Investors seeking to build sustainable wealth over the long term regard buy-and-hold stocks as one of the most reliable investment strategies. By focusing on fundamentally strong companies and holding their stocks for extended periods, investors can typically enjoy substantial returns. Meanwhile, they can better mitigate the risks associated with short-term market volatility.
The principle behind buy-and-hold investing is simple. First, identify quality stocks with strong growth prospects, solid financials and competitive advantages. Then, hold onto these investments through market ups and downs. Historically, this approach has been proven to generate impressive returns. Research suggests that the S&P 500 index has delivered an average annual return of approximately 10% over the past 90 years. Such an impressive performance underscores the power of long-term investing.
Warren Buffett, one of the most successful investors of all time, is a staunch advocate of the buy-and-hold strategy. His investment philosophy centers on purchasing stocks of companies with strong fundamentals and holding them indefinitely. Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) has consistently outperformed the market, demonstrating the effectiveness of this approach. With that information, let’s delve into three stocks that are well-positioned to deliver long-term growth and stability.
Celsius Holdings (CELH)
Beverage company Celsius Holdings (NASDAQ:CELH) has emerged as a standout player in the energy drink market. It captures the attention of health-conscious consumers with its unique beverages. Management’s innovative product line has resonated well with a growing demographic focused on fitness and wellness.
In early May, the energy drink company reported robust first quarter fiscal 2024 results, highlighting its ability to scale its operations and grow market share. Revenue increased 37% year-over-year (YOY) to $356 million. Gross margin surged to a record high of 51%, benefiting from economies of scale in sourcing. First quarter diluted earnings per share (EPS) of 27 cents jumped 108% YOY.
In fact, CELH’s strong sales momentum is primarily attributed to its success in expanding its global distribution channels. It has a long-term distribution agreement with PepsiCo (NASDAQ:PEP) for the U.S. and Canada. Additionally, the beverage company has recently announced expansions into the U.K., Ireland, France, Australia and New Zealand. Currently, international markets account for just 5% of revenues. This suggests robust growth opportunities outside the U.S. Consensus analyst estimates call for 40% earnings growth through the next two years.
Year-to-date (YTD), CELH stock has surged by close to 75%. As a result, the stock currently trades at an expensive forward price-to-earnings (P/E) ratio of 94x. And, its trailing sales ratio of 15.8x indicates high growth expectations. Investors may want to wait for a pullback toward the $90 level.
Diebold Nixdorf (DBD)
Financial and retail technology company Diebold Nixdorf (NYSE:DBD) is a company known for its ATM managed services. DBD offers a variety of security solutions and self-service technologies. This makes it a potential pick for investors looking for buy-and-hold technology stocks in the financial transformation space.
First quarter metrics showed mixed results for Diebold Nixdorf. Revenue grew 5.1% YOY to $897.1 million, falling short of analyst expectations. Nonetheless, the company delivered positive net income of $45.2 million, suggesting a strategic focus on profitability.
Recently, Diebold Nixdorf has unveiled Vynamic® Connection Points 7 (VCP 7), its latest self-service software, at the Intersect Conference. Investors are hopeful that VCP 7 could streamline digital transformation for financial institutions, potentially increasing efficiency and customer satisfaction.
Since January, DBD stock has advanced 54%, trading favorably at 10.5x earnings and almost 1x sales. At present, the 12-month median price forecast for DBD stock stands at $44.60.
Micron Technology (MU)
Semiconductor manufacturer Micron Technology (NASDAQ:MU) specializes in high-performance memory and storage solutions that are essential for artificial intelligence (AI) applications.
In its Q2 of fiscal year 2024 report, Micron revealed strong momentum across all of its four segments, driven by strong AI server demand. Revenue jumped 58% YOY to $5.82 billion. Adjusted EPS improved to 42 cents, compared to a loss of $1.91 per share in the previous year.
The ramp-up of investments in data centers, cloud and AI is boosting demand for Micron’s offerings. With high-bandwidth memory (HBM) widely regarded as a bottleneck technology for AI, Micron’s flagship HMB3E chip for AI servers is already sold out for 2025. The chipmaker is ramping up its HBM offering with 30% less power than the competition. Amid growing concerns about AI’s power consumption, HBM3E is expected to boost Micron’s market share and lead to sustained pricing strength due to tight supply.
Also, the company’s diverse segments and products are demonstrating robust growth momentum, which helps minimize revenue concentration risks for Micron. In Q3, management anticipates YOY revenue growth to accelerate to 76%. Record revenue expectations for fiscal 2025 indicate management’s confidence in its current growth momentum over the next several quarters.
Since January, MU stock has increased by 49%. Shares are changing hands at 7.7 times trailing sales. Wall Street remains optimistic for Micron stock with a potential upside of 10% from current levels.
On the date of publication, Tezcan Gecgil 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.
