20 stocks you can actually buy and not have to think about again

Taking the concept to it's limits

If I had a dime for every time(bars) that I saw an article or video about the only stocks you ever need to own, or about stocks that you can buy and throw away the key, I would have at least a couple dollars. Most do not take seriously at all the claim they make and just choose a hodgepodge of commonly bought and well-regarded stocks. I will not be doing this. I will limit my selection down to the stocks you truly can buy and own for a very very long time if that’s your cup of tea. They have moats that are as wide as the Grand Canyon. I will create a list of 20 equally weighted stocks and track their results over time without changing the portfolio. I will tell you a little about what each business does and the moat they have. This is not financial advice as I do not know your situation, needs, and tolerances. My goal of this portfolio is for it to be sufficiently strong enough to where if I was given 3 million dollars, and that was the only money I could ever receive through any means for my whole entire life, and I was not allowed to invest in diversified funds but only through businesses, I would sleep well at night with this smaller but well-designed basket.

Financial Castles

1. Royal Bank of Canada

Royal bank of Canada has their hands in all the cookie jars, sugar cookie, choco chippy cookie, peanut butter crunch cookie, etc. They are the largest Canadian bank, and they are growing in America as well. Their business segments are laid out as follows from highest portion of revenue to smallest portion, personal and commercial banking, wealth management, capital markets, and some insurance and investor services. They are incredibly competitively advantaged because in Canada the 5 largest banks control 90% of the market as opposed to the thousands of banks in America. Regulation from the government keeps new competitors from entering, and the more regulated environment also means Canada’s banks have been way lose prone to crisis’s than America. They earn chronically high returns on equity that most large US banks could only dream of and continue to reinvest and grow. There will always be a need for banking, at least as much as any industry out there, and Canadian banks are very good businesses. They will be for a long time, and the cream of the crop is Royal Bank of Canada.

2. Berkshire Hathaway

   I usually try to keep Berkshire out of my posts not because they do not deserve a place, but because I feel it can be a little bit of a cheat code and not provide any new ideas to readers. But this fits too well. Berkshire has a large stock fund that will continue to grow over time, in addition to dozens and dozens of businesses Berkshire owns privately. The most important being Geico, BNSF railroad, and their utilities. They own dozens more like Dairy Queen, the company that makes squish mallows, and Fruit of The Loom. Berkshire’s advantages that will keep it a good investment regardless of Warren’s incredible management is a few simple things- They have a culture of rare actual rational investing that will never go away, they have far less bureaucracy, red tape, and engagement in corporate nonsense than you will find almost anywhere, and they always operate with integrity and conservatism that allows them to do things nobody else can. Honestly you could have multiple millions in Berkshire alone and I would not be scared for you.

3. Toronto Dominion Bank

   The thesis here is very similar to Royal Bank of Canada. Toronto Dominion Bank is the second largest Canadian Bank and enjoys all the benefits of the Canadian environment. They have put up a fantastic performance over the past 2, 3, 4 decades and have successfully grown with very high returns on equity and disciplined underwriting. However, TD has had a legitimate setback as of late due to a breach in their anti-money laundering policies. They failed to be strong enough there, and as a result they now will have to deal with a limit on their growing presence in the U.S, and a slight tarnish to their brand. Overall, if you’re thinking about 30,40,50,60 years, TD is still a business that has natural moats and will earn high returns on equity in an environment that will grow and be a need indefinitely.

4. JPMorgan Chase

I said earlier that the big Canadian banks earn returns on their equity that big U.S banks could only hope to achieve, but JPMorgan is an exception. JPMorgan has an incredibly strong brand, culture of excellence, and very conservative underwriting/balance sheet. I do not see JPMorgan losing deposit share over time, or having a banking catastrophe, and they should continue to enjoy high returns on equity for a long time.

5. American Express

American Express is at this point a payment processor first and a credit card company second. Payment Processing is a fantastic business, and the credit card business is pretty good by itself. Both are industries that will grow over time, and I do not see American Express losing market share as they have an incredibly strong brand that commands respect, and they provide far more services, deals, and high-quality service to their customers than their competitors. The unmatched treatment of their clients and prestige of their brand will keep them earning their high returns on equity for a long time.

