Stocks to Hold Forever
One Great Oil & Gas Stock
The following actually happened to me two weeks ago, as my wife
and I were preparing to fly from Boston to Dallas on our way to
After we passed through the ID check, we joined a group of
people queuing for the X-ray conveyor belt and the body scanner. My
wife was in front of me. But another group was also queuing for the
same conveyor belt, so we were merging. And things were moving very
slowly, so some people were getting impatient, while others were
Among the former group was a woman who-with the usual body
language-indicated her intention to merge behind my wife and in
front of me, despite the fact that we were clearly traveling
So Zen-like, I motioned that she should do so.
At which a nice woman behind me said to the first woman, "You
could have let him go."
Woman 1 snapped back, "Why? I've been waiting longer than you."
Woman 2, "But they're traveling together."
Woman 1, "So what. I'm not tied to my husband."
Woman 2, "I'm just trying to be considerate. We'll all get through
Woman 1, "Why are you bothering me? Why don't you just stop
Woman 2, "Well, I won't talk to you anymore."
Woman 1, "Good!"
And that was that. I can't remember the last time two women
fought over me. And my wife, pre-occupied with putting her stuff on
the conveyer belt, missed the whole thing!
But it got me thinking. About culture. About civility. And above
all about impatience, which is the cause of so many investments
On that subject, here's a button with a maxim worth
Now, if you clicked on the button, you read an interpretation
that included the phrase, "patience means holding patiently as your
stock climbs, until you get an exit signal." For most of us, this
Cabot has had a slew of big winners like First Solar, Chipotle
Mexican Grill, Crocs, and International Game Technology thanks in
part to the rule that says, "Let your profits run."
But for a very rare group of investors, patience means holding
on forever-and this can be a very good strategy. In fact, less than
two weeks ago, I wrote about this strategy of holding stocks
forever, and if you missed it, you can read the whole column here:
Stocks to Buy and Hold Forever.
The main points were these:
- That if you work hard to target stocks with the greatest
growth potential, and then simply hold them forever, you avoid the
common mistake of selling a great growth stock too soon.
- That some of your stocks will fail, and bring you big
- But the few big winners that double, and then double
again and again over the years will far outweigh those losers.
- And if you simply keep holding, you'll pay no taxes on
your gains, and pass them to your heirs!
Now, the simple fact is that very few people make really big
gains in stocks, and the main reason is that most don't try! Sure,
they have dreams of making a killing, but they have no plan for how
to do it!
Yet, as we all know, your very best ally in the investing
business is time. And holding forever is the best way to put that
ally on your side, permanently. So this strategy of holding forever
just might be the best way for you to avoid the most common
mistakes of most investors.
But you've got to buy the right stocks.
And what are they?
1.They're the stocks of companies with revolutionary goods and
services that are likely to be in big demand by growing numbers of
customers. Alternatively, they're the stocks of companies
benefiting from revolutionary changes, like scientific discoveries
or government legislation.
2.They're the stocks of companies that are still relatively
small, and thus have room to grow.
3.They're the stocks that are not currently loved by investors
and thus have the potential to benefit from improved perception as
the years go by.
So what stocks would you buy today if you wanted to hold them
forever . . . and you wanted them to make you (and your heirs)
A little over five years ago, I asked this exact same question.
And I put my head together with the other Cabot editors and came up
with a list of 10 stocks. (You can read all about them in my column
from two weeks ago.)
Since then, while some are down big and some are up big, the
AVERAGE return for these 10 stocks was 52.4%. By comparison, the
S&P 500 LOST 2% over the same period.
That's a great result, and reason enough to do it again. So I
recently polled my editors to work up a new "never-sell" list of
stocks, and I'll be writing about them in the weeks ahead, one at a
time, so as not to overwhelm you. And I'll cover them in
The first stock is unusual, in that the company sells not a
revolutionary new product or service but a basic commodity. Its
EOG Resources (
and what it sells is oil and natural gas.
(Note: The E stems from Enron, whose name was mud for a while,
but those troubles are long gone, and you shouldn't let them
influence your thinking.)
What should influence your thinking is the fact that a
revolution has taken place in the oil and gas industry, and that
revolution is fracking, which enables access to vastly more oil and
gas deposits at lower cost and is likely to lead to energy
independence for the U.S. as early as 2020.
Understanding that, it makes a lot of sense to invest in a
leader in the industry.
Headquartered in Houston, EOG is one of the largest independent
oil and gas companies in the U.S., with nearly eight billion
barrels of oil equivalent (
) of natural gas and more than two billion (
) of oil and natural gas liquids. These deposits are largely in the
Bakken (North Dakota) and Eagle Ford (Texas) shales, and those
numbers are growing.
For 2012, analysts are looking for earnings growth of 44%, and
for 2013, 16%, but that's probably conservative.
In the latest quarter, EOG's after-tax profit margin was a
whopping 15.9%, which is astounding for the industry. The stock's
forward PE ratio is 19, and the dividend is 0.6%, and is raised
nearly every year.
Finally, EOG has been named to Fortune Magazine's list of "100
Best Companies to Work For" for the past six years.
Now, what's interesting about this stock pick is that it comes
from Tom Garrity, the ace editor of Cabot Small-Cap Confidential.
Tom has never mentioned EOG in that letter, and that's no surprise;
it doesn't fit the model for his letter. Most stocks Tom recommends
have never been noticed by most investors.
But the fact that of the 31 stocks recommended since the start
of 2009, Tom still owns 20, with an average open profit of 31.50%
per stock is a big reason to take notice of any stock he
So, you could just plunge in and buy EOG here. Or, you could
check out Tom's regular letter, and see what unknown stock he
uncovers next. That's what I recommend.
Yours in pursuit of wisdom and wealth,
Cabot Stock of the Month
Get-Rich Stocks and Stay-Rich Stocks