If you seek to buy and hold shares of a company for life, you had better ensure the firm has a sizeable enough economic moat protecting it from potential industry rivals. Indeed, the concept of an economic moat is incredibly important for new investors seeking to put money to work in the stock markets for the very first time.
As you may know, the artificial intelligence (AI) boom is the latest and greatest technological force that could reward the firms that leverage it effectively. As for the firms that don’t embrace the full power of AI, they stand to see their economic moats narrow a bit.
New investors: Big economic moats make for perfect stocks to hold for life
Though no moat is 100% safe, especially over rather lengthy periods of time (think more than 10 years), I do think that beginning investors should look to some of the widest-moat names out there as core holdings that can help ground your TFSA (Tax-Free Savings Account) from any market wobbles.
Of course, you’ll still need to do your homework and stay updated about a company’s fundamentals. That means staying tuned into the new events and looking over those quarterly earnings results.
Indeed, digesting quarterly or annual reports entails more than just looking at a quick brief and the reaction in the stock chart. It entails giving the income statement, balance sheet, cash flow statement, and even management notes a close look.
In addition, tuning into the conference call also does not hurt, especially during the Q&A period, whereby Wall Street analysts throw a bunch of questions to management. Indeed, it’s a lot of work to stay in the know about a stock. However, if you’ve got the time, I think that the rewards of being a self-guided investor have the potential to be great.
In this piece, we’ll check out one of the best wide-moat companies that may make sense to own for life, even if you can’t stay fully informed about a firm every single quarter.
CN Rail
CN Rail (TSX:CNR) has an incredibly wide moat that will be impossible to narrow over time, especially as the company continues to add to its extensive track network. Lately, union woes have weighed heavily, and as the Canadian economy stumbles along, CNR stock could continue to drag relative to the TSX Index, which has been faring far better than the rail giant. Now, below $160 per share again, I think that is an excellent time to add to a long-term position.
Despite less-than-stellar results and a management team that I believe is not operating as optimally as they could, CNR stock could be poised for gains going into the latter part of the decade.
The stock goes for 18.3 times forward price to earnings (P/E) and boasts a 0.65 beta, entailing less correlation to the rest of the market. I view CN Rail as severely undervalued with potential upside as interest rate cuts on both sides of the border gradually give a lift to the North American economy. If you’ve got an extra $2,500 in a TFSA or anywhere else, CNR shares look tempting right here!
