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3 solid buy and hold stocks to build long-term wealth


Creating a portfolio that can build up long-term compounded growth requires some buy and hold stocks that can steadily grow without a lot of ups and downs.

“Buy and hold” doesn’t mean “buy and forget” or, even worse, “buy and hope (it goes up)”. Rather, regular reading and research on each stock can’t be neglected. Reading company reports and updates gives you a view about how the stock story is improving (or slipping).

You would want a company with solid earning power that could continue for 10, 20 years or more. Also, having a strong brand name to attract new customers and maintain earnings growth is always a big plus. You don’t want to have to trade in and out of these buy and hold stocks. Ideally, you would add to each shareholding position over the years, especially during market downturns when you can buy good stocks on the cheap.

Westpac Banking Corp (ASX: WBC) is one suitable choice. The big four bank has given shareholders a total annualised return of 13.2% over the past five years – that’s higher than the ASX’s average long-term return. The stock pays a fully franked 5.3% yield and has a decent track record for dividend growth. I like the bank’s exposure to international markets because that diversifies its revenues to maintain overall earnings growth.

Still within the financial service sector, Platinum Asset Management Limited (ASX: PTM) has shown renewed earnings strength in the past few years. This asset manager specialises in international equities, which are growing faster than the domestic market here. It manages about $25 billion of client assets and funds. Financial year 2014 was a remarkable year, achieving high-double digit earnings growth, thanks to some overseas markets like the U.S. hitting new all-time index highs.

Among healthcare stocks, CSL Limited (ASX: CSL) has kept up its long-term track record for business expansion. The biopharmaceutical produces blood related medical supplies and treatments for viral diseases. Its products are in high demand in overseas markets, where the majority of its revenue is generated. It is expanding its facilities in Australia, Germany and the U.S. to meet the demand. CSL’s earnings are forecast to grow an average annual 16.7% over the next two years. I particularly like the long-term growth potential, so CSL should be high on investors’ watchlists.

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Returns as of 27th November

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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