Most financial commentary right now is focused on the extremely short term – and for good reason. Trying to predict the precise day the world will see this global pandemic contained seems to be getting far too much focus from long-term investors.
In my opinion, long-term investors should instead be focused on which companies have the balance sheets and ability to survive these near-term catastrophes and thrive over the longer term. After all, recessions tend to occur every decade or so, which means that some of the market stress is normal.
Picking a 30-year window as a long-term time horizon, I’ve got three companies for investors to consider in times like now.
Canadian financials and energy stocks have been hammered the hardest. This is especially true when one considers how the TSX has generally performed. In this environment, it is best to focus on the largest and best-diversified players with financial system importance like Toronto-Dominion Bank (TSX:TD)(NYSE:TD).
This is a great way to go for those considering true long-term income and growth. The yield on TD has breached 6%, at the time of writing. This is truly an incredible feat. TD Bank now trades at less than eight times earnings.
In addition, TD Bank has diversified its holdings internationally. TD Bank has also diversified away from Canadian residential mortgages. This was a smart decision, as residential mortgages will become increasingly problematic for banks, particularly as we enter the next recession.
If you believe in the long-term growth potential of North America, TD Bank is a great way to build long-term wealth over a three decade time horizon.
Perhaps one of the least discussed assets held by Suncor Energy Inc. is the 30-35 year reserve life of its key energy projects. Most of the discussion today is (rightfully) centred on the spot price of oil. However, Suncor has the ability to ramp up or down production levels as oil prices fluctuate.
Therefore, this company will be able to defer some short-term production to the future. Thus, Suncor will reap the ultimate oil price overtime, which should eventually reflect improved supply and demand fundamentals.
If one does not believe the risk of insolvency is dire with Suncor, and looks at the futures pricing of oil versus the spot price, this company looks like a great long-term option right now.
The need for wireless networks in Canada and around the world is only going to grow. 5G and new technologies are continuing to change the way we all use data and work, in my view.
Companies like BCE Inc. provide the “plumbing” for telecommunications sector. Companies with strong secular growth trends are thus likely to continue to grow decades from now.
Telecom giants like BCE have traditionally grown at a reasonable rate over long periods of time in a defensive fashion. In addition, they have raised their dividend over time, increasing shareholder value.
Stay Foolish, my friends.