Active trading is a risky endeavor. To stay one step ahead
of the pack, active investors need to continually monitor existing
stock holdings while also researching new investment ideas. It
takes a lot of time, and for many, simply parking money into an
is a much easier path.
What is the downside of this strategy? These funds hold a range of
investments that can bring mixed results. Moreover, the expenses on
the funds can often eat into returns, and that really adds up when
the power of
[Read on to learn more on compounding: "
How to Get Rich Slowly
Perhaps the wisest move is to find a handful of great investments
and hold on to them for a very long time. The
will be minimal, and your portfolio won't be weighed down by
Here are five companies that could easily form the core of a
well-rounded portfolio. Each company has been around for a long
time and is likely to remain as a major force for many years to
come. In fact, you could probably hold onto these five stocks
1. Procter & Gamble (NYSE:
Investment advisors often suggest owning "consumer staple" stocks,
though you can simply focus on the industry's strongest player:
Procter & Gamble. The maker of brands such as Crest, Iams,
Bounty, Duracell and Tide will be celebrating its 175th anniversary
Sales grow at a slow pace every year, but they really build a head
of steam over time: P&G's sales rose nearly 100% from 2002 to
2010. Most important, P&G continues to boost its exposure to
the world's most dynamic
such as China, India and Brazil.
2. General Electric (NYSE:
At the height of the 2008 economic crisis, many wondered if this
was still relevant. After all, a big bet on financial services
wrought havoc on the company's
, briefly pushing them below $10 for the first time since 1995.
The scare proved to be short-lived and shares have rebounded,
though they still trade for less than half of what they fetched in
the middle of the last decade. This may prove to be a good entry
point for investors looking for a long-term holding, however. GE
has steadily repositioned itself to capitalize on the latest major
trends in the global
The company builds state-of-the-art energy-efficient equipment for
power plants (with exposure to both fossil fuel energy and clean
energy such as wind), holds leading
in transportation equipment such as jet engines and hybrid
locomotives, has developed a strong platform of health care
technologies And maintains a major presence in the financing of
global infrastructure products.
GE truly appears on the mend.
Earnings per share (
peaked at $2.20 in 2007, fell to $1 by 2009 and are expected to
steadily rise back to around $1.65 by 2012. As the global economy
expands in the next few decades, GE should grow right along with
3. Citigroup (NYSE:
This may seem to be an odd choice for a long-term portfolio.
Citigroup has caused all kinds of pain for investors in recent
years. But behind the scenes, Citigroup has been transforming
itself into a major global player. CEO Vikram Pandit has sought to
reduce Citigroup's exposure to the weak U.S. economy while
aggressively investing in the world's most dynamic emerging
economies. Right now, North America and Europe constitute about
two-thirds of revenue. But emerging markets are expected to grow at
a faster pace than Europe and North America in coming years, so
that revenue mix may move closer to 50/50.
If the dollar weakens further, as many economists predict, then
that international exposure will really pay off as Citigroup's
rise in value.
The Simple Ways to
from the Falling Dollar
4. Cisco Systems (Nasdaq:
Cisco was one of the hottest stocks of the 1990s and one of the
most disappointing stocks of the last decade. This technology firm,
which makes a range of products from telecom switches to
video-conferencing systems, began to lose focus as management
poured resources into a range of new initiatives (such as the
star-crossed Flip camera).
Management is now duly chastened and vows to do better. Even as
the company searches for the right rebound formula, business is
still pretty good. Cisco generates roughly $10 billion in annual
free cash flow
and has boosted sales at least 10% in six of the last seven years
(which seems disappointing for a company that boosted sales in
excess of 20% every year in the 1990s).
Thanks to more than $5 billion in annual spending on Research &
Development (R&D), Cisco is ensuring its next generation of
products remains on the leading edge of technology trends. Whatever
money is left over after R&D spending is going toward major
share buybacks. The company announced a $10 billion buyback plan in
November 2010 after previously buying $72 billion of its own stock
since 2001. Shares of Cisco are out of favor while the company
re-focuses its efforts, creating a perfect entry point for
investors looking to build a long-term portfolio.
These 3 Companies are Buying Back BILLIONS of Their
5. Ford Motor (NYSE:
This automaker has executed a remarkable
. After flirting with bankruptcy a few years ago, major cost cuts
-- coupled with an outstanding lineup of new vehicles -- has put
Ford back on the road to health.
Shares rose nearly 1,000% from 2008 to early 2011 but have since
pulled back by a considerable amount. For long-term investors, the
pullback is a great entry point, as Ford's best days still lie
The company is earning around $2 a share every year even as the
auto industry posts sales levels well below prior peaks. Industry
analysts expect auto and truck sales to rise higher in the next few
years, which should help Ford to generate even stronger profits.
The Most Affordable Fuel-Efficient Cars of 2011
Action to Take-->
All of these companies share a few key traits: seasoned management
teams, global exposure and fresh product lineups. All have been
around for many decades (with the exception of Cisco Systems, which
was founded in 1984), and all figure to dominate their respective
markets many decades into the future. If you're looking for stocks
buy and hold
forever, then these five companies should be at the top of your
-- David Sterman
P.S. -- If you're looking for quality stocks with high yields,
you should take a look at this one. It pays a 19.2% dividend yield.
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Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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