The 10 Best
Stocks to Hold Forever
Around our research
office, we just call them our "Forever" stocks. We've talked about them
so much over the past few months, the nickname is just easier. Everyone
here knows exactly what we're talking about.
Put simply, this is the set of stocks you can buy today and hold for the
rest of your life. When you own them, you no longer need to worry about
things like inflation or deflation... bear markets or recessions...
flash-crashes or rising interest rates.
||"Forever" Stock #8 -- Intel
(Nasdaq: INTC) -- has turned every $20 invested in 1972
into $32,000 today. Just $630 invested back then would be
worth more than $1 million. This is one of the most epic
stock-market runs in history -- and it happened despite the '87
crash, the "Dot-com" bubble, and the Great Recession.
||"Forever" Stock #4 --
Reaves Utility Income (AMEX: UTG) -- has outperformed
"regular" stocks nearly 10-to-1 in its lifetime. And it has only
been around since 2004! It has returned nearly 11% per year
since its inception... and its dividend grew 28.9% along the
way. In total, investors have received more than 100 consecutive
dividends from this company.
||Another "Forever" stock has
raised its dividend 67.4% since 2008... and buys back billions
of dollars worth of its shares. In 2011 alone the company
repurchased $5.4 BILLION of its own stock. Since being
spun-off from its parent company in 2008, this company has
bought back nearly 20% of the outstanding shares, which helps
support the share price in just about any market.
This sort of "worry-free"
performance is exactly the reason many of the world's richest investors,
politicians, and businessmen have owned shares of these stocks for
decades, using them to obliterate the market.
We're talking about investors like Warren Buffett, Carlos Slim, and
Goldman Sachs, along with John Kerry and dozens of other Congressmen.
But it's not just the elite making money off these types of ideas.
People just like you have been making money from these types of stocks
George A. from Weatherford, Oklahoma told us he's held shares of General
Electric for 45 years. During that time, his holdings have turned from
$27,000 to $108,000... while also paying him "tons" of dividends.
Arthur R. of Sandy Springs, Georgia told us he invested in 200 shares of
Automatic Data Processing at just $8.00 per share. After holding about
five years, he sold at $59.90. His profit? Through splits, his
original $1,600 investment turned into $106,000 when Arthur sold.
Tony R. of Reading, Massachusetts bought $2,000 of Esso -- Exxon's
predecessor -- more than 50 years ago. "I never purchased any more, I
just reinvested dividends. For years it was the only stock I owned."
Tony said that stake topped out at more than $100,000.
Now, I'll be honest. There's a major caveat. You can't just buy any
stock, hold it forever, and expect to come out ahead. The market is
littered with Enrons, Worldcoms, even General Motors. Holding forever
didn't matter a lick with them.
That's why our staff have put so much time, effort, and money into
completing our list of 10 "Forever" stocks. We can never guarantee a
stock will rise, but the ten "Forever" ideas below represent our best
ideas for holding... and profiting... for the long term.
Note: Our research team think holding stocks like those profiled
below for the long term is one of the best ways to amass wealth. But
that doesn't mean anyone should just blindly hold. There are never
any guarantees in investing, and these securities are no different.
Best Stocks to Hold Forever
Infrastructure L.P. (NYSE: BIP)
The first of our "Forever" stocks is one we like to call our
"Rockefeller" idea. Most people know Rockefeller became rich via his
company, Standard Oil. And while we want to invest in the same sort of
business that he did, this pick has nothing to do with oil.
But that's fine by me, because when you look closely at exactly WHY
Rockefeller got rich, you realize Standard Oil didn't turn Rockefeller
into a billionaire simply because it was in the oil business.
No. Standard Oil made Rockefeller the richest man in history because the
company held a monopoly in its market.
Brookfield Infrastructure owns dozens of monopolies... and
they have the government's blessing. How is that possible?
Frankly, there is no other choice.
As you can tell by the name, this partnership owns infrastructure assets
-- electric transmission grids, ports, railroads, coal terminals, and
timberland. These unique assets aren't something another competitor can
just build next door.
