The only five stocks you’ll ever need to own

There are two approaches to successful long-term investing. The first is making rapid decisions on a day-by-day basis, quickly getting in and out of positions for quick gains over and over again, with the premise that each gain will add up over time to lead to big profits. The second approach, and the one we will focus on in this article, is to buy shares of solid companies that will be strong players for years to come and holding on to them for the long haul.

The idea is that as the overall market moves higher and lower, so will pretty much every stock. You will never find a stock that avoids selling pressure at some point in its history, but over an extended period of time, the markets always tend to trend higher as more and more money flows in. Based on this concept, if you can find five stocks that are leaders in their sectors, and are in sectors that are expected to remain strong in the future, you can pinpoint five stocks that will trend higher over the long-term, and at least keep pace with the overall market.

The one principle that we have to be sure to respect before suggesting just five stocks to own forever is that of diversity. There is no way you would want to use five stocks from the same sector, and in fact, if you are just dealing with five stocks you should probably make sure that each of the five companies operate in different sectors in order to keep a decent level of diversity in your portfolio.

Sectors that come to mind when you think of those which have expected longevity include technology, finance, food, healthcare, and energy. You can easily argue that each of these five sectors will play an important role in day-to-day life for decades to come.

While it is true that there are plenty of sectors that will also be of importance moving forward, such as defense and auto, I would argue that the above five play the most important roles in our day-to-day lives and therefore have the best chance of keeping pace with the broader market.

Working off those five sectors mentioned above, I have come up with a list of five stocks that I believe are the only five stocks you ever need to own.

Google

In the world of technology, it is hard to imagine a company better positioned for future growth and success than Google (GOOGL). The company has a sound track record of success in virtually every business it has tried to enter, with Google TV perhaps being the one big exception. The company is now a leader in both the software and hardware side of the tech world. It goes without saying that Google dominates the internet with its search engine, but it also has the most widely used mobile operating system in Android. While Android is open-source software, and while it is true that Google does not make money off of Android, its importance to the company can not be overstated. Google makes money off adds run on its mobile operating system, and from apps users download. Its real value is what it adds to hardware devices that Google is launching as it moves into the hardware side of things. Wearable technology, a new Android television that it recently announced, tablets, etc. all get instant credibility because of the Android platform. People love Android, and Google will be able to use this affection to establish stronger footholds in hardware markets it decides to enter. Google is a very innovative company, and looking ahead, the sky is the limit for the “king of search.” In my opinion GOOGL is the only stock you need to own in the tech sector.


Chart courtesy of stockcharts.com

Visa

In the finance sector, I like payment processor Visa (V). The main reason why I opted to go with a payment processor is the ongoing trend away from physical money towards electronic payments. Increased online shopping and an expected growth in mobile payments with smart phones and next smart watches means the use of physical money will continue to decline. In addition, credit card usage is building internationally, and in a lot of places around the world they are just now becoming a common part of every day life. As a result, electronic payment processing is going to assume a bigger part of day-to-day life moving forward, and I think Visa is the best-positioned company to take advantage of this. The company establishes relationships with other financial institutions, and is not in the business of doing any actual lending. Visa simply handles the transactions, avoiding the hassle and expense of issuing cards, setting interest rates, etc. Visa has a well-established brand name, and is poised to be a leader in the financial sector for years to come.


Chart courtesy of stockcharts.com

Monsanto

One thing the world will always need is food, and as populations continue to expand, and resources grow thinner, farmers are going to need to maximize their output. This is where Monsanto  (MON)comes in, providing seeds and various agricultural products to help farmers achieve higher yields through genetically engineered seeds which are designed to boost yield and be more disease and insect resistant. While some would argue against Monsanto's genetically engineered seeds, the reality of the situation is that in the future, food demand is going to increase significantly, and farmers will have no choice but to boost output as much as possible. Population growth has spiked over the last century, with the world's population rising from 1.2 billion to over 7 billion in just the last 120 years, and is expected to climb to 9 billion by the year 2050. This growth is going to put a strain on food supplies, and I believe that Monsanto will be a major player in ensuring enough output to satisfy the increased demand. This makes MON a great stock to buy and hold for years to come.


Chart courtesy of stockcharts.com

Johnson & Johnson

In the healthcare sector, I like Johnson & Johnson (JNJ) the most. The company is a strong player in several healthcare sectors, including personal care, pharmaceutical and medical devices and diagnostics. Its consumer business is strong due to the strong brand recognition of its products, and its rather diverse lineup of personal health products. While the company is primarily known for its consumer goods, its pharmaceutical and medical devices segments are also strong, and will most likely continue to grow moving forward. The U.S. population is not only growing, but it is also growing older, which creates a positive scenario for the company. The baby-boomer generation continues to reach retirement age, and as this demographic ages it will create higher demand for healthcare-related products and drive revenues in sector for the next several decades. Of all the sectors, I believe healthcare has the best outlook over the next twenty years, and you would be hard pressed to find a better company in the sector than Johnson & Johnson.


Chart courtesy of stockcharts.com

Exxon Mobil

With the possible exception of food, energy is the single biggest need of the world both today and moving forward. Without energy, everything comes to virtual standstill. Oil and gas are vital components to, among other things, keeping cars on the road, keeping factories in operation, and heating and cooling our homes and offices. As important as energy is today, it will become an even more precious commodity in the future. Population growth will undoubtedly lead to higher energy demand, and Exxon Mobil (XOM) is positioned to remain one of the biggest energy suppliers in the world. Not only does the company have huge oil and gas reserves, it has an outstanding track record at replacing its production with added reserves. In 2013, it replaced more than 100% of its production, which marked the 20th consecutive year of doing so, and over the last ten years it averaged 120% production replacement. As of the end of 2013, the company boasted reserves life of 16 years at its current production rate. The company has a proven track record of growing its reserves, but even if that were to stop completely (which it won't), the company could thrive for another 16 years. Energy will continue to play a vital role in our day-to-day lives, and Exxon Mobile will almost certainly continue to be an industry leader.   


Chart courtesy of stockcharts.com

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.


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Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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