Buying stocks for a long time has many advantages, as, when chosen correctly, it promises to make significant profits and eliminates the risks of temporary volatility and downturns in the stock market.
Investing in stocks over the long term requires a patient approach and understanding of industry trends. So, today many investors are investing their money in such areas as electric vehicles and alternative energy sources, self-driving cars, online commerce, delivery services, cloud computing and others. If investments in the shares of companies in these spheres were made 5-10 years ago, the deposits would have already increased several times. Plus, you don’t need to be a thorough expert in a particular field to invest in a growing trend.
The experience of renowned billionaires such as Warren Buffett shows that long-term ownership of good stocks often pays off both in value and multi-year dividend payments.
Long-term market statistics, according to research by The Balance, show that in the entire history of the broad benchmark S&P 500 index, the worst return on its shares was negative 3%. Thus, judging by history, the stock market as a whole is always growing, and recessions and corrections on it are, as a rule, temporary – they are replaced by “bull markets”.
Of course, a lot can happen in 10 years, so it’s important to choose only the strongest companies if you look that far. Here are three stocks to compose a diversified portfolio of long-term investment stocks.
1. Floor & Decor Holdings
Floor & Decor (FND) is a large, fast-growing American company that specializes in the sale of flooring materials and related products.
Floor & Decor had 140 warehouse format stores in 32 U.S. states as of the end of the first quarter of fiscal year 2021.
The company has five favorable factors and competitive advantages that make a long-term investment in Floor & Decor a good idea:
1. An ever-growing market for housing and home improvement sales amid the growing US economy.
2. The advantage of Floor & Decor in the form of a huge range of products in large areas of its specialty stores.
3. Due to the store-warehouse format, Floor & Decor always has goods in stock, which favorably distinguishes the company’s stores from such competitors as the specialized company LL Flooring (LL), which adheres to the strategy of a small showroom. Traditional home improvement retailers Lowe’s and Home Depot (HD) also have limited flooring options due to space constraints.
4. Focus on professional clients (design and construction firms).
In 2020, the number of professionals participating in the Floor & Decor loyalty program has grown by 74% compared to the same period last year. At the same time, such loyalty program participants spend on average three times more than non-registered clients of the professional sphere.
5. Among the additional advantages of Floor & Decor are its own lending offers, free design services, free storage.
Floor & Decor statistics
With the goal of growing from a chain of 140 stores to a chain of 400 stores, Floor & Decor should show strong growth in share value and be very profitable in 10 years.
Floor & Decor is up 70% over the past year and up 235% since it went public in 2017.
Today, it’s hard to imagine a more inopportune time for an IPO for a travel company than 2020.
However, this is exactly what Airbnb (ABNB) did on December 10, 2020.
At the same time, the almost absence of growth over this period can be viewed by long-term investors as a good chance to buy these shares at a low price with the prospect of holding them for a long time.
The COVID-19 pandemic is temporary and has further demonstrated the value of travel and experience over just shopping for consumers.
A huge plus of Airbnb is that it is a world-famous brand, most of the international traffic it receives comes naturally. In addition, in addition to rental housing – Airbnb is a platform for buying experiences: tickets to various concerts, events and workshops. Overall, the company believes its market opportunities are valued at $ 3.4 trillion.
Plus, Airbnb sees tremendous opportunity in the move to remote work, as people can live anywhere. In the first quarter of 2021, 24% of bookings were more than four weeks long, leading management to state that travelers are “living on Airbnb.”
All of this instills confidence that Airbnb’s revenues are set to skyrocket over the next decade, as will its stock.
Founded in 2009 by Twitter (TWTR) co-founder Jack Dorsey and friend Jim McKelvey, the fintech startup Square (SQ) has become a fintech giant.
The company was one of the first alternatives to commercial banks and offered an easy way to pay for merchant services in mobile.
Less than a decade later, Square built a database of millions of small businesses that used its app to accept credit card payments, track sales, and get funding.
The number of active customers per month for its Square Cash app surpassed 36 million in 2020.
The company also recently launched the Square Messages feature for merchants to communicate with buyers, as it sees a trend that consumers do not want to call in the company, but want to communicate the same way as with their friends: via messages. Collecting data from Square Messages through artificial intelligence software will enable companies to offer customer relationship management tools.
Square has multiplied its revenues over the past three quarters, aided by the ability to settle through its cryptocurrency app.
With a balance of nearly $ 6 billion in free funds, Square is well positioned to acquire third-party services and businesses.
Square shares are up 93.5% in the past year. Below is a graph of Square’s stock value since its IPO in 2016.