That means Brookfield enjoys monopoly status in most of its markets...
but it doesn't mean it can charge whatever it wants. Most of its fees
are locked in by regulations or contracts. This lets the partnership
earn a solid return that's usually tied to inflation.
In total, roughly 80% of the partnership's revenues are under contracts
or are regulated. Meanwhile, those practically guaranteed revenues are
coming from one of the most compelling portfolios I've ever seen.
The partnership has a stake in electric grids in Chile. It holds
railroads in Australia... ports all over Europe... coal facilities in
Australia... toll roads in South America... and timberland in the United
States and Canada.
We can only think of one, maybe two, other places where you can invest
in a stable group of monopolistic holdings this broad from all over the
And to be fair, we didn't find this unusual stock on our own. It was
discovered by Amy Calistri, who spends just about every waking moment
searching for stable, high-yielding securities to include in her premium
Amy first discovered this stock back in February of 2010, and readers
who took her advice and purchased when she did have already posted gains
of more than 180% on the stock.
But we think this stock still has plenty of upside left.
And as you would expect from ownership in a basket of monopolies, these
holdings throw off solid cash flows. In 2010, the partnership earned
funds from operations (FFO) per unit of $1.79. Then, in 2011, that
figure was $2.41 per unit -- clobbering the previous year's mark.
[Note: Organizations such as real estate investment trusts,
tanker companies, and master-limited partnerships often use "funds from
operations" as a basis of their performance instead of regular cash
earnings. That's because they have large depreciation expenses on their
assets. Depreciation is a non-cash charge. It lessens earnings, but it
doesn't actually take away cash used to expand the business... or pay
BIP has only been around since 2008. The security went public about the
time the downturn started. Yet despite the rough timing, the fund has
shown strong gains since it went public.
Brookfield's management's stated goal is to return 12-15% per year over
the long term.
Part of that comes from a solid dividend.
Right now BIP pays $0.43 per unit each quarter. That's a 15% increase
over 2012 and gives the units a yield of around 4.5%.
Over the long term, BIP's growth will come from new infrastructure
purchases, but also the partnership's $452 million backlog of growth
projects at the end of 2012. These include expansion projects for its
Australian coal terminal and a biomass terminal at its UK port.
With a $6 billion market cap, Brookfield's $500 million in expansion
projects is substantial. In fact, the partnership has said it may even
raise distributions more than its 3% to 7% annual target if expansion
continues as planned.
Risks to Consider: To help expand its portfolio, Brookfield does
leverage about 45% of its assets. The majority of this leverage is at a
fixed rate, but rising interest rates could hamper the partnership's
(2.) Google (Nasdaq:
This "Forever" stock is one of the most dominant companies on the
planet... and it hasn't escaped the grasp of some of the best investors
in the world.
Legendary investment firm Fidelity owns 11.800 million shares worth over
$9.5 billion. Goldman Sachs owns nearly another 2.5 million shares. Two
dozen Congressmen also own the stock... Rodney Frelinghuysen (R-NJ) owns
at least $150,000 worth, according to the Center for Responsive
So what do they all see in Google? It may be the same thing Warren
Buffett's second in command -- Charlie Munger -- sees...
a huge new moat," Munger said. "In fact I've probably never seen
such a wide moat. Their moat is filled with sharks."
Munger is famous for
loving companies with wide "economic moats" -- advantages that keep
competitors from gaining territory against a business.
And Google has plenty of those...
It's the most dominant company on the entire Internet. Depending on who
you cite, it owns no less than a 65% market share of online search, and
possibly upwards of 90%.
Moreover, it offers email... online documents... mapping tools... and
dozens of other free utilities -- all in an effort to get its
advertising platform in front of more eyeballs.
Its web advertising platform owns a nearly 40% (and growing) market
share... about triple its nearest rival.
In 2012, the company earned a total of $43.7 billion in advertising
revenues... up almost 20% from a year earlier.
But Google's profitability is what stands out the most. In fact, the
company is ranked #103 on the latest Fortune 500 list by revenues... but
#41 if you rank all the companies by profits.
That's helped the company build up a cash stockpile of more than more
than $60 billion in cash on its books... or more than $180 PER SHARE,
based on recent financial data.
