10 Best Long-Term Stocks to Buy and Hold Forever

Are you a beginner or seasoned investor looking for the best long-term stocks to maximize your returns?

The stock market is a perfect avenue for long-term wealth accumulation, and this investing style offers advantages that allow you to ride out short-term price fluctuations in the market and compound your returns.

In this article, we will discuss the best stocks for long-term investment, a detailed analysis of each stock, critical factors to consider when picking stocks and portfolio rebalancing.

 

10 Best Long-term Stocks to Buy Now

Whether you are a newbie or a seasoned investor or still deciding on your investment style, here are some of the best stocks to invest in 2023 for long-term consideration:

*Data are retrieved from Yahoo and Google.

Let’s take a look at these stocks

Microsoft (MSFT)

Microsoft is a dominant player across various software sectors, encompassing operating systems, cloud services, gaming, application software, and the burgeoning field of artificial intelligence, exemplified by its innovative Bing chatbot.

Microsoft is a compelling choice for long-term investors due to several key attributes. The company boasts consistent earnings, maintains a conservative financial approach, and generates substantial free cash flow. Furthermore, it not only pays dividends but also allocates a significant portion of its free cash flow towards share buybacks.

However, Microsoft’s stock isn’t necessarily undervalued in relative or historical terms. For instance, Microsoft’s current forward price-to-earnings ratio stands at 30.4, exceeding its five-year average of 28.6. Nonetheless, it remains below the long-term average of the S&P 500.

For instance, in August 2023, Microsoft reported a remarkable 21% year-over-year increase in fourth-quarter earnings per share, an 8% revenue growth and a 12% surge in free cash flow from the previous year.

Furthermore, Microsoft retains ample capacity to enhance its shareholder-friendly initiatives over time. Presently, the company dedicates roughly half of its free cash flow to dividends and buybacks, while the remainder is channelled into debt reduction, investments, and acquisitions.

Notably, Microsoft has an impressive track record of raising its dividend for 18 consecutive years, reinforcing its position as a Dow Jones stock worthy of inclusion in long-term investment portfolios.

 

McDonald’s (MCD)

McDonald’s is one of the best stocks to invest in 2023 for the long term. It has a dedicated customer base that cherishes its menu, particularly its iconic fries and hamburgers.

Several reasons for its attractiveness include:

• Its consistent generation of substantial free cash flow. Over the last 12 months, ending on March 31, MCD yielded an impressive $5.7 billion in free cash flow, equivalent to 2.7% of its $212 billion market capitalisation.
• Utilises free cash flow wisely to reward investors through a generous dividend, currently yielding 2.1%. Additionally, the company has repurchased nearly $3 billion worth of its shares in the past year.
• Maintains a conservative financial approach, adeptly managing its $37 billion in long-term debt, which reduces to $33.3 billion when accounting for available cash, all within the confines of its ongoing free cash flow generation.
• Consistently raised its dividend for an impressive 46 consecutive years, a testament to its commitment to rewarding long-term investors.

Adding to its allure, MCD stock is currently attractively valued, trading at just 26.8 times earnings. While not in the realm of bargain prices, this valuation stands below its five-year historical average.

 

Procter & Gamble (PG)

Procter & Gamble stands as a consumer products conglomerate with an impressive portfolio of iconic brand names, These include household staples like Downy detergent, Mr. Clean cleaning supplies, and Head & Shoulders shampoo, all of which contribute significantly to the company’s robust cash flow.

While Procter & Gamble’s brands enjoy widespread recognition and solid reputations, not many investors realize the true profitability of the company. PG, in fact, emerges as a standout choice among the best long-term investment stocks for several compelling reasons.

Here’s why:

• PG recorded a staggering $15.2 billion in operating cash flow for the past 12 months ending on 30th June. This figure is after accounting for $3.0 billion in capital expenditures (capex), and the company still generated an impressive $12.2 billion in free cash flow.
• What makes this even more remarkable is that PG’s free cash flow equates to a substantial 15% of its sales of $81 billion in the last twelve months (LTM). This is a remarkably high free cash flow margin, especially for a consumer products entity.
• The company has an impressive track record of annual dividend increases spanning 66 consecutive years. In its recent earnings call, Procter & Gamble’s management disclosed plans to repurchase $5 billion to $6 billion in common stock during the current fiscal year, equivalent to approximately 1.5% of its market capitalization.
• Notably, PG’s current valuation remains reasonable, trading at just 26.5 times earnings, a figure comfortably below its five-year average of 35.0.

