Three Long Term Investment Candidates
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Why is it that the average person considers holding a stock for 6 month to be “long-term” anymore? Our fast paced society has cut down our definition of what is really “long” in investing. But long term should be “long-term” and its importance has not fallen by the wayside even though its meaning might have. So if an investor is looking for stocks to invest in for many years to come, what type of parameters should an investor use? Look for well established companies with business models that have withstood the challenges of time and market change. When you have identified a company like this, then make sure it is paying a dividend because these are very valuable over the long term. Make sure these companies have world-known brand names.
Here are a few examples:
Nike (NYSE: NKE) is a globally recognized sports clothing and shoe company that has solid branding recognition. The company has struggled with the global anemic economic conditions though. Like most companies this quarter, its income fell 12.1% from year to year even though revenue rose. While revenue has increased the last four quarters, gross margins have shrunk for the last 5 due to higher material and energy costs. So the company is in a very challenging market right now. But the company has been there for its investors in good and bad times. Since 1993, Nike has an excellent and very consistent record of above-average earnings growth of 11.1% per annum, and a consistently rising dividend.
Generally speaking, the company did not grow as fast as the industry as a whole. Revenues for the industry averaged 19.2% while Nike saw revenues rise by 12.2%. But management has done well keeping the debt level of the company below the industry average while at the same time increasing cash flow to $974 million or 15.67% when compared to the same quarter last year. So in the trying times, management has kept the company moving forward and consistently grown its dividend when possible.
Starbucks (NASDAQ: SBUX) is a company you have heard of and unless you are sequestered have sat in its shop with a cup of coffee. When people think of coffee this is the company that comes to mind because the brand name has gone global! This is a great long term investment company as long as it continues to do what it has done well to make its name synonymous with coffee. It will continue to grow and expand for years to come. As an example of one of its regional plans to grow and develop, let’s look at Europe.
Starbucks’ annual revenue from sales in the European region, which includes Africa and the Middle East is just above 8% but its new expansion plan is projection that growth the come to 12% by 2016. It has what it calls its “Starbucks Renaissance Plan.” It wants to be seen the same way in Europe as it is in Manhattan — on every corner, with a cup in everybody's hand. It started using TV to advertise even though it has never used it before. It started running these in Great Britain last spring.
Finally Pepsico (NYSE: PEP) is one with a global brand no matter what a consumer’s income level. Pepsico's business of selling beverages and snacks on a global basis could be understood by a third grader. The Pepsi brand is also ubiquitous in many parts of the world, and over the next 20 years, it is likely that the number of consumers who will be introduced to its brand and products will continue to grow. To give you an example of its marketing and growth capabilities just in our neck of the woods: As the emerging markets develop and expand its middle class, there are companies like Companhia de Bebidas das Americas (NYSE: ABV) which is the largest brewer in Latin America, fifth largest in the world and largest bottler of Pepsico products also.
The company is strong and consistent. It is projected to grow its EPS at a rate of 7% over the next three years, which is in line with historical performance, so this is a good indication that past performance will continue. Even though it dropped in revenue last quarter (like most stocks), the company managed to outperform against the industry average of 3.3%.
Here are three companies that have been around with globally recognized brands that will be around for years to come and pay decent dividends. They are worthy of your further study to see if they are good long term investments for your portfolio.
johnmylant has no positions in the stocks mentioned above. The Motley Fool owns shares of Nike, PepsiCo, and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Nike, PepsiCo, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.