7 Top Stocks To Buy And Hold Forever
While the broader stock market soars to new highs regularly, growth stocks have also regained their popularity among investors — and that has created many stocks to buy for investors. The Street seems to be delighted about positive updates on the economic front. Meanwhile, the U.S. Senate has recently passed a bipartisan $1 trillion infrastructure package.
Moreover, investors also appear to be reacting positively to the July consumer price index (CPI) figures that show an increase of 0.5% month-over-month, in line with analysts’ estimates. As the economy continues to rebound and inflation rates stay under control, many stocks might still march forward. Therefore, I would like to discuss seven top stocks to buy and hold forever.
Investors understandably fear that another economic downturn might be in the cards, or that a new wave of delta variant may constitute short-term headwinds. Others point out that many stocks currently trade at overstretched technical levels. Thus, Wall Street could take some profits off the table in the near term. Nonetheless, the long-term bull case remains strong for growth as well as dividend stocks.
The U.S. economy grew beyond its pre-pandemic levels in the second quarter, with the GDP up 6.5%. Consumer confidence soared to its highest level in 17-months in July, and the earnings picture keeps improving.
Long-term investors don’t need to worry too much about timing the market or buying at new highs. The stock market keeps on repeatedly highlighting the benefits of buy-and-hold investing since the pandemic became a part of our daily lives. So with that information, let’s take a closer look at these seven top stocks to buy and hold forever.
- Cardinal Health (NYSE:CAH)
- DaVita (NYSE:DVA)
- Lemonade (NYSE:LMND)
- Nucor (NYSE:NUE)
- Nvidia (NASDAQ:NVDA)
- Prologis (NYSE:PLD)
- Roper Technologies (NYSE:ROP)
Now, let’s dive in and take a closer look at each one.
Stocks to Buy: Cardinal Health (CAH)
52-Week Range: $44.65– $62.96
Dividend Yield: 3.79%
Dublin, Ohio-based healthcare services group Cardinal Health provides customized solutions for hospitals, healthcare systems, pharmacies, surgery centers, clinical laboratories, and physicians’ offices. The company is one of the largest global logistics providers of wholesale pharmaceutical and medical products.
Cardinal Health released fourth-quarter and fiscal year 2021 results in early August. Top line increased 16% year-over-year (YOY) to $42.6 billion. However, non-GAAP net profit declined 26% YOY to $227 million. Non-GAAP diluted earnings per share (EPS) also retreated to 77 cents, representing a 26% decline from $1.04 in the prior-year quarter. Cash and equivalents ended the quarter at $3.4 billion.
On the results, CEO Mike Kaufmann remarked, “We’re disappointed with our fourth-quarter results. With the actions we’ve taken to date and our plans for fiscal year 2022, we feel confident in our strategy, and are encouraged by the tailwinds behind our growth areas and strong cash flow generation.”
While the bottom line significantly missed estimates of $1.20 per share, analysts indicate that an accounting adjustment linked to the pandemic is partially responsible for the earnings miss. CAH stock currently hovers at $51, down 4% year-to-date (YTD). The shares plunged 14% on Aug. 5 after the release of disappointing fourth-quarter results. As investors had already priced in pandemic-related headwinds, the recent pullback seems to double-punish the company for various measures taken in the past several months.
The shares trade at a forward price-earnings (P/E) ratio of 8.85 and current price-sales (P/S) ratio of 0.09, which implies a valuation for the worst-case scenario. Thus, CAH stock currently offers a reasonable entry opportunity for long-term investors.
DaVita (DVA)
52-Week Range: $80.85 — $136.48
Out next stock is a healthcare name favored by Warren Buffett. Denver-headquartered DaVita offers dialysis and related lab services to patients across the country who need this treatment on a regular basis.
DaVita announced Q2 results in early August. Consolidated revenue came at $2.917 billion, and operating income was $490 million. Diluted earnings per share was $2.64, up 63.0% from the prior year diluted earnings per share from continuing operations.
