I recently read an article discussing the 20-year performance of Toronto-Dominion Bank (NYSE:TD), one of Canada’s biggest banks. I wonder if there are stocks to buy that will do better than TD over the long haul.
I like to use Morningstar.com for projecting annualized returns. Since it only goes as far out as 15 years, I’ll try to find 10 stocks to buy for the next 15 years.
TD stock has an annualized total return of 9.63% over the past 15 years through October 25. I will look for 10 names that have done better over the past 15 years and ought to over the next 15.
Here are 10 stocks to buy for the next 15 years:
- Nvidia (NASDAQ:NVDA)
- Nike (NYSE:NKE)
- Comcast (NASDAQ:CMCSA)
- Estee Lauder (NYSE:EL)
- S&P Global (NYSE:SPGI)
- Sherwin-Williams (NYSE:SHW)
- Cintas (NASDAQ:CTAS)
- Sun Communities (NYSE:SUI)
- Texas Pacific Land (NYSE:TPL)
- Simulations Plus (NASDAQ:SLP)
To sweeten the pot even further, I’ll be looking for companies that pay dividends. Maybe not as long as the 25 years required to be a part of the Dividend Aristocrats, but offering some dividend payment in 2021. Additionally, in a patriotic nod to my own country, I’ll try to include as many Canadian stocks that qualify and are worthy of your hard-earned dollars.
Stocks to Buy for the Next 15 Years: Nvidia (NVDA)
Market Cap: $617.9 billion
15-Year Annualized Total Return: 28.7%
Dividend Yield: 0.1%
Tesla (NASDAQ:TSLA) recently joined the trillion-dollar club. It’s only the fifth U.S.-listed company to hit a market cap of this size.
Bck in August, I wondered if Nvidia could join the club in 2022. Currently more than $380 billion away from hitting $1 trillion, it’ll take another strong year in the markets. Year-to-date, it’s up 89.4% through October 26. If Nvidia delivers the same performance in 2022, it will hit $1 trillion and then some.
While I concluded that NVDA wouldn’t hit a $1 trillion market cap until sometime in 2023, there is no doubt in my mind that it remains one of the best stocks to own anywhere in the world.
In June, I said NVDA “could hit $1,000 sooner than you think.” At the time, it was trading at $746.28 — NVDA split on a four-to-one basis on July 20. As I write this, it is trading at $247.17 or $988.68 pre-split, only dollars away from $1,000.
Nvidia is capable of a lot.
Nike (NKE)
Market Cap: $259.3 billion
15-Year Annualized Total Return: 19.6%
Dividend Yield: 0.7%
Back in October 2011, I wrote here on InvestorPlace that readers ought to sell Under Armour (NYSE:UA, NYSE:UAA) and buy NKE stock. 2011 is so far back, Under Armour’s Class C shares (no voting rights) didn’t exist. They were created in 2016.
From Oct. 27, 2011, through Oct. 27, 2021, UAA stock is up 128%. Over the same period, Nike gained 595%, almost 5x greater.
At the time, Under Armour’s inventory growth was outpacing revenue growth by 1.5x. That’s never a good thing if business slows. On the other hand, Nike was trading at 4.4x book versus 8x book for Under Armour, despite the fact Nike was still growing sales by double digits and generating higher operating margins.
Today, UAA trades at 5.5x times book compared to 18.1x book for Nike.
Investors should continue to value Nike at a premium to Under Armour. It remains a superior business.
Comcast (CMCSA)
Market Cap: $246.7 billion
15-Year Annualized Total Return: 10.6%
Dividend Yield: 1.9%
Comcast isn’t afraid to rock the boat. The cable company let its broadcasting deal with MSG Network expire at the end of September because it feels the network is asking too much money for New York Rangers and Knicks games that no one watches.
According to CNBC, Comcast’s internal data shows that the average Comcast customer who received MSG watched approximately 10 of the 240 games available over the past year.
