Warren Buffett says that his favourite holding period is “forever,” but not all stocks make good lifetime investments. In fact, the majority are duds. To consistently create value for decades at a time is a difficult feat, and thousands of companies fail to do so.
But when it comes to saving for retirement, buying for life is a worthwhile goal. Owning long-term investments allows you to focus more on your savings schedule versus picking the right stocks. Boosting your contribution amounts will have just as much impact as selecting superior investments.
Which retirement stocks should you buy and hold forever? Let’s find out.
Invest in people
When it comes to long-term stocks, it helps to invest in the right people. Shareholders of Berkshire Hathaway know this firsthand. Helmed by famed investor Warren Buffett, Berkshire has delivered 20% annual returns for several decades. The key to this success isn’t necessarily the underlying business model but Buffett’s acumen.
The same can be said for Fairfax Financial Holdings (TSX: FFH). Its founder Prem Watsa is often referred to as the Canadian Warren Buffett. That’s because Fairfax and Berkshire have very similar operating models, which consist of owning a portfolio of insurance businesses that throw off regular cash that needs investing. Buffett and Watsa are the ones doing the investing.
Since 1985, Fairfax has produced annual shareholder returns of roughly 17%. That puts it into the top 0.1% of stocks. As long as Watsa is running the company, expect these returns to continue. In fact, Fairfax could be a better long-term bet than Berkshire considering Watsa is just 69 years old, while Buffett is a stately 89.
With decades of proven performance behind it and decades of runway left, this is a stock you may never need to sell.
Bet on population growth
If you’re not investing in a specific person, choose a business with strong secular tailwinds. These are growth drivers that should persist for decades, if not centuries to come. If you want to own a business like this, look no further than Brookfield Infrastructure Partners (TSX: BIP.UN)(NYSE: BIP).
Brookfield owns a diversified portfolio of infrastructure assets all over the globe. These projects include power plants, railroads, highways, airports, and more. Whatever a population needs to survive, Brookfield is there to provide it.
The great thing about Brookfield’s portfolio is that it is directly exposed to one of the greatest growth markets in history: population growth. Through 2100, the United Nations expects global populations to continue increasing at a breakneck pace. This should consistently boost demand for Brookfield’s infrastructure projects.
Just as importantly, Brookfield is an active buyer and seller in the space. That means it can monetize assets when prices are high and buy low as prices dip. As one of the only infrastructure-specific firms in the world, Brookfield often secures attractive price points on both sides of the deal.
The company has a terrific management team that has been producing double-digit annual returns since its inception in 2008. With population growth continuing for at least another 80 years, this is a stock even your kids may not need to sell.
