterly dividend to $0.68 per share. The company’s dividend increase, coupled with the EPS growth in the high-teens highlight’s Microsoft Corporation (NASDAQ:MSFT) solid return profile. These factors have led us to term Microsoft Corporation (NASDAQ:MSFT) as one of the best long-term stocks in the market.
Here’s what Baron Funds said about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:
“Shares of mega-cap software company Microsoft Corporation (NASDAQ:MSFT) pulled back with the broader software sector. The company posted another solid quarter, highlighted by total revenues increasing 20% and Microsoft Cloud revenues, now 45% of total revenues, growing 32%. These results were driven, in large part, by strong demand for large Azure contracts. We believe Microsoft can compound revenue in the low double digits for the next three years, underpinned by its expansion in its total addressable market and market share gains.”
You can also take a peek at the 6 Best Geothermal Stocks To Buy and 12 Best Fintech Stocks To Buy.
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Disclose. None. 12 Best Forever Stocks to Buy Now is originally published on Insider Monkey.
