Why Flight Centre is a “forever stock”

When planning your financial future and seeking to grow your wealth over the long term, you can buy the index – making sure you earn the market’s return less a small fee. Or you can buy individual shares you believe will outperform the market over the long term.

Of course, that’s far easier said than done! Not every company is a candidate for long-term buy and hold investing. Businesses fail. Great CEOs leave. Stocks fall out of favour. Companies tap out their total addressable market and hit a ceiling. In any market, in every business cycle, you’re going to have losers.

But here’s a top ASX stock that, I’d argue, is built to last. Call it a “forever stock.” I’m speaking of travel agency Flight Centre (ASX: FLT).

Flight Centre shares have outperformed the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) over the last decade, it’s true. Looking to the even more recent past, the shares have doubled in the last year. But it’s not this history of outperformance investors can bank on. The company’s future may look better than the past.

Sure, Flight Centre looks large by Australian standards today – its market cap is over $4 billion, vastly dwarfing that of Webjet (ASX: WEB) or (ASX: WTF). That’s not the way to judge, though.

The global travel market – Flight Centre’s total addressable market – is absolutely huge. With increasing brand awareness the world over, and being only now in the early innings of its international expansion, with the U.S. and China only just tapped, Flight Centre can keep growing for many years to come. (Flight Centre’s competitive, entrepreneurial internal culture is a necessary added advantage in this mix.)

For years, analysts have been expecting that primarily internet-based travel businesses would kill Flight Centre, but this hasn’t come to pass – and, I’d bet, it won’t. Flight Centre’s blended brick-and-mortar and internet offer is too compelling.

All of which is why ASX investors bet against this burgeoning global powerhouse at their own peril. Call me bullish, but the long side of Flight Centre may just be the right side.

Attention investors! Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool writer/analyst Catherine Baab-Muguira owns no shares in any company mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.