Investing in a tech stock like Google on the long-term is a little
riskier than say, Coca-Cola (NYSE: KO). You simply can't be sure exactly
where the business -- or its products -- will be a decade or more from
However, given the dominant position of Google and its ability to be a
leader in all aspects of the online world, I'd feel safe investing in
this company for the long haul.
Risks to Consider: Google has faced increasing scrutiny from
regulators in the U.S. and abroad over privacy concerns, but that should
not end up changing the long-term outlook.
Morris International (NYSE: PM)
First things first, we understand not everyone likes investing in
cigarette manufacturers. That's fine. However, Philip Morris
International is one of the most solid stocks on the planet, and we
think it can serve investors well as a "Forever" holding.
Philip Morris International is the world's second-largest tobacco
company, behind only China National Tobacco, and holds almost 16% of the
non-U.S. market. PMI's brands include seven of the world's top 15 names,
including Marlboro, the number one cigarette brand worldwide.
This company is a spin-off of Altria's (NYSE: MO) cigarette business
outside U.S. borders. Altria continues to sell its brands, including
Marlboro and Merit, in the United States, but that business is slowly
Outside the U.S., it's a different story.
Philip Morris International saw revenues increase more than 15% from the
end of 2010 to the end of 2012.
Some overseas markets offer growth opportunities in the cigarette
industry because of their growing populations and looser restrictions on
tobacco marketing. Estimates are that there will be 1.4 billion smokers
globally by 2020, up from 1.3 billion today, even if the percentage of
the population that smokes declines 1% annually.
That dependable business is exactly what you like to see in a "Forever"
holding... but it's far from the only reason to like the stock.
We think Philip Morris International is the most shareholder-friendly
company we've ever seen. Since 2008 it's raised its dividend 84.8%...
from $0.46 per share every quarter to $0.85.
That gives the stock a yield of roughly 3.5%, but the dividend is likely
to rise over time.
Meanwhile the company has repurchased more than 450 million shares
(more than 20% of all shares outstanding, worth $23 billion).
This sort of "Forever" investment hasn't been lost on the big names
either. Philip Morris is owned by a staggering 13 members of Congress.
James Sensenbrenner Jr. (R-WI) reports that via his wife, he has a stake
of up to $1,000,000 of the stock.
And Representative Sensenbrenner and his wife could shake hands with the
world's richest man -- Mexican telecom magnate Carlos Slim -- at
the company's annual meeting. That's because along with a couple dozen
members of Congress, Mr. Slim sits on Philip Morris International's
Board of Directors... and also has a stake -- owning more than 14,800
shares worth $1.3 million.
With a stable business, the most valuable global brands, and
shareholder-friendly practices, Philip Morris International is
everything we look for in a "Forever" stock.
Risks to Consider: Though somewhat mitigated by its global position,
Philip Morris faces regulatory risks and risks from litigation in
several of its markets. Also, if exchange rates were to become
unfavorable the company's global position creates some currency risks.
Utility Income Fund (AMEX: UTG)
Reaves Utility Income is a fund whose job is simple -- invest in the
most stable utility stocks on the earth and pay investors a fat yield.
The $598 million fund owns dozens utilities from all over the world --
including telecoms in New Zealand, electric companies in Brazil, and
energy businesses in Wisconsin.
Electric utilities make up the bulk of the portfolio at roughly 61% of
its investments, followed by telecoms (38%) and pipelines (13%).
And although it invests all around the world, the bulk of its holdings
are in the United States. You'll recognize many of the names it owns.
Some of the biggest stakes include AT&T (NYSE: T), Duke Energy (NYSE:
DUK) and Verizon (NYSE: VZ).
In total, about 88% of the fund's assets are in U.S. common stocks and
12% rests in foreign holdings.
To boost the yield it can pay investors, UTG does leverage its holdings
-- up to 34% of assets. As you'd expect, that makes the shares more
volatile than typical utility holdings. UTG was the single one of our 10
"Forever" stocks that fell more than the S&P 500 in the downturn. Of
course, when the bull market returned, that stock came back with a
vengeance... more than doubling the S&P 500 in the following
In fact, it's returned 11% per year since it's inception in 2004...
along with dividend growth during that time of 29%. And according to the
fund, every $1,000 invested at the fund's inception would now be worth
about $2,500. Our own Amy Calistri of
Daily Paycheck picked up the fund back in late 2009. She is
showing a gain of about 50%.
