3 stocks to buy and hold for decades
LLong-term investing, both buy and hold, has been shown to be one of the most profitable ways to invest.
Holding stocks for decades allows composition to work its magic to produce life-changing returns, and also defers taxes on capital gains that would otherwise eat into your earnings. Best of all, it lets you sleep peacefully at night. You just buy from big companies and let the time do the work.
If you doubt the wisdom of the strategy, just ask Warren Buffett, whose Berkshire Hathaway conglomerate has grown at a compound annual rate of 20% for decades, more than double the S&P 500s performance over the same period and beating its total return on multiple occasions.
The trick is to find the right stocks. Let’s take a look at three stocks you’ll want to hold onto for decades.
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1. Point correction
Point correction (NASDAQ: SFIX) has been very volatile since going public in 2017. As an online personalized styling service, the company is unique in the stock market, and its share price often moves double digits after each earnings report, sign that investors are still trying to understand the business.
Stitch Fix has a unique approach to clothing retailing, as the company has been collecting data on the tastes and shape of its customers for nearly a decade. Historically, his model was based on sending “Fixes” to customers, or boxes of five garments, allowing the customer to keep what he or she wanted and return the rest.
Later this year, Stitch Fix will take a big step forward with its data science-based model by launching the direct buy offer to new customers. Using its Style Profile Admission Quiz and tools like its Style Mix Game, the company will provide a curated selection of clothing for new customers based on their tastes. So far, the company has obtained strong direct buying feedback from its existing customers, and the program has served a quarter of its active customers.
Stitch Fix Founder and CEO Katrina Lake will be to resign in August to be replaced by current president Elizabeth Spaulding. This move is timed to coincide with the launch of direct buying, which will expand the company’s addressable market in multiples and could boost its growth. With a market cap of less than $ 5 billion, the stock has a huge advantage if it can execute a direct buy.
Ten years ago, venture capitalist Marc Andreessen said software was eating the world. Okta (NASDAQ: OKTA), a cloud-based provider of identity and security tools, may be a prime example.
The company has achieved a market value of over $ 30 billion, thanks to its leadership in what may seem like a niche category, but has grown significantly. Okta’s business provides tools such as multi-factor authentication and single sign-on to enable employees and customers to seamlessly and securely connect to online networks. His addressable market has grown significantly since its IPO in 2017, from $ 18 billion to $ 80 billion, expanding into adjacent markets and seeing increased interest in its identity cloud.
The company has also grown like clockwork with 40% revenue growth every quarter since its IPO, and its profitability has improved significantly. Last year, its free cash flow reached $ 110.7 million or 13% of revenue, and its adjusted net income was $ 16.2 million. His recent acquisition Auth0 should also help accelerate its growth, particularly internationally.
The need for identity and security solutions is not going to go away, and Okta’s revenue will eclipse $ 1 billion this year in an $ 80 billion market. There is still a lot of growth to come for cloud stock.
If there was any doubt that streaming would take over the entertainment industry, the pandemic has settled that debate. Legacy media companies have been scrambling to launch new services over the past year, accelerating the transition from linear to streaming TV.
This is great news for Roku (NASDAQ: ROKU), the market share leader for streaming TV devices with a 38% share in the United States, according to NPD Group. Roku is more than just a vendor of dongles to plug into your TV. The company’s software powers many smart TVs in the market and its platform has allowed it to build a powerful advertising business as it typically controls one-third of the streaming partner’s ad inventory on its platform. Just as streaming accelerated during the coronavirus pandemic, digital advertising and a number of advertising technology actions have touted high double-digit to triple-digit percentage growth in connected TV. This bodes well for Roku as the company is able to act as a toll charger in the industry.
Overall revenue grew 58% year-over-year in the fourth quarter to $ 649.9 million, and platform revenue, which is the high-margin component advertising-driven, jumped 81% to $ 471.2 million.
Video streaming still has a lot of growth ahead of it, both nationally and internationally. And ad spend is expected to continue to rise on streaming platforms, especially as the technology and targeting behind it becomes even more sophisticated.
Roku seems well positioned to capitalize on this long term trend.
10 actions we like better than Roku
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Jeremy bowman owns shares of Okta, Roku and Stitch Fix. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares), Okta, Roku, and Stitch Fix. The Motley Fool recommends the following options: January 2023 long calls $ 200.0 on Berkshire Hathaway (B shares), January 2023 short puts $ 200.0 on Berkshire Hathaway (B shares) and June 2021 short calls $ 240.0 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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