What do you consider your buy-and-hold stocks? Some investors focus on growth, others lean towards value, and some even bet heavily on trending meme stocks — but which strategy is optimal?
As with everything in investing, there’s no one-size-fits-all rule for selecting your buy-and-hold stocks. However, for most retail investors with a long-term horizon, certain characteristics should form the backbone of your search. You’ll notice recurring themes if you research these companies deeply enough. Broadly speaking, these potential buy-and-hold stocks combine a proven operational track record with substantial growth, robust financial health, and clear upside potential, making long-term capital appreciation a clear likelihood.
At the same time, some of these remain speculative plays compared to pure-value investments; this increases the chance of rapid growth and gains while their inherent risk is buffered by the stability of other buy-and-hold stocks, ultimately creating a well-rounded portfolio for the long run.
Tesla (TSLA)
Say what you will about Elon Musk, but there’s no denying that investors who counted Tesla (NASDAQ:TSLA) among their portfolio’s buy-and-hold stocks had a stellar performance over the years. Just ask the legions of short sellers who bet otherwise and lost billions. Tesla’s next bull run may just be getting started following Musk’s pay package approval, which cements his focus on the firm and is already bearing fruit.
This shift is already evident just weeks after the decision, with Musk redirecting his AI focus back to Tesla. Tesla’s Texas gigafactory is constructing a massive GPU warehouse to house over 350,000 Nvidia (NASDAQ:NVDA) GPUs, aiming to centralize AI development under Tesla. This follows Tesla’s announcement of a $3 billion to $4 billion investment in AI hardware, signaling Musk and Tesla’s commitment to becoming leaders in AI. Enhanced AI capabilities will significantly contribute to advancing Tesla’s “March of 9s,” addressing the final major obstacle to achieving full self-driving car technology.
Tesla’s robotaxi event on August 8 may prove the final catalyst catapulting Tesla from the (comparatively) lower price range it’s traded at for the past year — meaning investors looking to buy and hold stocks like Tesla should act soon.
Visa (V)
Visa (NYSE:V) may not have the flashiest operational model, but that doesn’t detract from its buy-and-hold stock status — just the opposite, in fact. Visa’s reliable sales streams, operational model, and willingness to adapt to new trends and markets are just some of the reasons Visa stock returned more than 400% over the past decade, doubling the S&P 500’s performance.
Visa owns about 20% of the global cashless payment processing market today, but that doesn’t mean management is content with its current dominance. The opposite is true as Visa is making massive inroads toward new client lists while adopting new technology.
Specifically, Visa is bringing digital wallets (already popular among consumers) to enterprise and corporate clients to help streamline their spending. Corporate credit is already the largest chunk of global credit utilization, and digital wallet opportunities promise to increase its size further and reward VIsa’s efforts.
Markel Group (MKL)
Markel Group (NYSE:MKL), primarily known as an insurance company, might initially seem like an unconventional pick among buy-and-hold stocks given the sector’s typically tight margins, despite benefiting short-term benefits from bond yields due to their substantial cash reserves. However, there is much more to Markel Group than meets the eye.
Often dubbed the “baby Berkshire Hathaway” (NYSE:BRK-A) (NYSE:BRK-B), Markel Group, under the leadership of CEO Thomas Gayner, is somewhat modeled after Warren Buffett’s approach at Berkshire. Gayner runs Markel as an insurance company and a large holding company that uses “underwriting profits to invest in equity, through both publicly traded stocks and ownership stakes in private companies.”
This strategy paid off handsomely, with Markel achieving a 360% return over the past 20 years, edging out the S&P 500’s 326% gain during the same period.
Despite its seemingly high share price, much of the bearish sentiment around Markel focuses on its core insurance underwriting business, overlooking Gayner’s innovative and successful investment approach. If you consider Gayner’s historical performance and believe in his strategy’s sustainability, Markel could be the biggest opportunity in decades if it goes the way of Berkshire.