CE) Javier Rodriguez cited, “..we accelerated our investments in integrated kidney care capabilities designed to improve patient outcomes, coordinate care, and lower overall costs. We have grown the number of patients under value-based care arrangements to approximately 10% of our U.S. dialysis patient census, and we expect to see significant growth in our integrated kidney care business over the next year.”
Year-to-date (YTD) the stock is up around 11%, and hit a record high in recent days. DaVita shares are trading at 14.62 times consensus forward P/E and 1.31 times sales. Interested investors could consider buying around these levels. Like many healthcare names, DaVita runs a recession-proof operation with a cash generating business model.
Stocks to Buy: Lemonade (LMND)
52-Week Range: $44.11 – $188.30
New York-based financial technology (fintech) group Lemonade offers a digital and artificial intelligence-based platform for various types of insurance products, settling claims, and paying premiums.
Lemonade released Q2 2021 results in early August. Total revenue fell 6% YOY to $28.2 million. Net loss widened to $55.6 million, compared to $21 million in the prior-year quarter. Net loss per diluted share stood at 90 cents, while cash and equivalents ended the quarter at $1.09 billion.
The company claims to enhance the consumer experience in the insurance industry by aligning its financial incentives with those of customers better than traditional insurance firms. Lemonade collects a fixed percentage of customer payments and transfers the rest to reinsurers that accept policy risk in exchange.
As a result, management eliminates the incentive to not pay claims from its business model. The company is currently expanding into life, auto, and pet insurance.
The global insurance industry is estimated to be worth more than $5.8 trillion. While second-quarter results may look gloomy for a stock that currently trades at 50 times sales, LMND stock still has plenty of upside potential. The shares trade at $72, down about 61% from their record high in mid-January.
LMND stock shares have also shed nearly 41% YTD. While Lemonade remains a speculative stock, the recent pullback offers an opportunity for long-term investors to buy the shares at a significant discount. The company could also find itself a takeover candidate.
Nucor (NUE)
52-Week Range: $44.05 – $128.81
Dividend Yield: 1.35%
Charlotte, North Carolina-based Nucor is one of the most important manufacturers of steel and steel products. It also produces direct reduced iron for use in its steel mills. In addition, its operations include international trading with companies that buy and sell steel and steel products.
Nucor announced Q2 results in late July. Consolidated net sales increased 103% YOY to $8.79 billion. Net earnings of $1.51 billion translated into $5.04 per diluted share. A year ago, the comparable metrics had been $108.9 million, or 36 cents per diluted share. Cash and equivalents ended the quarter at $3.21 billion.
“Nucor’s second quarter earnings of $5.04 per diluted share marks the highest quarterly earnings in the Company’s history,” cited CEO Leon Topalian. “We expect to set a new record for quarterly earnings in the third quarter of 2021 as demand remains robust and virtually all the steel end use markets that we monitor are growing.’’
Nucor has the strongest credit rating in the North American steel sector. Given the elevated infrastructure spending over the next few years, the group is poised to benefit significantly from the soaring steel demand. The Biden Administration’s strong preference for buying American also provides Nucor with a key competitive advantage over its larger foreign competitors. Additionally, the company has a solid balance sheet, and offers a dividend which has been growing for almost five decades.
Shares of NUE stock hit an all-time high in August, and is currently up about 122% so far this year. Forward P/E and current P/S ratios are 6.66 and 1.44, respectively. Interested readers could find value around these levels.
Stocks to Buy: Nvidia (NVDA)
52-Week Range: $115.67 – $224.70
Dividend Yield: 0.07%
Santa Clara, California-based Nvidia is the leading designer of graphics processing units (GPUs). Its chips are used in various end markets, including high-end PCs for gaming, data centers and automotive infotainment systems.
Well-known among gamers for its top-quality GPU graphics cards, Nvidia has also benefited significantly from the cryptocurrency frenzy, especially earlier in the year. Its chips are a household name for miners of cryptocurrencies. Moreover, they’re also vital in artificial intelligence (AI), medical research and data centers, and even in self-driving cars.
