Type to search

Wealthpop News

3 Stocks to Buy and Hold Forever

Share

Warren Buffett is one of the greatest investors of all time. He has amassed a fortune of over $100 billion by using a sound, long-term, buy and hold strategy. Buffett once said: “our favorite holding period is forever”. 

When searching for stocks to hold forever, investors should look to well-established, time-tested companies that are profitable key players in their respective industries.

With this in mind, today, I am going to share with you three stocks I believe you can confidently buy and hold forever: Home Depot, Inc. (HD), Waste Management, Inc. (WM), and Walmart Inc. (WMT). 

Home Depot, Inc. 

Founded in 1978, The Home Depot, Inc. is the largest home improvement retailer in the United States that sells tools, construction products, and services. The company has a total of 2,312 stores across the U.S., Canada, and Mexico. 

Year-to-date (YTD), shares of the home improvement retailer have lifted about 34.6%, outperforming its benchmark, VanEck Vectors Retail ETF (RTH), which has increased 16.7% over the same period. 

Recent Developments 

On October 6th, The Home Depot recently partnered up with Walmart GoLocal to strengthen local delivery options. With an 86% rise in online sales in FY2020, Home Depot should benefit from this partnership, enabling another option for same-day and next-day delivery for the U.S. customers.  

Financial Overview 

The Home Depot delivered solid second-quarter results, reporting an 8.1% year-over-year revenue growth to $41.12 billion, which led to a consensus revenue beat by $380 million. The revenue growth was primarily driven by an 11.3 % increase in a comparable average ticket to $82.48. The company’s online sales represented 13.3% of total sales, however, remained flat compared to 2Q2020. Also, the company’s GAAP EPS came in at $4.53, beating analysts’ estimates by $0.11. 

The company’s forward annual dividend payout currently stands at $6.60, which translates into a dividend yield of 1.88%. Notably, the company has been increasing its dividends 12 years in a row, having a 5-year dividend CAGR of 19.38% versus the sector’s median of 6.96%.

Analysts expect that the company will continue to improve its key operating metrics in the next quarter. The company’s EPS is projected to rise 4.5% year-over-year to $3.33. Following the same trend, its sales should advance 2.9% to $34.49 billion in 3QFY2022. 

It is worth mentioning that the company trades with premium valuations compared to the sector median levels. For instance, its FWD P/E and FWD EV/EBITDA come in at 24.07x and 16.68x versus the sector’s median of 14.45x and 10.30x, respectively. However, the company’s FWD revenue growth outpaces the sector median threshold by 31.65%. In addition, the company’s EBITDA and net profit margins are well above the sector’s median. Hence, I think the company’s revenue growth rates and superb margins could justify its rich valuations.

Analysts have established a “Strong Buy” rating for HD, with an average price target of $359.25.

Waste Management, Inc.

Waste Management, Inc. is a Texas-based company that provides waste management environmental services to various groups of customers in North America. Year-to-Date, its shares are up 34.4%, outperforming the VanEck Vectors Environmental Services ETF (EVX) by about 25.1%.

There are plenty of reasons why this company deserves a place in your portfolio forever. For instance, WM’s second-quarter earnings report topped both revenue and EPS estimates. The company’s revenue came in 25.8% higher year-over-over at $4.48 billion due to accelerated volume recovery. The company’s GAAP EPS has been reported at $0.83, up 15% from a year-ago period. 

As a result, management has raised revenue guidance for the year, which is a bullish sign for investors. Also, because of solid cash generation, management will increase its share repurchase volume for 2021, which is another good sign for WM stock.

The company is expected to reward its shareholders with an annual dividend of $2.30 per share, translating into a forward yield of 1.46%. Besides, WM’s dividend yield outpaces the sector’s median by 8.93%. 

Analysts are also bullish regarding the company’s growth prospects. For the next quarter, analysts expect WM’s EPS to increase 24.8% year-over-year to $1.36. Additionally, a $4.54 billion average revenue estimate for the third quarter represents a 17.70% YoY growth. 

In terms of valuation, WM’s FWD P/E of 31.50x and FWD EV/EBITDA of 15.62x come well above the sector’s median of 20.03x and 12.46x, respectively. However, I think the premium is worth paying, considering the company’s strong top and bottom-line numbers in Q2, expected revenue growth, and solid dividend yield.

Walmart Inc.

Walmart Inc. is one of the world’s biggest retailers that operate a chain of hypermarkets, grocery stores, supermarkets, department and discount stores, and neighborhood markets worldwide. 

Year-to-date, shares of the retail giant are up by about half of a percent. 

Recent News

On October 19th, Goldman Sachs analyst Kate McShane added the company to its conviction buy list. McShane thinks WMT’s investments in e-commerce and its supply chain should lead to higher EBIT in the coming quarters. As a result, WMT shares are up 2.03% at the moment of writing. 

Recent Quarterly Performance & Analysts’ Estimates 

The company’s total revenue for its fiscal second quarter, ended July 31st, 2021, has risen 2.4% YoY to $141 billion, topping the Wall Street consensus by $4.93 billion. Also, the company reported a Non-GAAP EPS of $1.78, beating Wall Street estimates by $0.21. Besides, Walmart is expected to pay an annual dividend of $2.20 a share, leading to a forward yield of 1.55%.

For the third quarter, analysts expect WMT’s EPS to stand at $1.39 compared to the year-ago figure of $1.34. Its revenues should moderately lift in the third quarter to $135.75 billion.

Additionally, Walmart’s EPS is projected to advance about 15% to $6.31 in FY2022, implying a forward P/E of about 22.5x, which is above the sector’s median of 24.19x. On the other hand, the company trades with EV/EBITDA TTM of 10.82x and P/S TTM of 0.71x. These ratios look undervalued versus the sector’s respective median levels of 12.58x and 1.44x, providing investors with a higher margin of safety at current levels.

Wall Street analysts have rated WMT as a “Strong Buy”, establishing an average price target of $173.29.

Tags:
Oleksandr Pylypenko

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. Oleksandr focuses his trade strategy around “special situations” (such as catalysts, potential acquisitions, or spin-offs) and how to make money from those catalysts, as direct stock purchases, combined with option-based approaches for risk minimization.

  • 1

Leave a Comment

Your email address will not be published. Required fields are marked *

×

It's not goodbye, it's hello Magnifi!

You are now leaving a Magnifi Communities' website and are going to a website that is not operated by Magnifi Communities. This website is operated by Magnifi LLC, an SEC registered investment adviser affiliated with Magnifi Communities.

Magnifi Communities does not endorse this website, its sponsor, or any of the policies, activities, products, or services offered on the site. We are not responsible for the content or availability of linked site.

Take Me To Magnifi