In total, the fund has paid more than 90 consecutive dividends and
yields around 6.0%, based on recent prices. UTG makes monthly payments
of $0.13 per share. We expect that amount to rise slowly going forward.
One note... this fund is a bit of a secret. It trades an average of just
90,000 shares per day. That's about what Apple (Nasdaq: AAPL) trades in
two minutes. Because of that, you might want to buy the shares with a
limit order, ensuring you get your expected price.
Risks to Consider: To achieve its above-average yield, the fund
leverages nearly 34% of its assets. This does add an element of risk
should borrowing costs rise. And if asset values see a marked decline,
the fund may be forced to liquidate some positions.
What do you do when you find a stock with more than a billion of its
products in use... that's also owned by Warren Buffett's Berkshire
Hathaway (NYSE: BRK-B)... holds $30 per share in cash... and is in the
process of buying back $2 billion in stock?
I think you buy it and hold forever.
That's exactly what I've found with MasterCard.
You've no doubt heard of this company, unlike some of our other
"Forever" stocks. In fact, you might hold one of their one billion cards
in use around the world. In total, MasterCard boasts over a billion
total accounts and racks up nearly $3 trillion in transactions each
But don't think this is a risky play that's dependent on people paying
off their credit card bills. In actuality, MasterCard is simply a "toll"
The company doesn't have anything to do with the debt that investors put
on their credit cards -- banks own that liability. MasterCard simply
earns a small percentage of each transaction that users make on its
cards. In other words, MasterCard makes more money as the number of
people around the world using its cards grows.
And right now growth in electronic payments is one of the most
unstoppable trends on the planet.
Let's take the United States. According to the Federal Reserve, there
are more than 65 billion payments made annually in the U.S. on credit,
debit, and prepaid cards. And even in a developed country like the
United States -- where card usage is ubiquitous -- the market grew at a
nearly 10% annual rate between 2006 and 2009 (the latest data
But that's just a taste of the global trend toward electronic payments,
and it's only from one of the most heavily developed economies in the
world where paying by card is already commonplace. Growth is much,
much stronger overseas.
In Brazil, card transactions are up 18% in 2011. Debit card transactions
rose 39% in fiscal 2011 in India -- where debit cards outnumber credit
cards 10-to-1. And major banks in China have reported annual growth of
65% in debit card usage. The number of credit cards in China is more
than quadruple the level in 2006.
And that's just the tip of the iceberg. It's estimated that 85% of
payments made around the world are still made with cash or check. That's
a big market waiting to be tapped.
Perhaps that's why Warren Buffett's Berkshire Hathaway disclosed
it had bought a 216,000-share stake in the company in the second quarter
of 2011. And then they "doubled down" -- buying 189,000 more shares.
But this is all just one part of MasterCard's appeal. In addition to
tapping into one of the world's strongest growth stories, the company's
financial standing is as good as it gets. Its net profit margin was 32%
at the time of this writing. On this metric, that makes MasterCard more
profitable than 97% of all companies in the S&P 500.
It has no debt. Cash and equivalents total $3.5 billion, about $30 per
share. At recent prices, that comes out to approximately 6% of the share
Meanwhile, the company's overall share count fell 2% in 2012 and it has
more share buybacks approved.
The move toward more credit and debit card payments is unmistakable...
and still has years -- if not decades -- to go. We think that makes
MasterCard a "Forever" stock.
Risks to Consider: While MasterCard is shielded from credit risk, the
company is facing increasing regulations in the U.S. and overseas. Case
in point, recent banking regulation lowered the amount MasterCard can
charge businesses when a customer uses a MasterCard.
Alerian MLP Index ETN (NYSE: AMJ)
If you've never heard of master-limited partnership (MLPs)... pay
MLPs have been one of the decade's brightest spots in the stock market.
