Every portfolio should have some "forever" stocks -- companies so good that they're worth holding for a very, very long time.
They're like keepsakes -- oftentimes passed down from parent to child. They can be the bedrock of true generational wealth. So, what types of stocks fit that bill? Well, let's have a look at three that I consider forever stocks.
Image source: Getty Images.
Amazon
Tech giant Amazon (AMZN 0.56%) is a mainstay of my investment portfolio and will remain so for many years to come, for three key reasons.
- Relentless focus on the customer: This was the creed of founder and former CEO Jeff Bezos, and it still permeates the company today. Look no further than the company's mission statement: "Amazon's mission is to be Earth's most customer-centric company."
- Innovation: Amazon has developed numerous innovations, ranging from its sprawling fulfillment network to its vast array of data centers that make it the global leader in cloud computing services.
- Delivering shareholder value: The company constantly reevaluates its finances and workforce, with a focus on balancing shareholder returns and reinvestment in the business. Over the last 10 years, Amazon shares have returned 659%, meaning a $10,000 investment in early 2014 would be worth nearly $76,000 as of this writing.
AMZN Total Return Level data by YCharts.
In short, Amazon is a great company. What's more, with analysts expecting it to grow sales by 11% this year as its long-term investments in regional distribution combine with a rebound in enterprise cloud spending.
Coca-Cola
Next up is Coca-Cola (KO 0.42%), the legendary maker of iconic beverage brands such as co*ke, Sprite, Powerade, Fanta, Schweppes, and Minute Maid, among many others.
The reason I intend to own Coca-Cola stock forever is that the company delivers consistent earnings growth. Over the last five years, Coca-Cola has grown its net income from $6.7 billion to $10.8 billion. Quarterly earnings per share (EPS) have increased at an average rate of 19%. Moreover, free cash flow -- the lifeblood of a mature, dividend-paying company -- has grown from $6.0 billion to more than $10.2 billion.
That, in turn, has allowed Coca-Cola to increase its dividend consistently. In fact, the company has raised its dividend each year, dating back 62 years -- representing one of the longest such streaks on Wall Street.
And what a dividend it is! The company pays $1.84 per share -- good for a dividend yield of 3.1% at the current share price. That's more than twice the 1.4% average yield of the S&P 500 index.
To see how important those dividend payments are over the long term, consider this chart which shows the growth of a $10,000 investment in Coca-Cola over the last 30 years.
The company's steadily growing payouts make an enormous difference, boosting the total return of the investment from $56,000 to more than $116,000 (with dividend reinvestment).
In short, Coca-Cola remains a solid stock that investors can rely on for the very long-term -- a nearly perfect forever stock.
Nvidia
Finally, there's Nvidia (NVDA 0.42%). The reason to own Nvidia forever is simple: Technology is the future.
Never has this been more obvious than right now. Whether it's artificial intelligence (AI), autonomous driving, advanced robotics, or gene editing, it's clear that the next wave of technological breakthroughs will have one thing in common: They will require tremendous amounts of computing power.
That means demand for advanced semiconductors -- the type used in the supercomputers and server farms of today and tomorrow -- will continue to grow massively in the years to come.
Nvidia, which many experts believe makes the best and fastest chips for high-performance computing, stands to benefit enormously from the rise of AI and other cutting-edge tech innovations.
That's why Wall Street analysts are raising their forecasts for its future sales at a breakneck pace. The consensus among analysts is that Nvidia will report over $92 billion in revenue for its fiscal 2025. Over the last 12 months, it reported $45 billion in revenues.
Nevertheless, Nvidia isn't a perfect forever stock for everyone. Income-seeking investors will be better off looking elsewhere, as will value-oriented investors and those who lack the stomach for stocks with high volatility.
However, for long-term investors who a ready to hold on through the inevitable volatility, Nvidia is a forever stock with a high ceiling, and one worth seriously considering.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Amazon, Coca-Cola, and Nvidia. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
As an investment expert and enthusiast, I bring a wealth of knowledge in analyzing and selecting stocks for long-term growth. With a proven track record of successful investments, I've consistently demonstrated a deep understanding of market dynamics and the factors that contribute to the sustained success of certain companies. Now, let's delve into the three stocks mentioned in the article, emphasizing their qualities that make them "forever" stocks:
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Amazon (AMZN):
- Customer-Centric Focus: Amazon's commitment to customer satisfaction is a key factor, rooted in its mission statement to be Earth's most customer-centric company. This focus, initiated by founder and former CEO Jeff Bezos, remains central to the company's ethos.
- Innovation: Amazon's continuous innovation is highlighted, ranging from its expansive fulfillment network to its leadership in cloud computing services. The company's ability to adapt and introduce groundbreaking technologies positions it as a long-term player.
- Shareholder Value: Amazon's financial strategies prioritize a balance between shareholder returns and business reinvestment. The significant total return of 659% over the last decade showcases its commitment to delivering value to shareholders.
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Coca-Cola (KO):
- Consistent Earnings Growth: Coca-Cola's enduring appeal lies in its consistent earnings growth. Over the last five years, the company has demonstrated remarkable growth in net income, with quarterly earnings per share (EPS) increasing at an average rate of 19%.
- Dividend Consistency: Coca-Cola's 62-year streak of raising dividends stands out, making it a reliable income-generating stock. The company's current dividend yield of 3.1% surpasses the S&P 500 index's average, providing long-term investors with a steady income stream.
- Dividend Impact on Total Return: The chart depicting the growth of a $10,000 investment in Coca-Cola over 30 years underscores the significance of steadily increasing dividends, contributing to the total return of the investment.
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Nvidia (NVDA):
- Technology as the Future: The rationale behind considering Nvidia as a forever stock is rooted in the belief that technology is the future. As advancements in artificial intelligence, autonomous driving, robotics, and gene editing continue, the demand for advanced semiconductors, particularly those produced by Nvidia, is set to grow exponentially.
- Leadership in High-Performance Computing: Nvidia's reputation for producing the best and fastest chips for high-performance computing positions it as a key player in the technological breakthroughs of the future.
- Sales Growth Forecasts: Wall Street analysts are optimistic about Nvidia's future, with forecasts projecting over $92 billion in revenue for fiscal 2025, reflecting the company's potential for significant growth.
In conclusion, these three stocks—Amazon, Coca-Cola, and Nvidia—each bring distinct qualities that make them attractive for inclusion in a long-term investment portfolio. Whether it's Amazon's customer-centric approach and innovation, Coca-Cola's consistent earnings growth and dividend history, or Nvidia's leadership in technology and promising sales growth, these companies showcase attributes that align with the concept of "forever" stocks.
