What makes a stock worth holding for decades?
It’s hard to give a “one-size-fits-all” answer to that question, but competitive strength would have to be one of the desired characteristics. If a company has some asset or quality that keeps its competitors at bay (e.g., a patent or high switching costs), then it could last for a very long time. That is doubly the case if the industry in which the company operates has a long future ahead of it.
In recent years, I have been trying to weight my portfolio ever more aggressively in “long-term holds.” My reasons for doing this include the fact that inactive investment strategies tend to outperform active ones long term, and the fact that holding a stock long term incurs less trading costs and task-related time sink than active trading does. In keeping with that observation, here’s one unstoppable stock I plan on letting ride for decades.
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Brookfield
Brookfield Corp (TSX: BN) is a company with so many things going for it that it’s hard to imagine it not lasting for several decades. Its advantages include strong brand recognition (among the high net worth global investors it courts); excellent leadership; operational synergies (different segments complementing one another’s strengths); and excellent positioning.
One of the biggest things Brookfield has going for it is the simple fact that it is so important to North America’s economy. The company owns countless valuable infrastructure assets across the continent, and indeed around the world. These include energy generation facilities in Canada, artificial intelligence (AI) data centres in the U.S., and real estate in both countries. In addition, the company owns cell towers, wind and solar farms in various countries worldwide.
Brookfield’s edge
Because it builds and invests in “hard assets” that nations need — not “want,” need — Brookfield has an enviable reputation with governments and organizations worldwide. In October, the company’s CEO, Bruce Flatt, helped broker an $80 billion deal between the U.S. government and Westinghouse to build a fleet of nuclear reactors (Westinghouse is jointly owned by Brookfield and Cameco). Before that deal was announced, Brookfield Renewable Partners (TSX: BEP.UN) struck deals to supply clean power to Alphabet and Microsoft. On top of all that, the company is currently working on a $20 billion AI investment fund with the government of Qatar.
The above is just a small sampling of the large, prestigious entities that do business with Brookfield. Brookfield got these impressive contacts basically through an emphasis on building hard assets, which was unusual a few decades ago, when Bruce Flatt was getting started as CEO. At the time, the idea was that software businesses were better because they incurred less maintenance costs, depreciation, etc. Now, however, a lot of the fancy tech companies look an awful lot like they’re all focused on building “commodity” AI chatbots, while Brookfield’s hard asset investments are looking more and more important to the world’s governments, which are obsessed with catching up with China in heavy industry.
The bottom line
The bottom line on Brookfield is that it’s a company with an extremely enviable competitive position that will last for decades. With a great reputation, a synergistic ecosystem and hundreds of billions in capital to invest, it is likely to be a major player in global finance for some time to come.
