It is not wrong to set strict criteria when choosing companies to invest for the long term. After all, if you plan to park your money for years and still sleep well, these companies need to have certain important characteristics that make them attractive for long-term investments. Not many businesses make the cut, but it’s worth a look.
Some aspects I look at are companies with a strong competitive edge and market leaders within their respective industries. Ideally, they should have a long track record of growing their income, net profit and cash flow, while also having a good runway for future growth. Finally, they need to show that they are resilient to crises such as the current COVID-19 pandemic.
After selecting a whole bunch of companies, there are three stocks that you can buy and hold with confidence forever.
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PayPal
PayPal (NASDAQ: PYPL) is a major player in the online payment and money transfer industry. The pandemic accelerated the shift to online communication and work and study from home, and also forced more people to use e-commerce and online payments as barriers persisted. The company is a major beneficiary of this move, as it experienced the strongest growth in total payment volume and revenue in its history for the third quarter.
Total payment volume increased by 36% year-on-year to $ 247 billion, increasing net income by 25% year-on-year to $ 5.5 billion. There was an increase in net new active accounts for the quarter, with 55% higher than on an annual basis to 15.2 million. Prior to this excellent performance, PayPal has already shown steady and steady growth over the years. Net income grew from $ 9.2 billion in 2015 to $ 17.8 billion in 2019, while net income doubled from $ 1.2 billion to $ 2.5 billion over the same period.
The company does not stand still, but continues with strategic initiatives to increase its reach. It has expanded its ‘buy-now-pay-later’ service in the US and UK, helping retailers take on more transactions without additional risk, while enabling customers to make purchases with interest-free installments. PayPal also has its Venmo credit card in partnership with Visa (NYSE: V) and has announced a new check-in feature for customers of its digital wallet, making the service more convenient and hassle-free for them.
Nike
One of the largest sports shoes and clothing companies in the world, Nike (NYSE: NKE), proved remarkably resilient during this pandemic. The company is known for its innovative shoes such as the Vaporfly and Alphafly Next% that improve athletes’ performance during a competition. For its fiscal earnings in the first half of 2021, the company reported a surprising 4% increase in year-over-year revenue to $ 21.8 billion, while net revenue increased 12% year-on-year it up to $ 2.8 billion. Notable was the momentum of Nike in digital sales, where digital sales rose 84% year-on-year with three-digit year-on-year increases in North America. Nike’s digital strategy is bearing fruit and promises a long path of continued growth for the business.
The company does not delay its product launches, even if the pandemic rages. Nike CEO John Donahoe spoke during the quarter about the new launches of LeBron XVIII and Kyrie 7 that responded enthusiastically. And Nike’s latest version, the Mercurial Vapor 14 shoe, promises to enable athletes to make sharp turns without losing their balance.
Nike recently increased its quarterly dividend year-on-year by $ 1275 per share, making it the 19th consecutive year of dividend increases. This step brings it ever closer to becoming an Aristocrat of Dividend.
Tractor Supply Company
Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the US with a total of 1,904 stores in 49 states, continued to show strong growth despite the downturn. Net sales for the third quarter of 2020 increased year-on-year by 31.4%, while comparative store sales increased by 26.8% year-on-year. The net income increased by 56% year on year because the pandemic caused more customers to focus on taking care of their homes, land and animals, which increased the demand for the company’s products.
Even before the crisis, Tractor Supply Company had been growing steadily. From 2015 to 2019, sales increased steadily each year, from $ 6.2 billion to $ 8.4 billion, while net revenue climbed from $ 410.4 million to $ 562.3 million. The declared dividends also climbed with net income and rose from $ 0.76 in 2015 to $ 1.36 in 2019. The company has a strong record of its increase in its store figures with approximately 10% compounded annual growth rate over the past 20 year.
The company’s “Life Out Here” strategy focuses on five pillars: customers, digitization, execution, team members and total shareholder return. This strategy promises to continue to drive growth for the company as it hedges itself as the place for rural equipment and farm equipment. Tractor Supply Company, which operates in a highly fragmented market, sees a total liable market opportunity of $ 110 billion, of which it has only a 10% market share, which implies significant scope for further capture of market share. In addition, the company has also identified opportunities for the growth of new stores to eventually take the number of stores to 2,500.