My 10 Forever Stocks
Forever Stock #1 was Autohome (ATHM), the Chinese company working to be the center of all consumer-oriented automobile information in China.
China is now the biggest auto market in the world, with a long road of growth ahead as the country grows richer, so the future is bright here. Most Chinese citizens want to own cars!
Forever 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.
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The trend toward collecting and storing video is obviously big, and I love the idea of getting paid regularly by all those police departments, not just in the U.S. but internationally.
Forever 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.
Since I wrote about it, Zillow has moved into Canada. Everyone wants a house!
Forever 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.
The shift from cash to credit to newer forms of digital payment is in full swing and Square has made all the right moves, including initial steps into the cryptocurrency markets.
Forever Stock #5 was SiteOne (SITE), the company that was spun off from Deere & Company in 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.
To a large extent, an investment here seeks to duplicate the success of early investors in Home Depot, though Site One’s business skews more to professionals.
Forever Stock #6 was GrubHub (GRUB), the leading online and mobile food ordering service in the U.S.
People are cooking at home less and less, and ordering in more and more and that’s a trend that won’t change.
Forever Stock #7 was Carvana (CVNA), the online-only used car dealer that allows customers to shop, finance, and trade in cars through their website.
As the second automobile-based stock in the group, this risks a tiny bit more concentration in one industry than might be ideal, but I think it’s worth it. The automobile retailing industry is ripe for disruption; no one likes used car salespeople!
Forever Stock #8 wasiQiYi (IQ), the Chinese company known as “the Netflix of China,” and the second Chinese stock of the group, which I think is entirely appropriate given that country’s growth trends.
The stock just came public in April and has been red-hot over the past five weeks: readers of my Cabot Stock of the Week advisory have more than doubled their money! But unless you enjoy riding bucking broncos, I recommend waiting for the stock to cool off a bit.
Forever Stock #9 was iAnthus Capital (ITHUF), a vertically integrated (cultivation, processing and distribution) company with interests in marijuana businesses in six U.S. states, encompassing eight cultivation facilities, five processing facilities and 46 potential dispensaries.
Cannabis is the fastest-growing industry in America today. Legalized sales to adults in Canada will begin in a few months, and the U.S. is only a few years behind the trend. Eventually, the industry could surpass the (much more destructive) alcohol industry.
Looking back at the first nine stocks, I can see I’ve covered houses, cars, food, landscaping, entertainment, security and digital commerce. And I’ve got a toehold in the medical industry—at least with part of the retail cannabis business (though some classify it as agricultural, which also applies to part of the industry).
But is anything missing, any industry that might hold great growth in the decades ahead? Robotics, artificial intelligence and biotechnology are some of the industries that come to mind, but experience tells me it’s hard to maintain leadership in high-tech sectors in the long run.
And there’s one telemedicine company in my Cabot Stock of the Week advisory that’s enjoying great success today, but I don’t have confidence that it can survive competition from bigger players.
So, after much deliberation, my choice for the final Forever Stock is a company that straddles the worlds of health care and finance.
Forever Stock #10: HealthEquity (HQY)
HealthEquity has carved out a profitable niche for itself in the U.S. health system by administering the health savings accounts (HSAs) that go along with high-deductible health insurance plans. With 15% of the HSA market and a market cap of around $5 billion, HealthEquity is a major player that’s still growing fast; revenue was up 29% in its most recent fiscal year. And with interest rates rising, the $6.8 billion of cash it acts as custodian for only becomes more valuable. The combination of service, custodial and interchange fees has driven earnings up by an average of 63% in the last three quarters and analysts forecast 50% EPS growth this year.
Thus the story is solid, and the only visible risk to long-term success might be a change in government policy regarding HSAs; I think it’s a minimal risk, but anything’s possible.
As to the stock, it came public in 2014, motored higher over the next year, but then suffered a nasty correction in early 2016 that took it right back down to its IPO price. Since then, however, the stock has been in an uptrend, as growing numbers of investors discover the company and its excellent long-term growth prospects.
The past few months have brought great strength to the stock, so this may not be the best entry point, but in the long run, I have high confidence that HQY will be a winner—and an ideal choice to close out our series on the 10 forever stocks to buy in 2018!
To get the list of additional stocks featured in Cabot Stocks of the Week, click here.
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This post was updated from its original version published in June, 2018.
