What is long term?
I don’t know the answer.
However, personally, I would say long term is at least five years. Whilst ultra-long-term is 10 years through to forever.
Why invest long term?
Obviously, no one can predict the future…
…but you only need to look at the success of Commonwealth Bank of Australia (ASX: CBA) and Woolworths Limited (ASX: WOW) over the past 20 years to know what long-term investing can do for your livelihood.
Shareholders in both those companies have multiplied their investment many times over.
In addition, those investors who bought during the early 1990s (and still hold today!) are likely receiving an annual dividend yield equivalent to more than 50% of their original investment!
That’s long-term investing at its finest.
There’s many trends which have contributed to the propulsion in each of their businesses and share prices over the years.
For example, tailwinds have played a big part in Woolworths and CBA’s success.
20 years of recession-less Australia has resulted in a booming housing market – good for credit growth.
Meanwhile non-stop wage growth and an industry open to consolidation provided the impetus for Woolies to open a store in every nook and cranny throughout the country.
The next BIG tailwinds…
There’s more to identifying great companies than tailwinds alone.
However, here are five companies which may capable of riding long – and significant – tailwinds over the next two decades.
Challenger Ltd (ASX: CGF) is a money manager and annuities provider to retirees. Annuities offer a fixed return over many years for an upfront investment. In addition to the baby boomer population entering retirement; Challenger forecasts superannuation assets to grow at a remarkable pace into the future.
Australia Agricultural Company Ltd (ASX: AAC) is perhaps a riskier long-term investment given the fickle nature of farming. However, as Asia’s enormous middle-class population continues to grow and demands soft commodity products such as grains and meat, Australia’s farmers stand to benefit.
APA Group (ASX: APA) is a long-term opportunity for investors seeking exposure to rising energy demand from Asia. As Motley Fool Writer, Regan Pearson, showed yesterday, demand for Liquefied Natural Gas, or LNG, will outstrip supply from 2020. Natural gas is used for things like heating and cooking. APA, Australia’s largest natural gas pipeline and infrastructure owner will benefit from such a trend.
Just as certain as the sun rising and falling, death follows life. InvoCare Limited (ASX: IVC) controls around 30% market share of funerals in Australia. Among other factors, ultimately, net population inflows bode well for the industry. InvoCare takes pride in offering the most respectful and caring services, and its success has been reflected with continuous organic and acquisitive revenue growth over the past 10 years.
Japara Healthcare Ltd (ASX: JHC) is another Australian company which will benefit from an aging population. The government’s recent Intergenerational Report found the number of Australians over 65 will more than double between now and 2055. Aged care centres, although perhaps lacking in scaling potential, will be a direct beneficiary.
Should you buy, hold, or sell these stocks?
If you’re investing over many years, chances are, you won’t even remember the original price you paid for the stock or how well it performed in any given year.
However, personally, I’m a firm believer that if you’re investing a set amount of money per week/month/year in the sharemarket, you should always seek to invest that money in the stocks which are offering the most compelling value at that time (obviously!).
I think Australian Agricultural Company Ltd shares are probably offering the most compelling value right now, however, they’re also the most risky. So don’t over-expose your portfolio and don’t buy it if you cannot stomach volatility.
Personally, I’m keeping the other four stocks on my watchlist and waiting for a more compelling entry point.
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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