 

3M (MMM)

3M is a formidable industrial conglomerate operating across four key sectors: safety and industrial, healthcare, transportation and electronics, and consumer goods. At its core, 3M is driven by a mission to leverage the power of science to enhance people’s daily lives.

3M also stands out as an exceptional choice among long-term investment stocks. A prime example of this is the company’s impressive performance in the second quarter, where it generated $1.5 billion in free cash flow and returned $800 million to its shareholders through dividends.

In addition to its strong dividend appeal, 3M’s stock presents an enticing value proposition, trading at just 11.6 times Forward Earnings, notably below its five-year average of 16.6.

What further enhances its investment appeal is the company’s conservative financial approach. As of the end of Q2, 3M reported a net debt of $11.7 billion, reflecting a 12% reduction from the previous year.

Considering its substantial cash flow, consistent dividends, share buybacks, compelling valuation, and prudent financial management, 3M emerges as a compelling long-term investment opportunity, especially for value-oriented investors.

 

Coca-cola (KO)

Coca-Cola stands as an iconic beverage company renowned for its flagship brands such as Coke, Diet Coke, Fanta, Powerade, and Minute Maid, consistently generating substantial cash flow for its investors. It is definitely one of the best stocks to invest in 2023 for the long term.

This solidifies its position as an appealing choice for long-term value investors, a sentiment echoed by Warren Buffett, whose Berkshire Hathaway (BRK.B) holds the largest stake in KO.

One of the standout features that renders KO a compelling investment is its status as one of Wall Street’s premier dividend stocks, with an unbroken streak of dividend increases spanning 60 years. Most recently, Coca-Cola raised its dividend by nearly 5% in February.

Currently, KO stock boasts an attractive yield of 3%, with the prospect of ongoing dividend growth.

KO’s dividend payments and share repurchases are comfortably sustained by the anticipated $9.5 billion in free cash flow expected to be generated at the end of 2023.

Moreover, this consumer staples stock currently trades at a price-to-earnings ratio of 25.6, notably below its five-year average of 32.1.

For long-term investors, KO stock presents a compelling investment proposition, thanks to its strong cash flow dynamics and investor-friendly initiatives.

 

Apple (AAPL)

Apple Inc. is renowned for its iconic iPhone smartphones, Mac computers, iPads, and various products and services.

While iPhones continue to command the lion’s share of the company’s sales, Apple has gradually diversified its revenue streams.

Its services segment, which encompasses the App Store and more, has been on the rise. In its most recent quarter ending April 1, Apple’s services generated revenue of $20.9 billion, constituting 22% of its overall $94.8 billion in sales. The strategic shift away from over-reliance on highly-priced iPhones has garnered favor in the market.

Apple’s management of its financial resources is evident through its substantial free cash flow and surplus funds after meeting operational expenses. In the last quarter, Apple reported a robust operating cash flow of $28.6 billion, concurrently returning over $23 billion to its shareholders.

Apple currently offers a modest dividend, recently increased by 4% to 96 cents annually. Importantly, this dividend hike amounted to just $3.7 billion, constituting 13% of its operating cash flow.

It’s important to note that AAPL stock is currently trading at 28.7 times forward earnings, surpassing its five-year average of 23.7, as per Morningstar. Nonetheless, it remains below the S&P 500’s average valuation.

In summary, Apple retains its status as one of the premier long-term investment stocks, underpinned by its consistent and robust cash flow, commitment to dividends, and proactive share buybacks.

 

Johnson & Johnson (JNJ)

Johnson & Johnson is an enduring giant in the healthcare industry, renowned for its unwavering stability.

It proudly holds a AAA credit rating—a distinction shared by only a select few on Wall Street. J&J’s operations within the healthcare sector are impressively diverse, encompassing a consumer health division featuring household names like Tylenol and Band-Aid, along with a robust portfolio spanning medical devices, prescription drugs, and vaccines.

