Do you have $ 1,000? 2 stocks you can buy and hold for decades

One of the most important characteristics that investors should have is patience – the patience to hold stocks of large companies in good and bad times, and even in the face of the great volatility of the market. For investors disciplined enough to do this, the magic of composition will do the rest. But this strategy works if, and only if, the stocks you select are in fact those of winning companies.

With hundreds of options on the market, it can be difficult to separate the wheat from the chaff. Today, we are going to look at two companies that seem to be on the right track to remain leaders in their respective sectors for years to come. The companies in question are pharmaceutical giants Johnson & Johnson (NYSE: JNJ) and fintech specialist Square (NYSE: SQ). Let’s see why it’s worth adding both to your portfolio.

JNJ data by YCharts

1. Johnson & Johnson

Johnson & Johnson has been making a lot of headlines lately thanks to its effort to develop a vaccine for COVID-19. This opportunity may give the pharmaceutical company a good boost in the short term, but in the long run, the pharmaceutical giant will benefit even more from the worldwide need for innovative drugs. This factor will be even more important due to the aging of our population.

Johnson & Johnson’s pharmaceutical business is the most profitable. During fiscal year 2020, sales in this segment were $ 45.6 billion, an 8% year-over-year increase that represented about 55% of the company’s total revenue. Johnson & Johnson has more than half a dozen highly successful products, which are drugs with annual sales in excess of $ 1 billion. Most pharmaceutical companies would consider themselves lucky to have only one.

For example, there is the treatment of Stelara plaque psoriasis, for which 2020 tax revenue increased by 21%, to $ 7.7 billion. There is also cancer treatment Darzalex, which earned $ 4.2 billion in 2020, an increase of 39.8% over the previous fiscal year. Imbruvica, another cancer treatment, recorded $ 4.1 billion in sales in 2020, 21% more than in 2019.

These drugs (and others) are helping the pharmaceutical giant to recover some of the losses it is incurring elsewhere. For example, sales of Remicade treatment for rheumatoid arthritis fell 14.4% in 2020, to $ 3.7 billion. The decline was due to competition from biosimilars. But note that Johnson & Johnson has well over two dozen end-stage clinical trials and an even greater number of phase 1 or phase 2 studies.

These candidates offer the pharmaceutical company many opportunities to compensate for products whose sales are stagnating. The company had more than half a dozen regulatory approvals or submissions in the fourth quarter alone. Johnson & Johnson’s pharmaceutical segment is well positioned to continue adding new products to its line (or adding new indications to existing products) practically every quarter.

A major concern with Johnson & Johnson is the lawsuits that plague the company. However, I am not, as a shareholder, concerned with these possible legal issues. The company recognizes the financial losses arising from these lawsuits in progress in its financial statements when these losses can be “reasonably estimated”.

And having handled thousands of lawsuits in the past few decades, the company does not believe that its current legal problems will have any material effect on its financial position. For example, during fiscal 2020, the drugmaker spent $ 5.1 billion on litigation expenses (the same amount it spent in 2019), which represented just 6.1% of its sales for the year.

Leaving aside this potential obstacle, the strength of Johnson & Johnson’s pharmaceutical business, along with its medical devices and consumer health segments, makes it worthwhile to keep these pharmaceutical stocks in its portfolio in the coming decades.

2. Square

“We believe that everyone should be able to participate in the economy,” says financial services expert Square, featured on his website. How is the company doing its part to make this goal a reality? First, Square attracts small and medium-sized business owners, offering efficient payment processing options. The company also offers payroll services, small business loans, e-commerce services, invoices and more.

Square’s product library is vast, and while many of its competitors offer alternatives to some of its solutions, few offer so many in one place. Once a company joins Square’s ecosystem, it is likely to expand the range of solutions it acquires from the financial services company. CEO Jack Dorsey once referred to Square’s ecosystem as being “extremely sticky”, giving it a powerful competitive advantage.

Square has also expanded into the area of ​​personal financial services thanks to its point-to-point mobile payment application, Cash App. The application now allows users to invest in stocks or cryptocurrencies as well. The Cash App also offers direct deposits and a debit card with ATM withdrawal options. Square’s Cash App and its vendor ecosystem continue to help it deliver solid financial results.

During the fourth quarter of 2020, ended December 31, the company recorded total net revenue of $ 3.2 billion, representing an increase of 140.5% year on year. Square’s gross profit for the quarter grew 52% year-over-year, to $ 804 million. Meanwhile, the cash app’s gross profit was $ 377 million, 162% higher than the same period last year. Square’s vendor ecosystem recorded a gross profit of $ 427 million, 13% higher than in the previous year’s quarter.

Square still has a long path of growth, which makes it an excellent action to keep in its portfolio in the coming decades. Analysts see the company’s revenue increasing by 39.6% over the next five years. Square took less than 3% of a $ 100 billion opportunity for its vendor ecosystem and less than 2% of a $ 60 billion opportunity for its personal financial services offerings.

Thanks to the “adherence” of its salesperson ecosystem and increased brand awareness, the company appears determined to continue to profit from these long-term opportunities for many years. Because of these factors, I have no doubt that in 10 years – or even looking at a longer period of time – Square’s shares will more than double.