Looking for a stock to hold for the majority of one's lifetime can be fraught with peril and uncertainty. The only constant is change, and it can be difficult to anticipate how changes will affect any investment in terms of quarters and years, let alone decades. While there isn't any investment that you can buy and simply forget, there are some companies that increase the likelihood that they'll still be in your portfolio in 50 years' time.
With that in mind, we asked three Motley Fool investors to choose top companies they believed could still be viable investments come 2068. They offered convincing arguments for Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Costco Wholesale Corporation (NASDAQ: COST), and Amazon.com (NASDAQ: AMZN).
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The test of time
John Bromels (Berkshire Hathaway): Thinking about holding a single investment -- any investment -- for half a century is enough to make you queasy. Who knows where we'll be in 50 years, or what technologies might disrupt once-stable industries like typewriters, pocket calculators, or dial-up Internet service?
To protect against disruption, one of the safest things an investor can do is diversify. Holding stocks from across a wide variety of industries ensures that one industry's Achilles' heel doesn't annihilate your entire portfolio.
And it doesn't get more diverse than Warren Buffett's famous Berkshire Hathaway, which has holdings in too many industries to name here. These include insurance (GEICO), railroads (Burlington Northern Santa Fe), and food (Dairy Queen, See's Candies). This wide variety of industries makes the company about the safest opportunity I can think of for an investor who wants to buy and forget... maybe even for 50 years.
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While it's true that 87-year-old Warren Buffett himself, who founded and still runs the company, is unlikely to stick around for another 50 years -- although, frankly, I wouldn't put it past him -- Berkshire's current holdings and asset management strategy will certainly endure without him. Buffett and Berkshire's strategies, after all, have produced returns that have beaten the market over the past one-, three-, five-, and 10-year periods. Why not 50?
Bulk purchasing has a bright future
Demitrios Kalogeropoulos (Costco): Given the e-commerce disruption impacting the industry today, a brick-and-mortar retailer might seem like an odd choice for an ultra-long-term investment. But Costco isn't your typical retailer. The warehouse giant earns most of its profits through subscription fees, not product sales, for example. Those fees are a direct result of its ability to sell a targeted selection of high-quality products to members at unbeatably low prices. And its over 90% renewal rate demonstrates that the company is succeeding at that ambitious goal.
It's an approach that has allowed Costco to recently become the world's second biggest retailer, roughly 40 years after opening its first location. Its latest operating results show no sign of it losing in its prime industry position, either. Sales are up 7% over the last six months, or about twice the rate of rivals like Walmart and Target. Costco's profit margin, at the same time, is holding up much better than peers who have had to slash prices in a fight over securing customer traffic gains.
Image source: Costco.
Costco is investing in its e-commerce segment today and it will need to keep innovating in that sales channel in the years ahead. Yet, it's likely that consumers will depend on physical retailers for a large chunk of their home needs in the far future. And that fact should help the industry's price leader continue its long track record of outperformance.
The future of retail
Danny Vena (Amazon): The retail industry has undergone a paradigm shift in recent years, with online sales accounting for 9.3% of total retail sales, up from about just 3.5% a decade earlier. That migration will no doubt continue, and arguably no company has contributed more to the growing adoption of e-commerce than Amazon.com.
From humble beginnings as an online bookseller, the company has gone on to become an e-commerce powerhouse, accounting for 4% of all U.S. retail last year, and 44% of online sales in the country.
E-commerce isn't the only megatrend Amazon will benefit from going forward.
Cloud computing is another area the company absolutely dominates, with Amazon Web Services (AWS) capturing 33% of the cloud infrastructure market. What began as a way to monetize surplus capacity on its servers has given birth to an industry that generated 10% of Amazon's sales and all of its operating income in 2017 -- and its contribution could triple in five years.
Image source: Amazon.
The smart speaker segment is another industry popularized by Amazon, with the Echo as the dominant player, holding an estimated 69% market share in the U.S. This bodes well for the company's e-commerce sales too, as Echo owners tend to spend 66% more than the average Amazon customer according to Consumer Intelligence Research Partners.
Amazon Prime is the ultimate customer loyalty program, offering subscribers a host of benefits, including free two-day or faster shipping on millions of items, free music streaming, and access to its Prime Video service. While Netflix rules the roost in the streaming video segment, Amazon has taken up a comfortable second place. It's important to note that a growing number of customers have subscriptions to multiple over-the-top video providers, so there's room for more than one streaming winner.
With significant leadership positions in the cutting edge areas of e-commerce, cloud computing, smart speakers, and streaming video, Amazon has a good chance of being a safe investment 50 years in the future.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon and Netflix. Demitrios Kalogeropoulos owns shares of Berkshire Hathaway (B shares), Costco Wholesale, and Netflix. John Bromels owns shares of Amazon, Berkshire Hathaway (B shares), Costco Wholesale, and Netflix. The Motley Fool owns shares of and recommends Amazon, Berkshire Hathaway (B shares), and Netflix. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.