The company has also earned a reputation as a dependable dividend stock, exemplifying its consistent commitment to its shareholders.

In April, Johnson & Johnson marked a significant milestone by increasing its dividend for the 61st consecutive year. This is a testament to its unwavering dedication to rewarding investors and making music to shareholders’ ears.

With demographic shifts in the U.S. and global markets driving increased demand for healthcare solutions, Johnson & Johnson is positioned for resounding success in the future.

 

NextEra Energy Inc. (NEE)

Regarding long-term investing, one cannot miss out on defensive stocks, especially for the utilities industry. Thus making it one of the best stocks to invest in 2023 for the long term.

These companies, such as NextEra Energy, often operate as geographic monopolies and are subject to strict regulations as they provide indispensable electricity services vital to businesses and consumers.

Among these utilities, NextEra stands out as the largest publicly traded utility stock on Wall Street. With a diversified portfolio encompassing wind, solar, nuclear, coal, and natural gas facilities serving approximately 12 million people, NextEra boasts a century-long legacy.

While its dividend yield may not be the highest compared to other stocks in its category or elsewhere, NextEra compensates with unparalleled scale and stability, providing investors with a sense of security that few can match.

 

Medtronic (MDT)

Medtronic stands as a prominent player in the medical device and therapies industry. This company is renowned as the original inventor of the pacemaker and holds significant appeal for individuals seeking top-notch retirement stocks.

This company is attractive towards investors because of its consistently robust profitability, enabling it to distribute generous dividends and engage in substantial share buyback programs.

As of the present moment, MDT stock offers an attractive 3.2% dividend yield, a figure that is poised to ascend further. Remarkably, Medtronic has bolstered its dividend payouts for an impressive 46 consecutive years, including a 1.5% increase in May.

With a price-to-forward-earnings ratio of just 17.1, Medtronic’s stock is deemed attractively priced. This valuation stands notably below MDT’s five-year average of 19.1 times, as reported by Morningstar.

In addition to that, Medtronic maintains a healthy financial position, carrying approximately $17 billion in net debt compared to its substantial $52 billion in shareholders’ equity. As the company’s cash flow continues to rebound from previous supply chain challenges, it is poised to reduce its reliance on debt over time gradually.

Given its robust cash flow and commitment to delivering value to shareholders, MDT is a compelling choice as one of the best stocks to invest in 2023 for the long term.

 

Amazon (AMZN)

Amazon is one of the best stocks for long-term investment and hardly requires an elaborate pitch for most investors.

The company is commanding in the U.S. e-commerce sector, while its Amazon Web Services (AWS) cloud platform is a dominant force, substantially outperforming its closest rivals, Microsoft and Alphabet.

Nonetheless, it’s worth noting that Amazon possesses even greater growth prospects than might meet the eye. E-commerce adoption in the United States has considerable room for expansion, representing just over 15% of total retail sales.

In cloud computing, the industry remains in its relative infancy, poised to expand fourfold to reach a staggering $2.3 trillion market by 2032.

Additionally, Amazon is poised to leverage its potential in diverse sectors, including healthcare, grocery stores, local markets, and beyond.

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Key Factors to Consider for Long-Term Stocks

When you are doing your research on a stock for your long-term investing, it is important to have a checklist of factors to consider.

Here are a few key considerations to keep in mind:

1. Company Fundamentals and Financial Health

Identify companies that have strong financials, which means they have a good balance sheet with low levels of liabilities and more assets, positive cash flow and increasing earnings growth.

2. Management Team

While often overlooked, a company with a strong management team with a solid track record in academics, experiences in the field and past success stories are good indicators that the company is well-managed. This is one of the long-term investing factors to consider when buying into some of your best long-term stocks.

3. Competitive Advantages or Unique Selling Point

Competitive advantages are distinguishing features that set the company apart from its competitors and can help you determine if it is one of the best stocks for long-term investment. They also contribute to the overall strength and appeal to investors. Some factors to look into are:

Strong brand name: A good example is Apple, which has successfully curated a positive reputation and ecosystem among consumers. This brand recognition gathers customer loyalty and trust. Thus, enduring a strong market presence.

