Warren Buffett is known for his famous holding period, which is (ideally) forever. There aren’t many businesses on the ASX that I would legitimately want to hold forever at this point in time.
Tailwinds around the ageing population could eventually turn into headwinds when overcapacity starts to happen. The Asian middle class will probably stop growing in size at some point. The number of tourists visiting Australia will stop growing at a point in the future.
All of the companies affected by the above scenarios are good potential investments today, but it shows that you can’t necessarily hold a lot of companies ‘forever’.
However, I think there are at least three businesses on the ASX that you can buy and hold forever:
Rural Funds Group (ASX: RFF)
This is a real estate investment trust that focuses purely on agricultural property, the only one of its type on the ASX.
It owns a number of different farm types across various states, creating good diversification. It owns cattle, poultry, cotton, almond and macadamia farms, and vineyards. It has Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE) as two of its major tenants.
Rural Funds Group grew its quarterly dividend by 8% in FY17 and has pencilled in a 4% increase for FY18. Farmland has been an increasingly valuable asset for hundreds of years and it’s easy to see it being useful for hundreds of years to come.
Rural Funds Group is trading with a trailing dividend yield of 5.33%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
It’s been running for over a century with the same family at the helm for many decades. It has paid a dividend every single year without fail and has increased its ordinary dividend every year since 2000.
When there is long-term management who can make the best long-term decisions then this suits all stakeholders involved.
Soul Patts is trading at 22x FY17’s estimated earnings with a grossed-up dividend yield of 4.26%.
InvoCare Limited (ASX: IVC)
InvoCare is Australia’s market-leading funeral operator. With its multiple national brands and acquisitions, it has been able to steadily grow its profit and earnings for over a decade.
The death rate is expected to steadily increase over the next 15 years which is a strong tailwind for InvoCare. As the Australian population increases InvoCare will inevitably have more potential customers as long as it maintains its market share.
InvoCare is trading at 27x FY17’s estimated earnings with a grossed-up dividend yield of 4.28%.
I think all three of these businesses really suit a long-term buy and hold strategy. None of them are cheap but that just reflects their defensive nature. It’s hard to pick a favourite, but in my opinion InvoCare is most likely to outperform in the ultra long-term.
It is also a fact that the above three businesses are going to be slow growers, although these three great blue chips may provide much faster growth in the medium term.
For many, blue chip stocks means stability, profitability and regular dividends, often full franked..
But knowing which blue chips to buy, and when, can often be fraught with danger.
The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2017."
Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.
If you’re expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you’ll be sorely disappointed. Not only are their dividends growing at a snail’s pace, their profits are under pressure too due to the increasing competitive environment.
The contrast to these “new breed” blue chips couldn’t be greater… especially the very real prospect of significant share price gains, something that’s looking less likely from the usual blue chip suspects.
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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited, RURALFUNDS STAPLED, Select Harvests Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Washington H. Soul Pattinson and Company Limited. 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.