These partnerships own assets like pipelines and storage tanks used to
ship and store commodities around the country.
But MLPs usually aren't leveraged to commodity prices -- they simply act
as a tollbooth -- earning money for the volume shipped through their
pipelines. As long as volume is steady, so too are their cash flows.
So while AMJ -- which holds a basket of MLPs -- is the newest investment
in our "Forever" list to hit the market, it also offers some of the
greatest potential for steady long-term gains. In fact, the underlying
index it tracks has a 20.0% annualized return over the past three years.
The index it tracks delivered a 10-year annualized return of 17.3%
Investors have piled into MLPs thanks to their stable "tollbooth"
businesses... but also because they are required by law to pay out the
bulk of their cash flow to investors or face punishment. That generally
gives MLPs high yields of 5% or more. And as the cash these partnerships
earn increases, so too do the distributions.
Stable cash flows... high yields... strong annual returns... what's not
to like? Well, the fact is that master-limited partnerships are pretty
complex when it comes to taxes. In fact, in some circumstances, the
distributions they pay can lead to taxes even if held in a tax-deferred
account like an IRA.
That's why we like this special "Forever" investment... it gets all the
benefits of owning MLPs without the tax headaches.
AMJ is tied to a basket of MLPs. Enterprise Products Partners (NYSE: EPD)
makes up the largest stake (15% of assets), followed by Kinder Morgan
Energy (NYSE: KMP) (10% of assets) and Plains All American Pipeline
(NYSE: PAA) (7% of assets).
As you would expect, this basket of holdings throws off a nice stream of
income. The quarterly dividends vary based on what the underlying
investments pay... but so far that simply means the payment has
increased nearly every quarter.
As we go to press, the notes have paid $2.02 each over the last year,
for a yield of roughly 4.5%.
But we think the biggest benefit comes from the lack of tax headaches.
Instead of issuing a complex "Schedule K-1" IRS form as most MLPs do,
this security takes care of all that. Instead, it issues a simple 1099
form like any other dividend payer.
As a result, you can hold these shares in your tax-deferred accounts. No
wonder Forbes.com called it one of "3 Good Buys in MLPs."
One thing to note -- as much as we think holding shares of AMJ will be a
great "Forever" investment, you won't be able to hold it for decades. As
an exchange-traded note, the security will mature in May 2024.
Risks to Consider: Royalty trusts are are at the mercy of oil and
natural gas prices, both of which can be quite volatile.
Emerging Markets Equity Income Fund (NYSE: DEM)
Here in the United States, we're struggling to see 2% GDP growth... and
that's coming out of a major recession... with billions in stimulus
spending... and record low interest rates.
The government has thrown trillions of dollars to get the economy
jumpstarted, and we're still only seeing moderate growth.
That's not to put down the United States. It's still one of the best
places in the world to invest, but limiting your "Forever" investments
to only U.S. companies looks to be a big mistake.
But Malaysia's GDP grew at a 6% rate in 2011... Taiwan grew 4%... and
Chile grew 6%. Economies like Taiwan, Brazil, Chile and others are
simply growing faster than the U.S. economy.
This "Forever" idea is one of the best ways to profit from that trend.
The WisdomTree Emerging Markets Equity Income Fund holds 331 of the
highest-yielding stocks from emerging markets all around the world.
Taiwan (20% of assets) and China (16%) make up the largest chunk of the
portfolio. But in total 17 countries are represented -- including South
Africa, Chile, Russia, and Malaysia.
China Construction Bank Corp (OTC: CICHY) makes up the largest holding
(8.3% of assets), following by Gazprom OAO (OTC: GZPFY) (6.4%) and Banco
do Brasil SA (OTC: BDORY)(3.0%). And since this fund focuses not only on
emerging markets, but dividend payers as well, it holds the bulk of
assets in financials (27%) and energy (18%).
Dividends do vary dramatically based on what the fund earns from its
holdings. As we go to press, the past four quarterly distributions add
up to $1.81 per share, giving it a yield around 3.3%.
But it's not the yield that makes this a "Forever" stock. It's the fact
that the type of companies that pay yields are typically more steady
performers. In still volatile emerging markets, that's important for
smoothing out the ups and downs. And so far, it's been paying off.
