Stocks for the Next 100 Years

As an iconic brand turns 110 years old, it got me thinking about which companies you can have confidence will still be around in 100 years... Before I get to my thoughts on that, I'll wish a happy birthday to American snacking stalwart Oreos... Source: Instagram/@oreo Longtime readers will recall that I am a fan […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Stocks for the Next 100 Years By Berna Barshay As an iconic brand turns 110 years old, it got me thinking about which companies you can have confidence will still be around in 100 years... Before I get to my thoughts on that, I'll wish a happy birthday to American snacking stalwart Oreo...  Source: Instagram/@oreo Longtime readers will recall that I am a fan of Oreo's parent company, food giant Mondelez (MDLZ). I first wrote about Mondelez back in the [July 10, 2020 Empire Financial Daily]( and I said I liked MDLZ shares because of the company's "great brands, marketing, and global scale." Since that recommendation, MDLZ shares have put up a respectable return of 28%... but they have underperformed the benchmark S&P 500 Index, which is up 40% over the same time frame. A 28% 18-month return is better than a sharp stick in the eye... It equates to about an 18% annualized return, almost twice the S&P 500's annualized return over the past 25 years. When it comes to putting up stock returns, Mondelez is kind of the tortoise to the hare of whatever today's hot tech stock is... With growth that is much lower but also less volatile than today's hottest thing, consumer packaged goods ("CPG") companies like Mondelez tend to do better when fear is higher, and greed is lower. It's not a surprise that about half of Mondelez's 18-month return came since the beginning of December, when things got rockier in high-growth land...  I like to have a mix of investments in my portfolio... I invest in value stocks, growth stocks, special situations, international stocks, small caps, etc. When it comes to maximizing long-term returns, it's a great strategy to mix potential home run high-growth names – the ones could be multi-baggers in less than a decade – with some of the tortoises. When I talk about potential home runs, I mean stocks like [home rental exchange Airbnb (ABNB)]( and [video game company Roblox (RBLX)](. These aren't cheap stocks... but their growth runway is massive. (My colleague Enrique Abeyta focuses exclusively on these types of aggressive growth names in his Empire Elite Growth newsletter – you can learn more about his approach [right here]( --------------------------------------------------------------- Recommended Links: [Tech titans are racing to invest in 'the next Industrial Revolution']( The world's leading tech titans are putting their money into an industry that could disrupt every aspect of our lives. Already, Microsoft's Bill Gates, billionaire entrepreneur Peter Thiel, and famed venture capitalist Marc Andreessen among others, have poured in billions of dollars. [To learn about this red-hot industry and the one little-known company at the forefront of this revolution, click here](. --------------------------------------------------------------- [Legendary investor who grew his fund 130,000% calls biggest tech of the next 100 years]( It's going to change the way we work, shop, play, bank, travel, and even purchase real estate. It could even change the way we attend live events and obtain legal advice. In fact, it could be the most important tech of the next 100 years. [Click here to see which four stocks could soar](. --------------------------------------------------------------- Sure, stocks like Airbnb and Roblox are sexier and more fun to talk about than companies like Mondelez... But you need conviction and fortitude to own them, because they're also much more volatile. This could not be clearer today, following both companies reporting earnings last night. Airbnb topped both revenue and earnings expectations, and the stock is up around 5% today. Revenue growth of 78% was just extraordinary, and the fourth quarter wrapped up what CEO Brian Chesky called "the best year in the company's history." After initially suffering from the abrupt stoppage in travel at the beginning of the pandemic, Airbnb is now benefitting from the changes in how we live that are the direct result of the pandemic. Remote work has led to a class of nomadic workers booking longer stays. Almost half of fourth-quarter stays at Airbnb were for a week or more, and 20% of nights booked were part of stays that were a month or more. Things weren't as rosy over at metaverse favorite Roblox. The company missed Wall Street estimates for both revenue and earnings, as well as the number of daily average users ("DAUs"). Like Airbnb, Roblox was a huge pandemic beneficiary, as young gamers turned to it as a way to fill time that normally would have been devoted to in-person activities like sports, lessons, and socializing. That rush of activity has created big headwinds to continued growth in engagement... Basically, Roblox is having difficulty "comping the comp." As its users return to normal life, it is seeing per capita spend – aka monetization – drop on the platform. Roblox is still the single best stock I can think of to play the growth of the metaverse. It has a long growth trajectory ahead... but it's down around 26% today and 47% year to date, after putting up an extraordinary 129% return in 2021. With the recent pullback, it's now up just 20% since its market debut last March...  I think this sell-off creates a compelling entry price for RBLX shares, although admittedly that is of little comfort to frustrated shareholders today. I like to pair off aggressive growth names like Roblox and Airbnb with lower-growth, less volatile names like Mondelez... High-flyers tend to be vulnerable to sell-offs all at once – like we have seen during the past few months. You want to take advantage of volatile times and buy good long-term growth stories when they are down... but it's easier to have the stomach for that if you have some slow and steady names that provide a ballast for your overall portfolio. The "tortoises" hedge the "hares," which helps to keep emotions in check when the markets hit a speed bump. But it's also important to remember that the best tortoises can also be multi-baggers... They will just take longer to get there. For the tortoises, the triples and quadruples may happen over decades versus years for the hares. Of course, everyone wants to make money faster, not slower... but it's also important to remember that your batting average is probably going to be a lot higher when picking the tortoises rather than