2024's Most Promising Long-Term Stocks with Exceptional Growth Potential!

2024's Most Promising Long-Term Stocks with Exceptional Growth Potential!

 For some investors, the holding period for stocks can range from days to weeks or months. However, smart investors tend to focus on the long term, often looking at decades rather than short-term gains. The legendary investor Warren Buffett, from Berkshire Hathaway, famously mentioned that his favorite holding period is "forever."

 While not every stock will be held indefinitely, the sentiment behind Buffett's statement resonates with many investors. The ideal approach is to invest in businesses with strong long-term prospects, allowing investors to buy and hold without constant worry about short-term fluctuations driven by economic figures or earnings reports.

 To identify such stocks, top portfolio managers were asked for their single pick that investors could confidently buy and hold for many years, even adopting a "Robinson Crusoe" approach – a metaphorical term suggesting complete confidence in the long-term outlook. These are the stocks that offer stability and growth potential, giving investors a sense of security in their investment decisions.

---

Diageo

Bill McMahon, Chief Investment Officer of Active Equity Strategies at Schwab Asset Management, has identified Diageo (Ticker: DEO) as an appealing investment opportunity. As a prominent London-based spirits company, Diageo boasts an extensive and recognizable portfolio, encompassing well-known brands like Tanqueray gin, Guinness beer, and Johnnie Walker Scotch whisky, among many others. 

Although the pandemic-induced boom in sales provided a momentary surge, Diageo's share price has since stabilized, presenting an attractive entry point for value-oriented investors. 

McMahon believes that investors may be overly cautious in the short term, overlooking the company's long-term attractiveness. Diageo's unmatched global presence, with sales in over 180 countries, grants it a strategic advantage, enabling it to leverage market trends effectively. 

Particularly promising growth opportunities lie in premium tequila categories, owing to the company's ownership of prestigious brands like Don Julio and Casamigos, as well as in emerging markets such as China and India. 

The dividend payout of 2.15% further enhances Diageo's appeal to investors, with the potential for continued growth in the future. 

Recent stagnation in the stock's performance might be attributed to the exceptional sales during the pandemic, leading to unfavorable comparisons. Additionally, concerns over potential recessionary trends and the financial health of the U.S. consumer have likely influenced investor sentiment. 

While the analyst community awaits the next earnings report before showing significant enthusiasm for the stock, McMahon believes there is substantial upside potential, referring to Diageo as a premium franchise worth considering for investment.

---

 LVMH Moët Hennessy Louis Vuitton

For truly long-term investors, the "Robinson Crusoe" philosophy, named after the famous shipwrecked protagonist, offers an excellent approach. The idea is to imagine being stuck on a desert island for years with all your personal wealth invested in a single stock that you can't trade. In this scenario, the stock you choose must be one that you have complete confidence in for the long haul. 

For Eaton Vance's Dyer, that stock is LVMH Moët Hennessy Louis Vuitton, a global luxury goods company known for its iconic brands such as Louis Vuitton, Christian Dior, and Tiffany & Co. While the company is listed in Paris, American investors can purchase American depositary receipts (ADRs) under the ticker LVMUY in the over-the-counter market. 

Dyer looks for companies with strong growth potential, high returns on capital, healthy gross margins, significant cash flow for reinvestment, a robust balance sheet to weather crises, pricing power to counter inflation, and a trustworthy management team. LVMH ticks all these boxes and stands out for its collection of aspirational and highly valued brands. 

Acknowledging that the stock is not cheap, Dyer emphasizes the enduring appeal of LVMH's products and the potential for growth in Europe and China, which should offset any cyclicality concerns. 

In the context of the desert island analogy, Dyer believes that after a decade, an investment in LVMH would have appreciated by double digits every year, making it a compelling choice for long-term investors seeking consistent growth and appreciation.

---

First Citizens Bancshares

Investors faced uncertainty this year due to troubles in Silicon Valley Bank, which had repercussions on several regional banks. However, Oakmark legend Bill Nygren suggests considering an under-the-radar gem in the financial sector: First Citizens, often regarded as the "biggest and best bank no one has heard of." 

First Citizens came into the spotlight when it was chosen to acquire SVB's business, a deal approved by the FDIC to stabilize the sector and prevent further contagion. Despite not being widely recognized like CEOs of larger banks, First Citizens' CEO, Frank Holding Jr., has delivered remarkable performance since taking the helm, leading to a substantial increase in the bank's stock price. 