Nvidia announced Q2 results on Aug. 18. It reported record revenue of $6.51 billion, up 68% YOY. It was also up 15% from the previous quarter. The company reports revenue in two main segments:
- Gaming (record revenue of $3.06 billion, up 85%);
- Data Center (record revenue of $2.37 billion, up 35);
Net income of $2.37 billion translated into non-GAAP earnings per diluted share of $1.04, up 89% YOY. Despite the impressive metrics, analysts noted that crypto-related sales were short of expectations. In Q2, management expects revenue to be $6.80 billion.
Following the announcement, CEO Jensen Huang cited, ““Enabled by the NVIDIA platform, developers are creating the most impactful technologies of our time – from natural language understanding and recommender systems, to autonomous vehicles and logistic centers, to digital biology and climate science, to metaverse worlds that obey the laws of physics.” Non-GAAP earnings per diluted share came at $1.04, up 89% YOY.
As a result of the increased use of semiconductors in our lives, NVDA stock has seen an incredible rally, soaring from $33 at the end of 2018 to almost $220 now. It has also surged 69% YTD. On a side note, regular InvestorsPlace.com readers would well remember that on July 19, Nvidia finalized a 4-for-1 stock split (current prices reflect that split).
Analysts suggest that Nvidia deserves to be added to the Dow Jones Industrial Average consideration for the Dow Industrials. Therefore, NVDA stock could be one of the best stocks to buy and hold in the long term. Forward P/E and current P/S ratios are 54.35 and 25.16, respectively.
Prologis (PLD)
52-Week Range: $129.67 – $131.20
Dividend Yield: 1.93%
San Francisco, California-based Prologis develops and operates over industrial and logistics facilities across the globe. It was formed in 2011 following the merger of AMB Property and ProLogis Trust.
As the industry leader in logistics real estate, the company owns many real-economy assets such as warehouses and distribution facilities. E-commerce businesses increasingly rely on the company. According to a 2020 report, “The current economic value of goods flowing through Prologis facilities worldwide is $2.2 trillion—a 69% increase over 2017. This $2.2 trillion in throughput represents 3.5% of the gross domestic product (GDP) of the 19 countries in which Prologis operates.”
The group released Q2 results in mid-July. Total revenue fell 9% YOY to $1.15 billion. Net income stood at $599 million, up 48% from $405 million in the prior-year period. And net income per diluted share was 81 cents compared to 54 cents a year ago.
CEO Hamid R. Moghadam remarked, “Demand for logistics space is robust and diverse, and operating conditions remain the healthiest in our 38-year history. Vacancies in our markets are at all-time lows, contributing to record rent growth and valuation increases.”
Prologis is well-positioned grow further as the e-commerce boom continues to expand at a rapid pace. PLD stock hit an all-time high in recent days, and are up more than 31% so far this year. Forward P/E and current P/S ratios stand at 84.03 and 22.67, respectively. Long-term investors could potentially wait for a pullback of about 5%-7% to buy PLD shares.
Roper Technologies (ROP)
52-Week Range: $362.90 – $499.21
Dividend Yield: 0.47%
Sarasota, Florida-based Roper Technologies is a diversified conglomerate with a wide range of software and industrial businesses. It operates in four segments: application software, network software and systems, measurement and analytical solutions, and process technologies.
Roper announced Q2 results in late July. Revenue increased 22% YOY to $1.59 billion. Net income was $286 million, or $2.69 per diluted share, up from $219 million, or $2.08 per diluted share in the prior-year quarter. Adjusted free cash flow surged 30% to $409 million.
On these metrics, CEO Neil Hunn cited, “Our solid cash flow performance allowed us to reduce debt by approximately $375 million in the second quarter, bringing our total leverage reduction to $1.4 billion since completing our 2020 acquisitions.”
Roper started as an industrial firm but has evolved into a diversified technology company over the past few decades. It has developed a software business that includes factory automation, 3D graphics, insurance, healthcare, IT, and supply chain management solutions.
ROP shares have soared over 500% in the past decade. They currently trade at around $478, up almost 11% YTD. The stock trades at 32.05 times forward earnings and 8.5 times current sales. Interested investors could regard a potential decline as an opportunity to buy into the ROP stock share price.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