Since the fund's inception in 2007 through the end of 2011, it's
returned 6.3% a year... and that's through a worldwide global recession.
For comparison, the MSCI Emerging Markets Index -- the most widely
reported gauge for the performance of emerging market stocks -- has
returned 1.5% annually during the same time.
The fund charges 0.63% per year, but to have access to a basket of
stocks representing what we think is the best way to play emerging
markets, it's a small price to pay.
Risks to Consider: Emerging markets and currencies can see steep
declines when global markets are volatile. DEM doesn't hedge its foreign
currency exposure, meaning it can suffer from both falling asset prices
and falling currencies.
(8.) Intel (Nasdaq:
If we told you we found a stock that for every $200 you invested back in
1972 would be worth $320,000 today, you'd likely think we were late to
But while we don't expect shares of Intel to repeat that same
performance... we do think the stock is an attractive "Forever" holding.
Of course, I'm not alone.
In total, more than 40 members of Congress own a stake in the
All the big banks own a piece of this company... just like Congress.
Morgan Stanley owns 27 million shares. JPMorgan Chase owns 29 million.
Bank of America owns 42 million shares. And Goldman Sachs owns over 35
million shares of this stock.
So what are all these investors seeing?
How about a company that's raising its dividends, spending billions to
buy back its own shares, making smart acquisitions, and according to
investment research firm Morningstar, owns an "stranglehold" on a $30
As you likely know, Intel is the world's largest semiconductor chip
maker. Chances are the computer you're reading this on is powered by an
Now, we won't bore you with the technicals of the chip business. The
important thing to know is that Intel is by far the largest player in an
industry that will still see growth for years to come.
Of course, there is growth in the personal computer market as
penetration in emerging markets increases. But the company makes chips
for just about any electronic device. In a world that's constantly
becoming more connected via cell phones and tablets, this growth is
still in the early stages.
Meanwhile, as the largest player in the market, Intel also has an
enormous research & development (R&D) budget. That all but guarantees it
will continue to be a leader in the semiconductor field.
But we think it's the company's attitude toward shareholders that's most
appealing for its status as a "Forever" stock. Its business throws off
enormous amounts of cash... and the company is doing everything it can
to put that money in shareholders' pockets.
Intel has bought back stock every single year for the past 20 years
straight... totaling $87 billion. And since 2005 it has ongoing
authorization to buy up to $25 billion in stock. For all of 2011, it
bought $14.1 billion worth, and in 2012, it bought $4.7 billion worth.
Meanwhile, the company is a dividend machine. Not only has it paid more
than 70 consecutive dividends, but it hasn't cut its payments once. And
since 2004 Intel has raised dividends 463%.
Today the shares pay $0.225 each quarter, for an annual yield of 3.5%.
But here's the kicker... those dividends are likely to continue their
rapid rise. In 2012, Intel paid out just 40% of its profit as dividends.
One more reason to think Intel's kind policies toward shareholders will
continue... as of the end of 2011, the company held $18 billion in cash
on the books.
No wonder John Kerry, dozens of member of Congress, and George Soros all
seem to love this stock.
Risks to Consider: So far, Intel hasn't become a dominant player in
chips for smartphones -- a major growth market. Meanwhile, PC demand is
cooling in developed markets.
There's a problem with Warren Buffett's Berkshire Hathaway (NYSE: BRK-B)...
even Warren Buffett himself says so:
rates of gain will fall far short of those achieved in the past.
Berkshire's capital base is now simply too large to allow us to
earn truly outsized returns."
Most company leaders would
be ousted if they admitted as much. But Warren Buffett isn't your
typical executive. It stands to reason: If Buffett himself is cool to
his company's prospects, why should we invest?
That's why we like "Forever" Stock #9 -- Markel -- which we call "Baby
Berkshire." It invests just like Warren Buffett's Berkshire Hathaway,
but there is one major difference...
This company is still small enough to make nearly any investment it
wants, which can lead to big returns. Berkshire has a market
capitalization worth hundreds of billions. Markel's is just $5 billion.
