I own roughly 30 stocks in my personal portfolio, but there are some I bought because I think they're currently undervalued -- not necessarily because I think I'll hold them forever.
On the other hand, there are a few stocks in my portfolio that I could see myself holding throughout the rest of my career, throughout my retirement, and eventually passing on to my children. I'm not even 40 yet, so that's quite a long time horizon. And while I'm not necessarily committing to holding these stocks forever, here's why Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Public Storage (NYSE: PSA), and AT&T (NYSE: T) could be core components of my portfolio for decades to come.
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I'm happy to let the greatest investor of all time take the reins with my money
Berkshire Hathaway was one of the first stocks I ever bought in my retirement account and it remains a staple of my portfolio today. The Warren Buffett-led conglomerate owns a collection of more than 60 subsidiary businesses and also has a huge stock portfolio with major investments in companies like Apple, Bank of America, Coca-Cola, and more. In fact, because of the diverse nature of Berkshire's business, I've said that if I could only own one stock, that would be it.
To be clear, Warren Buffett has cautioned investors that Berkshire's returns going forward won't be nearly as strong as the approximately 21% annualized return it's produced since Buffett took the reins in 1964. The company just has become too large to sustain returns like that. Having said that, Berkshire's business model is still a value-creating machine, and I believe the stock will generate market-beating returns in my portfolio over the next 50 years.
A dominant leader in a "forever" industry
One of the first things you should look for in stocks you could hold forever is a business that will be around forever. No matter how much technology evolves, people will always need secure places to store their possessions. That's why leading self-storage real estate investment trust Public Storage is one of my largest stock holdings, and one I plan to keep for the long haul.
To be fair, self-storage is more of a cyclical business than most other types of commercial real estate. Tenants generally lease space on a month-to-month basis, which makes it easier to leave if times get tough and they need to cut back. It also makes it easier to switch to lower-cost competitors as opposed to, say, a retailer renting space in a mall on a 10-year lease.
While there certainly may be ups and downs along the way, Public Storage should be a long-term winner. It has a dominant market share, larger than the next three largest publicly traded self-storage companies combined. The company has a fantastic track record of value creation through acquisitions and is just starting to ramp up its efforts to develop value-adding properties from the ground up.
With Public Storage's well-covered dividend yield of roughly 4% and a conservative balance sheet, I'm confident the company will not only remain in my portfolio for decades, but will be one of the stocks I worry about the least.
Great income and room to grow
There are a few reasons AT&T is currently the single largest stock position in my portfolio and one that I plan to hang on to for decades.
For starters, AT&T provides a service everyone needs -- mobile communications -- and with the surge in connected devices, the need is increasing rapidly. And given its size, AT&T has the resources to stay on the forefront of new technologies as the industry evolves. For example, AT&T is already beginning to emerge as one of the early leaders in 5G technology.
Furthermore, while the market seems nervous about AT&T's flurry of acquisitions such as Time Warner, DirecTV, and others -- specifically, the debt the company incurred as a result -- I think these moves will help further differentiate the company from peers over the long run. In short, I see AT&T as a dominant force in telecommunications for decades to come.
Finally, while it's not one of the reasons I'm going to hold it forever, AT&T is an extremely cheap stock right now, which is why it has grown into my largest stock investment. As of this writing, AT&T trades for just 9.3 times forward earnings.
AT&T pays a dividend yield of about 5.9%, which, combined with the company's potential for slow and steady revenue growth, should result in some impressive total returns over the years.
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Matthew Frankel, CFP owns shares of Apple, AT&T, Bank of America, Berkshire Hathaway (B shares), and Public Storage. 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.