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Industrial Dawgs

1. Union Pacific Corp

Railroads are highly likely to be important for a long time. They transport goods at long distances for much lower cost and carbon footprint than both trucks and airplanes can. There will always be a need to transport goods and given that railroads transport goods long distance the cheapest with the exception of large boats which only work if there is a water way available railroads will continue to be a need for a very long time. There are only 7 railroads that control practically the whole market across Mexico, America, and Canada. Each business is well protected from competition as once a railroad has its thousands of miles of track established it basically locks all the profits that will flow from goods transported in those areas. A competing railroad will not set up a track in the exact same path because that would lead to overcapacity. Both railroads might not get to use their trains to their full capacity and will likely engage in a pricing war. In this situation both businesses suffer. The regulation and the massive amounts of capital needed to get to scale a functional railroad also help to keep the competition out. They earn good but not fantastic returns on capital and will continue to do so for a long time.

2. Canadian National Railway

   The thesis behind UNP and CNI are so similar I won’t waste your time too much. The big differences behind these two is that Canadian National Railway is the only railroad with tracks running through to the Pacific, Atlantic, and Gulf. CNI also has a lot more rail in Canada whereas UNP has a stronger footprint in the West to Midwest of America.

3. Waste Management

Waste Management is the largest provider of waste management services in America. They operate both the collection of trash and disposal into the landfills they own, and they are building out facilities to use the natural gas that can be extracted from waste. Waste will always be a need and is a growing need. The business is incredibly moaty because it is not just capital intensive but quite difficult to get approval for landfills. In addition, once a city has a contract established with Waste Management it is highly likely to be renewed as it is very costly to cities to switch and the large majority of times the risk of switching to another Waste Management company is not worth any potential savings in the cases they do exist. Waste management earns decent returns on capital and should continue to for a long time.

4. OMA airports

   I have written before about how good airports are so I will keep it short. OMA airports and ASR airports operate you can probably guess airports in Central America (mostly Mexico). The number of domestic and international travelers have been consistently growing over time in central America and will likely continue to do so. ASR and OMA are given exclusive rights to operate airports in certain areas, and there are no competitors at almost all of their airports for 50, 60, 70, 80 miles. They add more revenue over time through advertising space in the airports, the parking garage, the stores within the airports, the right for an airline to use the airport, and off ticket sales. ASR has very low debt and earns good returns on capital while OMA has low debt and earns very good returns on capital. It is a good business to be in.

5. ASR airports

Look to OMA for the analysis of ASR.

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Data and Processing Dominators

1. S&P Global

S&P Global provides credit ratings for businesses, has the rights to benchmarks/indexes, and also provides market and commodity insights/data. Credit ratings are fantastic to be in because there are only really 3 companies who can give credit ratings and will continue to really only be 3 businesses who rate the safety of debt. So, when a business needs to issue debt, they need to inform investors on how likely it will be that it gets paid back for investors to be interested in buying the bonds. Since investors, want a source they deeply trust as to how safe their bonds are they always go with the established respected players. In addition, regulation helps to keep there only ever really being 3 used raters. This will be a stable/growing need forever.

Now to explain the indices side. Many people buy stock funds, when you buy an etf tracking the S&P 500 or any of the many mutual funds that compare themselves to the S&P 500, you are supporting S&P Global. S&P Global partially owns the company that decides what goes into the S&P 500 or not. Since investors use the S&P 500 and other indices as a baseline to judge the performance of almost all the investments they make, companies will compare themselves against the index. In order for a fund or ETF to say they are tracking the index, use the name of the index, or be given real time access to the index data they have to pay a fee to S&P Global. Many funds do not aim to track an index created by S&P Global, use the name, or need the data, but many do, and for those funds which over time have been growing in popularity they need to pay SPGI. If you are wondering what are the chances that the many passive funds (which will continue to grow) will want to track an SPGI index continues just look at this list of their top indices. The S&P 500, Dow Jones Industrial Average, S&P Midcap 400, S&P Small Cap 600, S&P dividend aristocrats, Dow Jones U.S Real estate index, and the Dow Jones U.S dividend 100 index (used for SCHD).

SPGI also provides market data and commodity insights that are absolutely essential to utilities, banks, insurance companies, and other groups. SPGI is one of the most trusted and respected for this need because of their prestige, long history of excellence, and established relationships that make them one of the few who can get the data needed for their clients.

Overall SPGI operates in an area that will always be a need and that is an oligopoly, another area that will always be a need due to passive investing and SPGI permanently owns some of the most valuable indices, and they have a strong data business in a growing need for organizations where SPGI is likely to do well over time. Their margins and returns on tangible capital are fantastic and they have low debt, so they are a good choice for this list.