Just like Berkshire, Markel is a property and casualty insurance
company. Its origins date all the way back to the 1920s, when founder
Sam Markel began by insuring "jitney busses" -- pint-sized busses
usually operated by veterans just back from WWI.
Today, the company specializes in offbeat and niche insurance markets
that most other companies won't touch. The company covers items as
diverse and unique as summer camps, antique motorcycles, auto races and
amusement parks. These niche markets mean Markel faces limited
competition, allowing the company to have pricing power over its rates
without fear of losing customers.
And just like Berkshire, Markel takes in those premiums, invests them in
the market, and looks to turn a profit. In addition to Treasuries,
municipal bonds, and corporate bonds, the company also invests in
There should be little surprise that Berkshire Hathaway shares make up
one of Markel's largest holdings... as do a number of other stocks owned
Buffett favorites like Coca-Cola (NYSE: KO), Costco (Nasdaq: COST), and
American Express (NYSE: AXP) are all held in Markel's portfolio.
But like we said, Markel has the size to invest in smaller companies
Berkshire couldn't touch. That includes AMF Bakery Systems, a leading
manufacturer of high-speed bakery equipment, and Ellicott Dredges, a
leader in portable dredge design and manufacturing.
Risks to Consider: Like any property and casualty insurance company,
Markel could suffer losses from man-made or natural disasters and its
investments could be impacted by changes in interest rates, broad
economic conditions and regulation.
Energia (NYSE: CPL)
I looked all the way to Brazil for "Forever" Stock #10, but don't
worry... it trades on the New York Stock Exchange.
CPFL Energia is the largest electricity transmission and distribution
company in Brazil, with approximately 7 million customers. The company's
regulated areas of operation include some of the most developed and
wealthiest parts of the country.
In a developed market like the U.S. or Western Europe, annual growth in
electricity demand is modest. And thanks to the global economic downturn
of 2007-09, some developed markets consume less power today than they
did back in 2006-07. But that's not the case in Brazil -- in the past
decade energy demand has jumped 33%.
CPFL's profitability is also supported by its monopolistic position.
Roughly three-quarters of its total power sales were to captive
customers who do not have the option of switching to another electric
distributor. These customers pay a regulated rate that offers CPFL a
reliable return on its investments. The company has also been successful
holding on to its customers who are able to actively choose their own
In addition to distribution, CPFL owns power plants or stakes in power
plants and sells electricity at unregulated rates. While these segments
carry higher business risks than CPFL's core distribution segment,
there's also plenty of growth potential.
I also like the fact that CPFL generates the majority of its electricity
from clean, renewable energy sources. The firm operates more than a half
dozen hydroelectric power plants throughout Brazil, plus several wind
and biomass plants.
While CPFL is the largest electricity distributor in Brazil, it still
has just a 13% share of the total market. That gives the company plenty
of opportunity to grow by acquiring other firms in its core distribution
market or in its smaller generation and commercialization segments.
Like many utilities, CPFL pays a hefty dividend yield. The company makes
semi-annual payments, with a policy of distributing at least 50% of net
income. The two most recent dividends add to $1.53 per share, giving the
stock a recent yield above 7.5%.
This is the sort of stable and growing business that we want to hold
forever. The company operates in a regulated business that offers stable
returns on investment. In addition, it's seeing growth opportunities,
mainly through acquisitions, along with a nice yield.
Risks to Consider: The company is exposed to to risks from both
foreign currency exchange rates and interest rates. We also are
concerned about the effects of forthcoming rate redeterminations on the
company's ability to maintain its distribution and expect this headwind
to crop up during the next round of tariff resets that begins in 2015.
We sincerely hope you've
enjoyed today's report, The 10 Best Stocks to Hold Forever. On behalf of
our entire staff here at StreetAuthority.com, we'd like to wish you the
best of success in your investing in the months ahead.
Note: The securities mentioned in this report are consistent with the
editor's investment strategy and philosophy. These investment ideas,
however, should just be a starting point for your own research. For the
editor's timeliest investment suggestions, please consult the
newsletter's current portfolio additions and/or "Buy First" list.