Even after the significant rise in share price following the SVB deal, Nygren believes that First Citizens is still undervalued, offering potential for further growth. One reason for this is the bank's expertise in acquiring distressed banks and successfully integrating their assets. This has earned the bank a special relationship with the FDIC, giving it an advantageous position in auctions of troubled banks. 

For value-conscious investors, Nygren highlights that First Citizens' B-shares (FCNCB) are trading at a roughly 10% discount to the A-shares. Although they may have lower liquidity due to less frequent trading, these supervoting shares are even more attractively priced for those looking for long-term investments. Nygren suggests that investors who buy these shares and hold them for the long term could find an even better value opportunity.

---

 Generac

With extreme weather events becoming more frequent, some companies find themselves benefiting from the uncertainty and increased demand for reliable power solutions. One such company is Generac, a leading player in the backup generator business. 

As outages become more commonplace, both homeowners and businesses are realizing the need for setting up their own sources of dependable power. This trend works in Generac's favor, making it one of the rare stocks that thrive in a chaotic world. 

While the stock initially experienced a significant surge during the pandemic, driven by interest in "green power" stocks, it has since settled into a more reasonable valuation, making it appealing to value-focused investors like Ariel managers. 

Generac's growth prospects extend beyond residential customers, as commercial businesses also require reliable backup power. Additionally, regions increasingly affected by extreme weather present untapped markets for the company. 

The rise of electric vehicles and the work-from-home trend further bolster Generac's potential. Electric vehicle owners will need charging options during outages, while remote workers depend on consistent power availability in their home offices. 

Given the increasing challenges posed by extreme weather and the aging electric power infrastructure, Generac is well-positioned to address these needs. Ariel's Kuhrt believes that just based on the backup generator business alone, the stock should be trading higher. When factoring in the other aspects of its business, such as smart thermostats, battery storage systems, remote monitoring platforms, and lawn equipment, the company's potential for significant upside becomes evident.

---

 Realty Income Corp.

The commercial real estate business is facing challenging times due to the work-from-home trend and rising interest rates from the Federal Reserve. However, one smart long-term play, according to Neuberger Berman's Jones, is Realty Income, a reputable $41 billion real estate investment trust (REIT) with a conservative focus on "net lease" properties. 

Net lease REITs like Realty Income own real estate assets leased to tenants responsible for all property operating expenses and taxes, resulting in defensive and diversified cash flows. The company boasts a massive portfolio of 12,400 properties, primarily leased to long-term commercial tenants. 

Investors, especially income-oriented ones, appreciate Realty Income's REIT structure, which mandates distributing 90% of taxable income to shareholders as dividends. As a result, the stock offers a payout exceeding 5% and has increased its dividend 120 times since its public listing in 1994. This consistency led to its inclusion in the S&P 500's Dividend Aristocrat index in 2020. 

While the U.S. economic outlook remains uncertain, Jones sees significant growth potential for Realty Income abroad, particularly in Europe. The net lease financing industry in Europe is at an earlier stage of development compared to the U.S., providing the company with substantial growth opportunities. 

Although the stock's performance hasn't been stellar in recent years, it has remained relatively stable compared to more highly leveraged competitors who faced challenges in the real estate landscape. Additionally, Realty Income's size advantage makes it an attractive potential partner for mergers, further enhancing its prospects. In sum, Jones finds Realty Income's prospects to be "compelling."

---

 How we picked 

To identify the best long-term stocks, we conducted a poll among experienced fund managers at major mutual fund companies. Each portfolio representative was asked to recommend one stock that met certain criteria: solid fundamentals, an attractive valuation, and high growth potential. 

Our focus was on companies with strong brands and economic moats, capable of withstanding future challenges. We also sought companies with the potential for significant stock price appreciation over the long term. 

Note that the forward price-to-earnings ratios represent estimated earnings over the next 12 months, and all share prices are as of July 30, 2023.

---

 DISCLAIMER: The content presented in this blog is based on information and insights from various sources, including but not limited to The Wall Street Journal. While we strive to ensure the accuracy and reliability of the information provided, we cannot guarantee its completeness or timeliness. The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of The Wall Street Journal or its affiliates. Readers are encouraged to conduct their own research and seek professional advice before making any financial or investment decisions. The blog is intended for informational purposes only and should not be construed as financial advice. The Wall Street Journal is not responsible for any actions taken based on the information presented in this blog. Readers are advised to verify the information from other sources and consult with financial experts and professionals before making any investment decisions.

image credit :https://www.freepik.com/