2. Moody’s Corporation

I took a longer time explaining SPGI partially because I wanted to make Moody’s and MSCI easier to understand, so the next ones should not take as long. Moody’s operates the other largest credit rating business in the world. They earn very nice returns on capital from this oligopoly, and because businesses will always need access to debt, and investors demand the businesses have ratings, and because Moody’s is one of the only 3 that are accepted, Moody’s will always have a big place in this fantastic growing industry. It is not talked about as much as other big investments of Warren Buffet’s like Coke or American Express, but Warren has owned over 10% of the business for over 25 years and has said it has a terrific moat. Their growing analytics business is also high margin business that will be a growing demand for a long time, and Moody’s is well positioned due to the strong trust in their brand, the switching costs of their cloud-based products, and their proprietary large databases.

3. MSCI Inc

   MSCI’s most important business is their indices licensing business so I will focus mainly on that, but MSCI also operates an analytics business, provides ESG data and has a private assets segment. MSCI earns great returns on capital, has moderate amounts of debt, and has above 80% gross margins. MSCI has one of the most valuable group of indexes of any index provider. I absolutely do not see passive investing shrinking over time. It is also highly likely that more investment dollars in the future will be placed in indexes abroad as the U.S currently makes up a chunk of the global stock market more than twice the size of our GDP, and also is selling at a disproportionately high price to other markets, and in general as other emerging economies like India, China, and other countries have been developing their economies faster than America their stock markets will become more and more important to all investors wanting passive diversification. MSCI has a dominant portfolio of the most important and widely used passive indices abroad. As more and more dollars for these funds grow over time, the index funds grow with them, and a lot of those index funds will try to mimic the widely accepted MSCI indices and have to pay MSCI for the data and right to do so. In addition, ESG investing and disclosures are highly likely to continue growing over time, and MSCI’s proprietary ESG rating frameworks are the gold standard and are deeply embedded into ESG investing.

4. Visa

   It is well known Visa and Mastercard are excellent businesses to be in. They have little need for capital expenditures or research and development despite having super strong moats in incredibly high margin and return on capital industries. They are instead able to pay healthy growing dividends and repurchase shares consistently. The reason why they have been able to thrive and grow so rapidly without constant massive reinvestment is due to their incredibly strong network effects. They also have other competitive advantages like trusted well-known brands and regulatory barriers for setting up a global payment processing business. However, the main reason they are great long long run candidates is their network effects. As we have discussed before network effects are when a business becomes stronger as more and more people use it. If you are a customer looking to open up a debit or credit account in America, you are likely going to get a physical card(Apple Pay also works) with your bank. This bank can choose to use Discover, Visa, Mastercard, or if you opened up an account with American Express then American Express. They don’t offer you a card using the Peter The Goat bank. Why? Because no stores take Peter The Goat cards(this will change soon), but almost all merchants domestically and the overwhelming majority of stores abroad if they take cashless payments will take Visa or Mastercard(except in China). This means that the majority of new cards getting issued in addition to the massive number of cards already in existence will use one of the two big established players because the main utility of the card is determined by the number of merchants that accept it. The new businesses when they first accept cashless payments will also take Visa and Mastercard because they know their customers use it, and they want their customers to be able to conveniently shop at their stores. Cashless payments are going to keep growing globally and Visa and Mastercard are very competitively advantaged to stay on the top.

5. Mastercard

Look to Visa analysis due to similarity of business models I would rather save you the time than write about Mastercard

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Steady eddy’s

1. Coca Cola

   I think there is a balance of perspectives that need to be walked on when thinking about the future of the Coca-Cola Company. When Warren Buffet still says the best brand in the world is Coca Cola, and he never ever points out any negatives of coke, I think it is a little bit of a blind spot for him. As a college student, I can tell you that if you walk into a classroom with a can of Coke, Sprite, or Fanta that it would feel weird. If you walked in with a 400-calorie coffee from Starbucks, which many people do, nobody would bat an eye and might think dang I wish I had a coffee. If you walk in with one of the sodas I talked about, people think soda is so unhealthy. Despite a rising number of obese and overweight young people, our generation has certain foods or drinks they consider negatively much stronger than older people similar to the way a lot of young people view cigarettes as just being like gross. Soda is perhaps the number one victim. That being said, there are still lots of young people drinking soda, will continue to do so, and would be fine to own for a decade as one of your only businesses. However, when you consider the broader picture of Coca-Cola’s business, I think it will have been a reasonably good pick to grow and preserve one’s wealth over a very long time. Coke’s diet products are viewed more favorably, they have many water brands and Vitamin Water which should do well over time, they have juice, Powerade, and tea brands which should do okay, they have an investment in Monster Energy which should do well over time, and they have been continually adapting by buying growing beverages like Body Armor, Fair life protein, and they fully own and operate the well liked growing Costa Coffee chain. The business earns good returns on capital, has almost zero credit risk, and has massive advertising and distribution power to stay the most recognized brand in the world. In the whole picture the Coca Cola business will be fine.