Block (SQ)
Speaking of buy-and-hold stocks operating within payment processing, few fintech stocks can beat Block (NYSE:SQ). After a few rough quarters, compounded by wider market unease and a crippling short report that ultimately proved overblown, Block’s most recent earnings report points to renewed strength.
Specifically, Block’s gross profit improved by more than 20% to hit $2.09 billion, with much of that coming from its Cash App segment, which saw profit climb 25% year-over-year. This marks the fifth consecutive quarter of 20% or better profitability growth, while sales also jumped 20%.
Moreover, like Visa, Block is focusing on the future of finance — with a big emphasis on its crypto exchange and new blockchain ventures. Earlier this year, Block released its physical hardware crypto wallet, BitKey, to help diversify its customer base beyond those comfortable enough to hold coins in Cash App. Perhaps noting increased consumer concerns following the FTX debacle, Block is rapidly positioning itself as an all-weather crypto player to differentiate itself in the long term.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR) stock finally broke free from its sub-$25 trading range, and many investors are noticing. But, for those paying attention, Palantir always counted itself among the ranks of quality buy-and-hold stocks, even if per-share pricing volatility made short-term trading tough.
Palantir’s biggest strength today is rapid diversification beyond government contracting; government contracts offer decent money and long-term sales, and staking your operational future on just a few clients — even governmental — is risky. But Palantir is seeing success compound across its corporate client list, creating a snowball effect as it delivers value to private firms as diverse as Tampa General Hospital, United Airlines (NASDAQ:UAL), AARP, and even Wendy’s (NASDAQ:WEN).
Palantir’s operational model creates a certain amount of entrenchment and high switching costs; in other words, once a company relies on what Palantir offers, they’re unlikely to move to a competitor. A wider range of corporate clients both diversifies and extends Palantir’s sales streams, compounding Palantir’s status among buy-and-hold stocks.
Brookfield Renewable Partners (BEP)
Few stocks capture as wide a swath of the sustainable and green energy sectors as Brookfield Renewable Partners (NYSE:BEP), making it a top buy and hold stock for sustainability-minded investors.
Brookfield Renewable Partners holds a diverse portfolio of smaller renewable energy companies worldwide, focusing on long-term value rather than short-term gains. That trait makes it stand out among even the most forward-thinking buy-and-hold stocks. Brookfield’s portfolio includes hydroelectric power, wind, utility-scale solar, and energy distribution solutions. This diversity helps investors to capitalize on emerging trends and technologies in specific sectors while aligning with the broader sustainability movement.
Management aims for a 12% to 15% total return by enhancing existing assets and securing market deals, creating a long-term compounding effect for buy-and-hold investors. Since Brookfield Renewable’s parent company often deals with distressed debt investments, the current economic climate means plenty of new opportunities for management to set itself up for long-term momentum.
Smaller firms struggling to raise capital or manage debt may find themselves attractive merger and acquisition targets for Brookfield, a trend we’re already seeing accelerate.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a prime choice for long-term buy-and-hold stocks, combining smart financial management, significant long-term growth potential, and innovative leadership that continues to push boundaries despite its size — a distinction not as evident in companies like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
Microsoft’s strategic positioning in the AI sector may be the next catalyst to propel shares higher. While skepticism about more ambitious AI claims is understandable, the technology undeniably challenges traditional search engines and introduces new productivity tools that enhance Microsoft’s existing software suite. Microsoft’s hefty investment in OpenAI, the leading AI firm, secures it a front-row seat and early entrant advantage in developing the next major technological breakthrough.
Today is reminiscent of the early 2000s when search engine technology was on the horizon, but consumers didn’t realize its enormous potential and profitability. Among public companies, Microsoft is uniquely positioned to capitalize on this future potential, making it a top buy-and-hold stock for a forward-thinking investment strategy.
On the date of publication, Jeremy Flint held a long position in MKL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in NVDA and PLTR.