What are the best stocks to anchor a portfolio? Which securities should investors buy and hold forever? These are not easy questions to answer. Profitable companies with durable competitive moats tend to reward investors over the long haul. Free cash flow and competent management can also lead to higher returns.
It isn’t easy to find these stocks, but these investments exist. They can generate compounding returns for investors over many years. Interestingly, there’s a British investor named Nick Sleep who became rich by investing only in the following three stocks and holding them for more than a decade. Perhaps they could work for your portfolio too. Here are the three best forever stocks to buy for August 2023.
Berkshire Hathaway (BRK.A/BRK.B)
Former hedge fund manager Whitney Tilson likes to call Berkshire Hathaway (NYSE:BRK.A / NYSE:BRK.B) “the number one retirement stock in America.” He believes that the company’s Class B shares should form the basis of any portfolio. Tilson isn’t alone in his praise of BRK.B stock. The holding company of famed investor Warren Buffett continues to attract investors who value portfolio diversification, stable returns, and free cash flow.
Berkshire Hathaway’s stock is currently trading near an all-time high after reporting strong second-quarter financial results. But don’t let that dissuade you from taking a position. Shares have been on an upward trajectory for nearly 60 years now and continue to appreciate over time. The record highs for the stock come after Berkshire reported that its operating earnings rose 6.6% year-over-year to $10.04 billion in Q2. Berkshire also reported that its cash holdings reached nearly $150 billion in the quarter ended June 30. Berkshire Hathaway has been earning big returns on its cash hoard due to high-interest rates.
BRK.B stock has gained 23% over the last 12 months and it’s up 75% over the past five years.
E-commerce company Amazon (NASDAQ:AMZN) looks to be getting its house in order after suffering an 18-month hangover following the Covid-19 pandemic. Broad-based cost cuts, such as 27,000 job cuts, look to be taking hold and improving the Seattle-based company’s bottom line.
After lagging behind the broader market and most of its mega-cap tech peers during 2022, AMZN stock is once again resuming its upward trajectory. The stock’s recent success has reminded investors that the company is built for long-term success.
AMZN stock recently popped 10% after the company issued Q2 results that handily beat Wall Street estimates and raised its forward guidance. Earnings per share of 65 cents were 85% higher than the 35 cents expected on Wall Street. Analysts especially liked that advertising across Amazon’s various services and platforms totaled $10.7 billion in Q2, also beating consensus forecasts.
The overall results were Amazon’s biggest earnings beat since Q4 2020 and are a reminder to never count out this e-commerce behemoth. AMZN stock has now gained 63% this year.
The loyalty exhibited by its customers makes Costco (NASDAQ:COST) the envy of the retail world. The company’s annual membership renewal rate sits at an astounding 90%. This level of loyalty helps to explain why COST stock has risen 25% this year and is up 156% over five years. The value customers see in its groceries and other items that are sold “at cost” makes the company largely immune to economic cycles.
In a recent note to clients, investment bank Oppenheimer (NYSE:OPY) raised its price target on COST stock to $630 a share and wrote that “Costco has one of the most defensible moats in all of retail.” The company’s same-store sales may have cooled recently, but they have remained resilient despite warnings of a coming recession.
The company seldom raises its membership fees but can easily do so while maintaining most of its customers. A potential membership fee hike could help the company boost its earnings. Brand loyalty and resilience during economic uncertainty make Costco a must-buy long-term stock.
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