2 Stocks for the Next 50 Years
Feb 14th 2013 6:15PM
Updated Feb 14th 2013 7:00PM
Given today's fast-paced trading environment where the average holding period for any given stock is less than four months (by some reckonings), it might seem crazy to look for investments you could hold for decades. Still, many legendary investors have done exactly that, relying on the stocks of the world's greatest companies to build their incredible fortunes.
But seriously, let's talk about finding investments a high-schooler could buy and hold until they retire (no easy feat, I know). To do so, we'll need to look for stocks which have solid underlying businesses with serious competitive moats. In addition, these companies need to have forward-looking management that consistently makes great decisions with a long-term focus in mind.
With that, here are two such stocks I'm convinced any long-term investor would be content to own for the next fifty years.
A world of glass
First up, consider well-known glass maker Corning . Founded in 1851, it's a safe bet few companies know more about what it takes to last a lifetime.
Corning takes pride in its ability to innovate through continued research and development and survive no matter what technological revolutions come its way. Sure enough, Corning CEO Wendell Weeks is often maligned by Wall Street for his stubborn refusal to manage the company around quarterly results.
Nowadays, Corning is about much more than conventional glassware and boasts an array of products from providing glass substrates for LCD displays to optic cables for telecommunications. However, as prices and demand for LCD panes have fallen, Corning currently finds itself trading down almost 50% over the past five years, even after reporting record sales of $2.15 billion for the fourth quarter of 2012. Its fourth-quarter earnings per share of $0.34 (excluding special items) represented the company's first year-over-year quarterly improvement since 2010, signaling a potential turning point to reverse the lasting downward trend of its shares.¬†¬†
As it stands, with shares of Corning currently trading at just over 11 times trailing earnings, it's difficult to claim the stock is overvalued. What's more, the company ended 2012 with $6.1 billion in cash and equivalents on its balance sheet, or nearly one-third of its entire market capitalization.
Finally, Corning also recently completed a $1.5 billion share buyback and boosted its quarterly dividend by 20% to $0.09 per share, so investors can be paid for their patience while they wait for the stock to rebound.
E-commerce and cloud computing
If Corning's too old and cheap for you, perhaps you might consider retail's perennially overpriced digital behemoth, Amazon.com , whose shares hit an all-time high recently after the company missed estimates for both revenue and earnings per share and lowered guidance during its most recent quarterly report.¬†
Wait, what? Why would any stock rise after a report like that?
As fellow Fool contributor Tim Brugger pointed out, a closer inspection of Amazon's results revealed all is well with the retailer. In fact, year-over-year revenue rose 22% during the crucial holiday season, easily outpacing the wider retail industry's expected 14% growth. In addition, thanks largely to Amazon's fanatical efforts to streamline operations through building new distribution centers, gross margin in North America expanded to 5% from 2.9% from the year-ago period -- its highest level for the holiday quarter since 2001.¬†Furthermore, as Amazon continues to implement its warehouse-optimizing Kiva robots while building more strategically placed distribution locations, margins should continue marching upward going forward.
So why else should you feel comfortable holding Amazon for the long haul? In short, this web giant is about much more than just retail. With its Kindle segment, for instance, by selling the physical devices at near-cost, Amazon is intelligently¬†building a pipeline of high-margin electronic goods which should pay massive dividends down the road. ¬†
In addition, Amazon boasts an industry-leading cloud computing solution its Web Services business, which currently handles web traffic for hundreds of companies and organizations around the world including NASA,¬†Netflix, Lionsgate, Yelp, and Pinterest.
While the $1.5 billion in revenue from Amazon Web Services represented a relatively small chunk of the company's overall revenue in 2012, IT research firm Gartner recently estimated cloud computing should nearly double to represent a $206 billion industry by 2016.¬†Meanwhile, despite stiff competition from the likes of fellow cloud computing titans IBM¬†and Rackspace, Amazon should continue to benefit from the overall trend as the wider market grows.
Equally as important, Amazon CEO Jeff Bezos is a master of eloquently crafting investor expectations and, like Weeks, consistently refuses to manage his company around Wall Street's fickle quarterly demands. To be sure, in his¬†letter to shareholders when Amazon went public in 1997, Bezos wrote, "We believe that a fundamental measure of our success will be the shareholder value we create over the long term." Later, he expressed hope investors could share his vision and elaborated to say "We are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about."
To the patient investors go the spoils
I don't know about you, but I'd love to tell my grandchildren about fortunes made buying shares of Corning and Amazon.com in early 2013.
While their valuations remain worlds apart, both companies possess enormous competitive moats and rightly focus on creating long-term value for shareholders. All things considered, there's no reason they can't both survive and thrive for at least the next fifty years.
More expert advice from The Motley Fool
With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand-new premium research report on Corning, our analyst walks through the business, as well as the key opportunities and risks facing it today. Click here to claim your copy, and receive a full year of updates as key events unfold.
The article 2 Stocks for the Next 50 Years originally appeared on Fool.com.Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Corning, Netflix, and Rackspace Hosting. The Motley Fool owns shares of Amazon.com, Corning, International Business Machines, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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