Best Forever Stocks: Carvana (CVNA)

Stock #7 of my series on the best forever stocks can be found below. But first, a few words about Memorial Day.

Memorial Day, as most of us know, commemorates the U.S. men and women who have died in military service to their country.

But when it first became a national holiday in 1868, it was called Decoration Day, and it was only for honoring—and decorating the tombs of—fallen Union soldiers.  The Civil War, of course, was the bloodiest of all American wars, because every man who fell was an American.  And following the war, it was nearly impossible to find a family—or the remnants of one—unaffected by the war.  So taking a day to decorate the graves of lost ones was only natural.

The Confederate states, however, already had various days for honoring their dead, and most saw no point in changing the date to suit those northerners who had so recently been killing their menfolk.

Then came World War I, which proved a major unifier for the north and south; when two parties join to fight a third power, that’s what happens.  So after that war, most southern states began to observe Decoration Day.

Thirty years later, after World War II, the name Memorial Day became more commonly used, and finally, in 1967, the name was officially changed to Memorial Day.

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But how many of us actually go to graves on this day to formally remember our fallen servicemen and women?  Not enough, I’ll wager.  And fewer and fewer every year.  And that’s partly because most of the people who actually remember those dead soldiers have passed on themselves.

Consider the numbers, which reveal a real trend of shrinkage over time.

Revolutionary War – 25,324 dead
Indian Wars – 6,125 dead
War of 1812 – 15,000 dead
Mexican War – 13,283 dead
Civil War – North – 363,020 dead
Civil War – South – 199,110 dead
Spanish American War – 2,893 dead
Philippines War – 4,273 dead
World War I – 116,708 dead
World War II – 408,306 dead
Korean War – 54,246 dead
Vietnam War – 58,219 dead
Iraq War – 4,497 dead
War in Afghanistan — 2,216 dead

Those are the big ones. Unlisted are dozens of smaller conflicts, including the Barbary Wars of 1801-1815, the China Boxer Rebellion of 1900, Haiti in 1915-1920, Grenada in 1983 and Desert Shield/Storm in 1990 and 1991.

I sincerely appreciate that these people made the ultimate sacrifice, and I honor them on this special day.

But equally sincerely, I pray for the day when mankind—or at least America—looks back on war as a relic of a less civilized past.

Admittedly, that day is not right around the corner.

But I am a student of trends, and the trend is clear here; conflicts are taking fewer American lives. Partly, this reflects the fact that war has become more mechanized; a drone pilot in Nevada can now eliminate an enemy combatant in Syria with no risk to himself. And partly, I hope, it reflects the fact that as our civilization as a whole slowly becomes more civilized, we increasingly use less lethal means to settle our differences.

It’s a good trend.

And now, on to today’s Forever Stock.

Forever Stock #7

Forever Stocks, remember, are stocks that you buy when they are still young and fast-growing—and then hold on to forever, or at least as close as you can get to that.

The goal, in holding, is to avoid being shaken out as so many investors are by temporary corrections, by either the stock or the broad market.

And by holding, the goal is to end up being a long-term owner of the next AMZN stock, the next AAPL stock, the next GOOGL and the next NFLX, to buy it, and then simply to hold onto it.

How to Find the Best Forever Stocks

The key attributes I look for in forever stocks are these:

  • A product or service or business model that is revolutionary.
  • A product or service or business model that serves a mass market.
  • A company that’s still small enough to grow rapidly.
  • A company that is not respected—perhaps not even known—by most investors.
  • Last, but not least, I look for a chart that shows that other investors have begun to recognize the company’s potential; that tells me that my thinking is on the right track.

For the record, stock #1 in this series on the best forever stocks was Autohome (ATHM), the Chinese company working to be the center of all consumer-oriented automobile information in China.

Stock #2 was Axon Enterprise (AAXN), formerly known as Taser. The company still sells those stun guns, but has a great new business model based on selling body cameras and in-car cameras to police departments, collecting the resulting video and storing it in the cloud, and thus generating great recurring income.

Stock #3 was Zillow (Z), the king of real estate information in the U.S., and still growing at a good pace, with revenues up 27% last year.

(Note: these are not in alphabetical order. Instead, each week I’m highlighting the stock that’s at the best short-term buy point.)

Stock #4 was Square (SQ), the company that began by enabling small merchants to process digital transactions on a phone or tablet, and has evolved to provide a wide range of software and hardware products, all designed to empower merchants of any size to serve their customers more effectively.

Stock #5 was SiteOne (SITE), the company that was spun off from Deere & Company in May 2016, and is now the largest (and only national) supplier of landscape products in the U.S., and has huge potential to keep growing by acquisition.

Stock #6 was GrubHub (GRUB), the leading online and mobile food ordering service in the U.S.

And Stock #7 is: Carvana (CVNA)

Best Forever Stocks: Carvana (CVNA)

Carvana is an online-only used car dealer that allows customers to shop, finance, and trade in cars through their website. Founded in 2012, it came public in 2017, and has racked up some very impressive numbers. In fact, here’s what Mike Cintolo recently wrote about it in Cabot Growth Investor.

“The term ‘disruptive’ gets thrown around a lot, but Carvana is genuinely disrupting the used-car sales industry. The company’s big idea is that it turns any online screen into a used-car vending machine. Shoppers can look at 360° pictures of cars and get a guarantee of an undamaged body and no major accidents. If you buy, Carvana delivers the car within a day or two and offers a seven-day test drive period, too. The simplicity of this buying process has produced three years of triple-digit revenue growth (although no profits yet, as the company plows cash flow back into expansion). Used cars are a $739 billion industry in the U.S. and Carvana—which now has operations in 56 markets, up from 23 a year ago—should be in around 80 markets at year-end. Profitability is a long way off, but CVNA is holding above the highs of a 10-month base and is setting up nicely.”

This chart shows why Caravan (CVNA) is No. 7 in our series of best forever stocks.Setting up nicely, of course, is a way of saying that the technical chart is developing a pattern that is likely to precede a renewed advance. There’s no certainty, of course, but generally, it means that risk here is low while short-term potential is high. And if you can get a short-term profit under your belt, it’s much easier to settle down to a holding period that approaches forever.

If you are looking to add additional strong stocks to your portfolio, consider taking out a subscription to Cabot Growth Investor. Our flagship publication features the best growth stocks in the market and has helped our readers double their money multiple times in the last 48 years.

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Timothy Lutts

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