Topic: How To Invest

Finding good companies for long-term investments isn’t easy, but here’s a start: focus on blue chips and hold the good ones indefinitely

good companies to invest in

Uncover good companies for long-term investments and you will boost your portfolio returns over time. Learn more here and discover one of our top picks.

Long-term stock investment strategies aren’t built to make a fast dollar. They are built to prosper over time, and most importantly, teach you how to pick the right stocks.

In our view, your goal as an investor, particularly if you follow a conservative investing strategy like the one we recommend, is to make an attractive return on your investments over a period of years or decades. Failure means making bad investments that leave you with meager profits or losses. Continue reading to learn about good companies for long-term investments.

How Successful Investors Get RICH

Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' for FREE from The Successful Investor.

How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.


Visa Inc., symbol V on New York, is on our list of good companies for long-term investments

Visa has been a terrific performer for our subscribers since we first recommended the stock at $19 (adjusted for share splits) in the December 2010 issue of our Wall Street Stock Forecaster newsletter.

A big part of Visa’s appeal is that it gets most of its revenue from the fees it charges card issuers and merchants using its network. This unique business model means the banks—and not Visa—are responsible for evaluating customer creditworthiness and collecting payments, which helps to cut risk for investors.

The company first sold its stock to the public at $11 a share in March 2008. We held off recommending it at that time, as the best way to cut the risk of investing in initial public offerings is to wait till after the next market slump and/or recession comes along. Thanks to Visa’s unique business model, it was able to avoid big losses during the 2008-2009 financial crisis.

Even though rising interest rates and inflation could slow consumer spending, we feel Visa has many more years of growth ahead. The COVID-19 pandemic accelerated the shift to online shopping, while the easing of restrictions will spur the use of credit and debit cards to pay for airline tickets and hotel rooms.

Visa is also making shrewd acquisitions that enhance its expertise in new areas, such as buy-now-pay-later payment plans. These moves will let it stay ahead of smaller firms with potentially disruptive fintech (the combination of financial services and technology services). 

The company also continues to reward investors. In the first half of fiscal 2022, it spent $7.05 billion on share buybacks. It still has $9.8 billion remaining under its current authorization.

Visa has also increased its dividend each year since the 2008 IPO.

Visa is a buy for long-term gains.

Spotting good companies for long-term investments lets you profit from long-term growth in the economy

For decades—as long as I’ve been involved with the stock market—some brokers have claimed that they favour the “buy and hold” investing strategy in principle, except when the market was so treacherous and unpredictable that their clients had to indulge in short-term trading, options or whatever to make any money.

Brokers have powerful financial incentives to recommend this kind of switch. The alternate investing methods they recommend involve higher fees. These fees leave their clients far less likely to make significant profits, but they virtually guarantee that the broker’s income will go way up.

Meanwhile, though, savvy investors generally resist this switch. They recognize that you can’t predict market swings, but you can profit from long-term growth in the economy, and from the wealth creation that takes place in well-established companies.

Uncover good companies for long-term investments when you start with blue chip companies

We believe that investors should devote the biggest part of their portfolios to large, well-established “blue chip” securities. At the same time, though, a strong portfolio anchored with blue chip stocks offers the opportunity to invest a smaller part of your portfolio in promising smaller companies without subjecting yourself to excessive overall risk. And the best of these smaller companies may one day grow into blue chips themselves.

Shares of large, well-established companies generally have a market “cap” (that’s short for “capitalization,” or total value of shares outstanding) of billions of dollars. They usually rebound better than other stocks from downturns.

“Small caps” are smaller companies with a market capitalization below some arbitrary figure, such as $1 billion. They are typically more volatile—rising more quickly in bull markets, but often falling quicker in market downturns, and rebounding more slowly.

To succeed in today’s volatile markets, you’ll need to own shares in a variety of companies of varying sizes. But here’s one thing your best choices will have in common: each will be about the right size to succeed in the business it is in.

Use our three-part Successful Investor approach for all of your investments, including finding good companies for long-term investments

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight. 

Do you expect Visa’s value to continue growing, or do you think its acquisitions will hinder its growth?

Do you have a strategy for investing while there is so much uncertainty in the market?

Comments

Tell Us What YOU Think

You must be logged in to post a comment.

Please be respectful with your comments and help us keep this an area that everyone can enjoy. If you believe a comment is abusive or otherwise violates our Terms of Use, please click here to report it to the administrator.