There are many stocks in my portfolio, and while some may be short-term, others have been in it for many years and are likely to remain within a decade or two. What are the characteristics of companies like that? Well, they are respected giants in their respective arenas and have a promising future.
Here are three stocks that I have no predictable plans to sell: Costco (NASDAQ: COST), Microsoft (NASDAQ: MSFT)and PayPal (NASDAQ: PYPL).
Image source: Getty Images.
Costco
Costco’s shares recently accounted for about 5% of my overall portfolio – and I can’t imagine selling them until I’m well retired and need money to live. I don’t remember exactly when I bought it, but maybe it was about 15 years ago, in which case I’m making a 10-fold gain – an average annual growth rate of about 16.8% (with dividends reinvested).
The leader in deposit discount retailing has earned high marks over time, not only for offering its customers, but also for treating its employees, their diversity, their culture and the quality of their CEO well. It is also known for its profit margin limit: Costco sets its prices from 14% to 15% above cost, which serves its customers well. It also serves its employees well, paying more than its rivals, as is clear from the table below.
|
Company |
Average hourly pay rate |
Average hourly cash payment rate |
|---|---|---|
|
Costco |
$ 17.52 |
$ 14.67 |
|
Walmart |
$ 13.05 |
$ 11.47 |
|
Target |
$ 13.33 |
$ 11.55 |
|
BJ’s Wholesale Club |
$ 12.89 |
$ 11.27 |
Source: Even.com.
Higher wage spending is actually a positive factor for the company, as it helps to keep employee turnover low, which keeps its operating costs lower.
The retailer’s overall strategy has led to successful operations and growth, which serve shareholders well. The same is true of Costco’s dividends. At recent stock prices, it yielded just 0.77%, but the company has increased its payout by an average of 11.8% per year for the past five years. And in December, it is paying out a special dividend of $ 10 per share.
Microsoft
Microsoft is another big share in my portfolio, and one that I can’t date accurately without sifting through many old files. I probably bought my stock from 15 to 20 years ago, which means I gained somewhere between 1,050% to 1,450%, with dividends reinvested.
I see no reason to sell Microsoft, even if it appears to be overvalued at some point, because over my many years (or even decades) investment time horizon, the company will eventually grow and surpass any overvaluation. This robust technology has much in its favor and I am comfortably optimistic about its long-term prospects. On the one hand, Windows remains the dominant computer operating system in the world, and its Office productivity software package is still widely used. And by offering Office 365 as a subscription product, the company generates a large amount of regular, reliable revenue.
Microsoft also has a popular video game platform on its Xbox and a leading cloud computing business on Azure. Both LinkedIn and Skype are owned by Microsoft, and the company also offers devices such as Surface tablets. Meanwhile, its Bing search engine generates advertising revenue. This type of diversification means that if one segment stops or falls, another one can compensate. And its history makes it clear that this company is willing to try to build new big businesses and is able to succeed in those efforts.
Microsoft boasts a market capitalization of around $ 1.7 trillion, but I can easily see it growing well beyond that. Its dividends at recent stock prices have yielded only 1%, but the payment has grown at an average annual rate of about 9.2% over the past five years. (The most recent increase was 9.8% and the previous year, 10.9%.)
PayPal
PayPal must also remain in my portfolio for decades and can become even more dominant within it. You are certainly familiar with its main digital payment platform and may even be one of the more than 320 million people who actively use it. But the company is more than that. Among other things, it also has Venmo – the point-to-point payment system that has grown rapidly in recent years. It has even branched out into the buy now, pay later business. Its “Pay in 4” service allows consumers to buy items priced between $ 30 and $ 600 and pay in four interest-free installments. PayPal’s talent for entering (or developing) the “next big thing” in payments makes me optimistic about its future.
Meanwhile, in the last reported quarter, it boasted 361 million active accounts (up 22% year on year), 4 billion payment transactions totaling $ 247 billion (up 38%) and 40 transactions per active account. He also had about 28 million active business accounts. In November, PayPal announced that it would facilitate the purchase and sale of several major cryptocurrencies – bitcoin, Ethereum, Bitcoin Cash and Litecoin – on PayPal.com.
PayPal does not pay dividends at this point, but that’s fine with me, as the company is still growing rapidly and can create more value by reinvesting its profits instead of distributing them to shareholders.
Consider any or all of these growing stocks for your own portfolio – and you may find that you never want to sell them either.