Long-term investors strive to identify and acquire remarkable companies with the intention of never letting them go. As Warren Buffett famously remarked, his preferred holding period was “forever.” The idea of “never” selling stocks may be a lofty goal, acknowledging that there are valid reasons to divest. Nonetheless, adopting a default stance of “never” selling may lead to superior outcomes.
Here are two companies that have secured a place on the list of stocks I will “never” sell. Each possesses competitive edges in their respective sectors, a history of triumph, and vast opportunities for sustained growth and robust financial performance. Let’s delve into the attributes that make these stocks long-term fixtures in my investment portfolio.
Amazon’s Enduring Dominance
If you’ve made an online purchase recently, chances are high that you chose Amazon (NASDAQ: AMZN) as your platform. In essence, this sums up the rationale for owning the company. As long as Amazon retains its position as the primary online marketplace for millions, it stands a strong chance of remaining a winning stock for investors.
Back in early 2023, when the stock revisited its pandemic-induced nadir and investor sentiment waned concerning the e-commerce titan, this might have seemed implausible. However, since then, the stock has embarked on an extraordinary upswing, as the company has optimized its cost structure and bolstered its bottom line.
While Amazon’s dominance in online retail is well-known, it’s crucial to acknowledge that it leads the way in cloud infrastructure through Amazon Web Services (AWS). The company’s market share supremacy is poised to endure, fueled by rising demand for its services to accommodate the surge towards artificial intelligence (AI).
Surprisingly, AWS is no longer the fastest-growing segment of Amazon’s business. In the first quarter of 2024, AWS revenue expanded by 17%, trailing behind advertising, which surged by 24% to reach $12 billion. Although advertising revenue lags significantly behind the e-commerce and AWS divisions, its rapid growth presents another reason to be optimistic about Amazon’s future.
Winmark’s Unsung Brilliance
While Amazon commands global recognition, Winmark (NASDAQ: WINA) operates discreetly in the background. Winmark serves as a franchisor for stores that specialize in reselling used items. Its portfolio includes renowned brands like Play It Again Sports, Plato’s Closet, and Once Upon a Child. Despite its prolonged success, Winmark remains relatively modest with a market cap of $1.4 billion.
The appeal of owning Winmark’s stock lies in its business model. As a franchisor, Winmark shifts most of the expenses associated with operating a retail business onto its franchisees, granting the company attractive profit margins.
For instance, in the second quarter of 2024, Winmark boasted a gross margin of 95.8%. Delving deeper into the income statement, this resulted in a net profit margin of 51.8%. These margins have incrementally and consistently climbed over time.
While the business rationale for Winmark and its shareholders is evident, there is proof that its franchisees are content too. In Q2 2024, Winmark achieved a 100% renewal rate across four of its five brands.
Winmark gradually expands its store count throughout the year, emphasizing a methodical approach. In 2024, the company increased its total store count by 1.2%. The high renewals by franchisees bode well for the company’s future, complementing the gradual yet consistent store expansion.
Investing Decisions with Amazon: A Consideration
Before contemplating an investment in Amazon, it is prudent to reflect on the following:
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to acquire, excluding Amazon. The selected stocks are projected to yield substantial returns in the forthcoming years.
Consider the scenario when Nvidia was on this list on April 15, 2005… an investment of $1,000 at the time of the recommendation would have ballooned to $692,784!
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*Stock Advisor returns accurate as of July 22, 2024