In August, Comcast announced that it would partner with ViacomCBS (NASDAQ:VIAC,NASDAQ:VIACA) in Europe to launch SkyShowtime, a streaming service that will stream content from both companies in more than 20 European countries, including Spain, Portugal, and the Netherlands. SkyShowtime will be available to more than 90 million homes.
“Our new streaming service, SkyShowtime, will combine the best of the US and Europe with iconic brands and world-class entertainment for millions of consumers in more than 20 new markets in Europe,” said Dana Strong, Group Chief Executive, Sky, in its press release announcing the new service.
Comcast’s current trailing 12-month (TTM) FCF is $13.88 billion. That’s good for an FCF yield and FCF margin of 5.6% and 12.7%, respectively.
Estee Lauder (EL)
Market Cap: $119.3 billion
15-Year Annualized Total Return: 20.8%
Dividend Yield: 0.6%
Estee Lauder a stock with sneakily good performance. There always seems to be something pressuring the company — during Covid-19, the company’s travel retail segment was hit by the lack of people traveling through airports — yet it continues to grow sales.
In fiscal 2006 (June 30 year-end), Estee Lauder had annual sales of $6.46 billion and $619.6 million in operating income. In fiscal 2021, its sales and operating income were $16.22 billion and $2.62 billion, respectively. That’s 6.3% compound annual growth for sales and 10.1% CAGR for operating income.
That might not seem like a lot, but year in, year out, it adds up to an incredible increase in value for shareholders. According to Inequality.org, the Lauder family’s wealth grew from $1.6 billion (2020 dollars) in 1983 to $40 billion in 2020. Since 2015, their wealth has increased by 119% or 16.9% per year.
I first recommended EL stock in 2012 and I’ve been recommending it ever since. It’s important to note that current CEO Fabrizio Freda was the CEO back in 2012. So he’s been in the top job for more than 12 years. Consistency pays.
S&P Global (SPGI)
Market Cap: $107.8 billion
15-Year Annualized Total Return: 14.6%
Dividend Yield: 0.7%
If you look at S&P Global’s 10-year return compared to its 15-year return, you’ll notice that its annualized return nearly doubled between 2006 and 2011. Since 2011, it’s averaged an annual return of 27.3%, right up there with the other names on this list.
I wonder what happened over those five years to accelerate growth?
The short answer is activist investors. Jana Partners and the Ontario Teachers’ Pension Plan forced the company to split into two separate businesses in 2011. However, before McGraw-Hill could complete its split, McGraw-Hill Education was sold to Apollo Global Management (NYSE:APO) for $2.5 billion in November 2012.
McGraw-Hill would be renamed McGraw-Hill Financial. It became S&P Global in April 2016. The rest, as they say, is history.
Since the Sep. 12, 2011, announcement that McGraw-Hill was splitting into two companies, the stock has gained 816%. It’s proof positive the activists were on to something.
Sherwin-Williams (SHW)
Market Cap: $83.2 billion
15-Year Annualized Total Return: 20.7%
Dividend Yield: 0.7%
There is no question that Sherwin-Williams has benefited from the decade-long boom in housing prices. Just try selling your house without a fresh paint job inside and out. It’s not happening.
In 2009, Sherwin-Williams finished the year with $7.09 billion in sales. In 2020, it had sales of $18.36 billion, more than double. Even more important is the fact its profits increased five-fold from $436 million to $2.04 billion.
The 29 analysts covering SHW give it an “Overweight” rating with a median target price of $312.50, below where it’s currently trading. However, I suspect that the company will deliver a catalyst or two before the end of the year that will move analysts off their skeptical perches.
Sherwin-Williams’ current trailing 12-month (TTM) free cash flow (FCF) is $3.22 billion. That’s good for an FCF yield and FCF margin of 3.9% and 15.4%, respectively.
It isn’t cheap, but you have to pay more for quality.
Cintas (CTAS)
Market Cap: $44.5 billion
15-Year Annualized Total Return: 17.3%
Dividend Yield: 0.9%
It’s incredible to think that a company supplying company uniforms, floor mats, restroom supplies, first aid kits, fire protection products, and so much more would turn out to be a five-star investment.
