?Buy and hold investing is dead?. ?The pros and high frequency traders rule the world?. ?Buy and hold is still dead.?
Those are amongst the headlines that have been splashed around the world by various media sources since the depths of the global financial crisis. That last one was one of my personal favourites ? it was as though they had to reconvince themselves let alone whoever they were writing for.
Many analysts believe that the traditional long-term investing strategy is a thing of the past, whereby short-term traders can now recognise far greater returns than those who remain patient and…
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“Buy and hold investing is dead”. “The pros and high frequency traders rule the world”. “Buy and hold is still dead.”
Those are amongst the headlines that have been splashed around the world by various media sources since the depths of the global financial crisis. That last one was one of my personal favourites – it was as though they had to reconvince themselves let alone whoever they were writing for.
Many analysts believe that the traditional long-term investing strategy is a thing of the past, whereby short-term traders can now recognise far greater returns than those who remain patient and stand by the businesses that they own.
Indeed, the GFC changed the way the world perceived risk and it has certainly impacted confidence levels throughout the economy. But has it really changed the nature of investing itself? Do the four most overused words in investing, “this time, it’s different”, actually apply to this situation?
The answer is no. Just as it always has been, the buy and hold method is most definitely still the most profitable way of investing.
However, there is an obvious catch. In order to justify holding onto a company for the long-term (or to justify buying it to begin with), you must believe in the business. That is, you must believe that it will be substantially bigger in five or 10 years’ time than it is today and be patient enough to hold onto the stock through the good times and the bad.
As such, you want companies that you can understand, or ones that you can relate to – those that have sustainable business models and products that the market knows and loves. Here are three companies which I would certainly trust holding onto for the next decade:
Telstra Corporation Ltd (ASX: TLS): The telco is one of Australia’s largest and most recognisable companies, boasting a market capitalisation of $62.1 billion and winning more and more customers thanks to its superior customer service levels. While it also offers a legendary fully franked 5.7% dividend yield, there is plenty of growth ahead with the use of smartphones and broadband continuing to accelerate. What more could you ask for?
Coca-Cola Amatil Ltd (ASX: CCL): A poor performance in 2013 caused by pricing pressures has opened up a perfect opportunity to add some fizz to your portfolio. Warren Buffett, the world’s most successful investor of all-time, once described the Coca-Cola brand as a “forever brand”, adding that “no business has ever failed with happy customers.” Its short-term woes could very well be your chance at long-term investing success, particularly with its 5.2% dividend yield.
Village Roadshow Ltd (ASX: VRL): The entertainment and media company is another business for the long-term. The company operates a number of theme parks in Queensland and the United States and recently opened another Wet ‘n’ Wild Sydney park, while it is also exploring expansion into Asia. The stock has delivered investors with enormous returns in recent years and looks set to continue doing so – its 4.3% dividend yield is just the icing on the cake.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.