the hares. Identifying the best tortoises is a pretty intuitive exercise... Just ask yourself which companies you can never imagine disappearing. I once met an analyst who told me that her firm's investing time horizon was 100 years... I had never heard that before. I knew of mutual funds that professed three-, five-, or even 10-year investment horizons. At the other end of the spectrum are hedge funds that trade around events and quarterly reports... These funds turn over their assets multiple times in a year. Taking it even further, some high-frequency trading quant funds only hold stocks for minutes – or even just seconds. A 100-year time horizon was a new one for me, and I asked what made the cut. The answer was mostly CPG companies... Procter & Gamble (PG) was one of them. With Oreo's birthday on my mind, I asked my husband what stocks would make the cut for his 100-year portfolio. He offered tech giants Alphabet (GOOGL) and Apple (AAPL) along with chipmaker Nvidia (NVDA) as the tech portion of his portfolio and rounded out his list with retailer Target (TGT) and burger chain McDonald's (MCD). The next morning, he woke up and added broker Charles Schwab (SCHW) to the list. I actually pushed back against his whole tech portfolio. I think all three names he picked are great – we even have open recommendations in paid newsletters on two of the three – but my position is that if you are looking out 100 years, there is no tech or health care name that will make the cut. Things just change too fast in those industries. I told him 30 years ago he would have picked IBM (IBM) and Dell (DELL) for his tech firms... and that wouldn't have worked out so well. He conceded that maybe he was thinking in 10-year terms. Pushing out the clock to 100 years, I would agree with his pick of [McDonald's]( a company I have written about favorably many times. To his list I would add other names that should be familiar to Empire Financial Daily readers... [spirits giant Diageo (DEO)](... [luxury goods conglomerate LVMH (MC.PA)](... coffee chain Starbucks (SBUX)... as well as CPG stars Mondelez, Hershey (HSY), and Lindt (LISN.SW) – clearly, I think eating chocolate is never going out of style. I also named media giant Disney (DIS) as one of my 100-year picks, before quickly retracting it, based on a number of things I have observed during the short reign of new CEO Bob Chapek... This conversation actually took place before [Disney's blowout earnings last week](. I was concerned about how the changes taking place in the Parks division were going to create short-term windfalls but could also erode customer loyalty with some of the company's highest value customers. But after sleeping on it, I decided that since Mickey Mouse is already 94 years old and the company is in fact just beginning its 100th year in business now, I'm putting DIS shares back on my 100-year list, recognizing that even the long-term survivors will experience peaks and valleys along the way. So here's my list of stocks for the next 100 years: Diageo, Disney, Hershey, Lindt, LVMH, McDonald's, Mondelez, and Starbucks. It's very weighted to eating and drinking because those are the only things we are doing now that I have high conviction we will still be doing in 2122. Even if the metaverse takes off, we will still have to come up for sustenance every so often. I offer this list with the giant caveat that checking on how these are doing in anything less than 10 years will tell you nothing, given the 100-year time horizon! But I do believe this analytical exercise is a good one for balancing out your bets on high-flyers. In the mailbag, I'm pulling out a pair of reader letters from early January that seemed on point with today's topic... Which stocks would make your list for a 100-year time horizon portfolio? What do you think of my choices and my husband's? Let me know via e-mail by clicking [here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Berna). "You asked about our thoughts on 2022, and frankly my concerns are all about what I see as a deteriorating quality of equities to pick from going forward... I see so many of the 'movers' as companies that are so dependent on growth (vs. having a strong cash flow or earnings focus) that I feel sometimes my options break down to gambling in a fairly rigged (against the individual investor) market... "I've done well in the most recent run up, but I'm retired now, and I don't have the income streams or time horizon to sustain another crushing reset in the market... my request for 2022 would be some suggestions for people like me on where to more safely (and rationally) direct our investment activity to minimize our risk... "Thanks, and have a great holiday!!!" – James C. Berna comment: James, I actually read your letter after writing today's essay... But I think my 100-year list might offer some candidates for safer investments. "Hi Berna – I'm not making any major moves, other than to prepare my shopping list for when the market turns around and I can go bargain hunting. The only thing I sold recently was the Financial Select Sector SPDR (XLF), after Whitney cautioned a few weeks ago that the easy money in financials has been made. I sold XLF for a solid gain and bought a Vanguard ESG fund instead. Who gave me the wise advice to load up on ESG...? "I did make one minor move – I sold an SPDR S&P 500 ETF (SPY) call spread and bought shares of the Proshares Ultrashort S&P 500 ETF (SDS) – both make money when the S&P 500 index falls. "In the long run, betting on the bear is a losing game, but in the short run it can soften the blow of a market plunge. "My advice to worried investors is to take the long view. I've been investing in stocks since 1998, and I've used every big dip – tech bubble, financial crisis, COVID plunge – to load up on good stocks that were selling at a ridiculous discount. The other thing I did was never sell parts of my retirement fund during a selloff. Instead, I stayed fully invested and, if I could, upped my contributions to take advantage of the dip. 20+ years later, I'm way ahead. Finally, I've kept the vast, vast majority of my savings tied up in broad index funds rather than in individual stocks. "Be well, prosperous, and healthy." – Paul P. Berna comment: Given that this letter came in around New Year's, I must congratulate you, Paul, on what we know with hindsight were some excellent, winning trades. With the S&P 500 down about 7% year to date, those call spreads and SDS shares must have been big winners. Well done! Regards, Berna Barshay February 16, 2022 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. 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