But that’s precisely what Cintas has been and will continue to be: A winning stock. YTD, it’s up 22.5%, slightly better than the entire U.S. market.
The company’s past success is undeniable. It’s grown sales and adjusted earnings per share in 50 of the past 52 years while averaging organic growth of 6% and double-digit EPS growth.
It plans to grow its organic growth in the mid to high single digits in the years ahead, boosting its operating margins between 20% and 30% and generating strong FCF.
Its TTM FCF is $1.15 billion, good for an FCF margin of 15.8%. The company’s FCF yield of 2.6% is low, but it’s justified given its hold on the corporate uniform business.
Sun Communities (SUI)
Market Cap: $22.9 billion
15-Year Annualized Total Return: 13.6%
Dividend Yield: 1.7%
I don’t believe I’ve ever written about or recommended this company to readers. Sun Communities owns or has an interest in 584 manufactured housing (MH), recreational vehicle (RV), and marina properties in 38 U.S. states, plus Canada and Puerto Rico.
In business since 1975, the real estate investment trust (REIT) went public in 1993. It is the leading owner of MH, RV, and marina properties in the U.S., growing organically and through acquisitions. It generates 52% of its revenue from manufactured housing, 30% from RVs, and the remainder from marinas.
So far, in 2021, it has invested $1.1 billion in 11 MH communities, 11 RV resorts, and 14 marinas. To keep the inventory fresh, it also sold six MH properties for $162 million.
With high occupancy rates of almost 97% and 2% to4% rent increases each year, it’s a stable moneymaker.
Since the beginning of 2020, it has added approximately 57,500 sites at 166 properties and marinas at the cost of $4.1 billion. The possibility for expansion at many of its properties ensures the rental revenues will keep growing.
It’s an intelligent, under-the-radar long-term buy.
Texas Pacific Land (TPL)
Market Cap: $10.0 billion
15-Year Annualized Total Return: 28.7%
Dividend Yield: 0.9%
In my March 2021 article “10 Stocks to Buy With $1,000“, Texas Pacific Land was one of the names on my list:
“I was hesitant to put an energy-related stock on the list of 10 companies. However, with oil prices coming on, it might make for perfect timing. Trading at $1,141 as I write this, Texas Pacific is one of Texas’s largest landowners.”
The company, which has been around since 1888, owns more than 888,000 acres in West Texas oil country. It makes money by leasing the land to oil and gas producers, taking a cut of the revenues generated.
Up 80% YTD, it’s done well for two reasons: First, oil prices have moved higher. Secondly, it converted to a C-corporation from a trust in January, bringing into the fold a lot more institutional investors prohibited from owning trusts. Investors now own more than 56% of the company’s stock.
As long as the oil industry remains viable, Texas Pacific will continue to benefit from its arrangement. And then, when fossil fuels are no longer a part of our life, they will likely sell large parcels to willing buyers.
I suspect it will be around in 2088 and beyond.
Simulations Plus (SLP)
Market Cap: $836.9 million
15-Year Annualized Total Return: 25.5%
Dividend Yield: 0.5%
The smallest of the companies on my list, Simulations Plus, dates back to 1996. It provides scientific software and consulting services to drug companies who use their services and software to advance their drug development pipelines.
If Covid-19 has proven nothing else to investors, it’s that the health care infrastructure required to carry out all the work that goes on behind closed doors in the name of science is massive in scope.
Long-time shareholders have benefited from this opportunity.
In 2020, the company’s revenues were $41.6 million, generating an operating profit of $11.6 million. Its gross and operating margins are significant. A decade ago, its annual sales were $8.7 million with an operating profit of $3.5 million.
CEO Shawn O’Connor had this to say about the company’s latest fiscal year: “We believe our proven business model and increasing software revenue mix will enable us to grow our bottom line faster than our top line, while generating strong cash flows to further strengthen our balance sheet,” O’Connor stated in its Q4 2021 press release.
In the case of SLP stock, slow and steady wins the race. Expect it to go over $1 billion in market cap sometime in late 2022.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.