2. Next Era Energy

   Next Era Energy is the largest renewable energy utility in the world. Power/electricity is a need every day of the year and is growing and in particular the demand for renewable energy is likely to be growing indefinitely even faster. Utilities earn fair returns on their capital but not great. They work with regulators to guarantee a return on their investments but without charging extortion like rates. NextEra has a massive backlog of orders for new energy projects and is a respected business that will grow with the need for a long time. They generate massive amounts of energy from solar and wind power which they sell to other utilities, municipalities, and large businesses under long-term purchasing agreements. In addition, they operate Florida Power and Light serving 6 million people, and in the areas they serve they are the only option. It is an attractive market as Florida’s population is growing at a good pace. You won’t get fantastic results with Next Era energy, but you are highly likely to get good results.

3. Costco

   Groceries will always be a need. Costco differentiates itself by their unique warehouse model, Kirkland Signature brand, incredible volume, and store amenities. Yes E-grocery and online shopping are growing, but Costco’s cheap gas, iconic food deals and free samples, and services like the pharmacy keep people coming back. In addition, Costco has a significant amount of their goods in the store as one time only, unscheduled deals on big ticket items. This also helps to keep people coming to stores to see what limited time goods are in store at a discounted price. Costco is also growing its own e-commerce business. Costco offers necessities at the lowest prices that are of a high quality with many amenities that keep customers coming back and has a loyal customer base. They earn really good returns on capital and operate with low debt. They have a very long way to go in expanding and are a good choice for this list.

4. Chubb

   Chubb is an insurance company that operates all kinds of insurance, they insure special valuables, homes, cars, workers compensation, and also has some reinsurance and life insurance underwriting. Most insurance companies lose money on their underwriting and make their money on the float they invest typically into bonds. So people do not pay more to their insurer than they end up taking out in claims as a whole. Chubb is exceptional at underwriting; they consistently achieve significant underwriting profitability and also get the income from their bond portfolio. Chubb’s moat comes from its strong brand and execution insuring high net worth people’s assets. Chubb specializes in insuring things like art, expensive homes, expensive cars, and yachts. This specialization means less competition which means they consistently achieve underwriting profitability. Insurance will always be a need, and it is a growing one. Chubb is of the highest caliber and will likely continue to be.

5. Amazon

   I intentionally do not have a lot of technology stocks because those businesses tend to change faster, and the biggest most successful ones face some real regulatory risks. However, Amazon is too good for this list to be left off. I am not a technology expert, but I do understand that cloud services and storage are likely to be growing industries for a good while. I know that streaming is not going anywhere soon, and I know for sure that e-commerce is not going anywhere for a long time. Amazon is #1 in both Cloud and e-commerce at the moment and has respectable businesses from their Whole food’s stores, some products like Alexa or the Kindle, and more importantly from the advertising they can sell across their e-commerce site, streaming service, and Twitch. Amazon is basically another very strong conglomerate like Berkshire at this point. Yes, Chubb has different insurance businesses, but it’s all insurance, whereas Amazon is like a conglomerate because it is massively successful in two different fields and also has some success in other ventures. Amazon has pretty low debt and actually earns good returns on capital. Despite the poor margins of e-commerce, Amazon this past year earned 10% ROIC. Which is solid. However, this number is growing and if Amazon in a way more similar to other companies, was spending only what it needed or a bit more than that on its research and development instead of the massive amount they do their ROIC could be at the upper limits in the high teens, or at least the mid-teens. And that is quite good.

I have often seen the claim that you can buy X number of stocks, hold them forever, and never think about them again. Most of the times the picks are made quite half assed, and do not really take seriously thinking about those businesses which are structurally set up to last for decades and decades. This list is not perfect I could have made it better, but I hope I have provided an above average attempt at this and that an equal weighted portfolio of these stocks would hold up well over a very long time.

Margin of Wisdom

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