Unique products: Coca-cola has its signature soft drinks, and this is a competitive edge in the market. You, as an investor, should look at this factor as a tangible differentiator in their offerings.

Proprietary technology: An example of a company that exemplified this trait is NVIDIA, which specializes in graphics processing units (GPUs) and artificial intelligence (AI) technologies. This trait translates to market leadership and can challenge other competitors to replicate.

 

Crucial Guidelines for Long-Term Investments

1. Build a Solid Financial Foundation

• Before buying into some of the best stocks for long-term investment, establish a rainy-day fund to cover daily expenses and emergencies.
• Clear outstanding debts and ensure you have funds for unexpected expenses.

2. Define Your Time Horizon

• Determine your investment goals and the time frame you want to achieve them.
• Longer investment horizons provide more opportunities to take on risk for potentially higher returns.

3. Select an Investment Strategy

• Have a clear investment goal and strategy for your investment in some of the best stocks for long-term investment
• Consider financial advice, risk tolerance, and the understanding of your chosen investment.
• Ensure your investments are regulated and protected.

4. Decide on Investment Style and Vehicle

• Choose between lump-sum or periodic investments.
• Consider starting with smaller amounts to reduce risk and adapt to market fluctuations.
• Be mindful of tax implications and utilize tax-efficient accounts like ISAs.

5. Diversify Your Portfolio

• Invest in a mix of assets to reduce risk and balance returns.
• While stocks can offer high returns, consider other assets like bonds for stability.

6. Global Diversification

• Diversify your portfolio across different geographical regions to capture varied market opportunities.
• Recognise that no single country has all the best companies.

 

The Role of Portfolio Rebalancing in Long-Term Investing

What is Portfolio Rebalancing?

As you construct a portfolio tailored to your long-term objectives, the risk-to-return balance may shift over time.

Consequently, it becomes essential to periodically assess the portfolio’s asset allocation and adjust it to align with your financial objectives.

This ongoing process of readjusting the allocated assets to match their target distribution is called Portfolio Rebalancing.

Why is it important?

• Diversification

Over time, asset allocation in your portfolio may shift due to varying returns from different asset classes, which can lead to misalignment with your financial goals and reduce diversification.

Thus, portfolio rebalancing allows you, as an investor, to realign with the original asset allocation and ensure diversification is maintained.

• Risk Management

When one asset class significantly outperforms another, you may unknowingly increase your risk exposure.

Portfolio rebalancing involves reducing the overgrown asset class to manage and control risk levels within acceptable limits.

• Maximize Returns

Effective portfolio rebalancing allows you to lock in profits on some of the best stocks for long-term investments during bull markets while averaging your investments during bear markets. This strategy aims to capture market volatility to enhance returns.

It can yield a 2% to 3% Alpha (outperformance) compared to the benchmark, thus increasing overall returns.

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Final Thoughts

Reflecting on the Long-Term Investment Landscape

If you decide to become a long-term investor, you have to keep in mind to be patient and avoid panicking during market ups and downs to yield positive outcomes.

Markets can be volatile, even if you buy into some of the best long-term stocks. You should also know that hanging onto investments for a long time typically pays off.

Staying Informed and Adaptable in a Dynamic Market

To adjust your strategy effectively, it’s essential to stay abreast of market dynamics. This involves tracking trends, keeping current with industry advancements, and maintaining a strong connection with your customer base to comprehend their evolving requirements and preferences.

This entails monitoring economic indicators like interest rates, inflation, and GDP growth, along with industry-specific trends as well.

I suggest doing your research on the best long-term stocks that have been mentioned above, always remembering to pay attention to major issues, including the state of the economy, and carefully diversifying your portfolio.

 

Frequently Asked Questions

 

*General Advisory Disclaimer:

This article provides advice that does not factor in your objectives, financial circumstances, or requirements. Prior to taking any action based on this information, it is important to assess the suitability of the provided information in relation to the characteristics of the relevant financial product, taking into consideration your objectives, financial situation, goals and needs.