3 growing blue-chips to hold for 20 years

Speculative investments might be exciting, but solid, growing, blue-chip companies, held over decades are the bedrock of any investment portfolio.

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The share market is notoriously short sighted – plenty of fund managers are motivated to perform in the short term rather than the long term. As a result, retail investors can take advantage by having a long-term view. In my view there are plenty of blue-chip stocks that you can comfortably hold for a decade or more, but for an ultra long term investment it will likely pay to choose a slightly smaller company, with more room to grow, and less potential to be disrupted by a more nimble competitor.

Carsales.com Limited (ASX: CRZ) owns the eponymous car selling website in Australia as well as (a share of) similar businesses in Indonesia, Malaysia and Thailand through iCar Asia Ltd (ASX: ICQ), and South Korea, through skencarsales.com. The company looks to profit from one of the best business moats – the network effect. Ebay Inc (NASDAQ: EBAY) is the most famous example of the network effect, which arises when an online marketplace has the most buyers and the most sellers, making it most attractive to both buyers and sellers. This creates a virtuous cycle that makes it very difficult for other companies to compete, and as a result the dominant network boasts pricing power.

Sonic Healthcare Limited (ASX: SHL) provides pathology and radiology services around the world, but its share price has come down slightly in the last few weeks, presumably as a result of the $7 medicare co-payment proposed in the budget. However, almost half of its business comes from overseas and over the long term, I don’t think the co-payment (if it does pass) will undermine demand. After all, people are willing to spend on health (whether they should have to is another matter). Sonic is a solid ultra long term investment, in my view, because it will benefit from the ageing population. I also expect growth will also come from further international expansion, and it is pleasing to see that the company already has a foothold in eight different countries.

CSL Limited (ASX: CSL) provides blood plasma products, vaccines and specialises in protein science. As a result, the company is constantly coming up with new products, which it can launch quite economically, because it already has a comprehensive distribution network. Demand for CSL’s products is driven by poor preventative health, violence, ageing populations and natural disasters. Profit growth extending beyond the decade is arguably already implicit in the share price, so at current prices, CSL is really only a stock for very long-term investors.

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Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article.

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