Long-term buyers don’t pay attention to how stock markets go up and down in the short term. Instead of getting caught up in the drama, they buy shares in safe companies that have a track record of years or even decades of reliable performance.
Businesses that are growing and give steady gains are the best long-term stocks. You need to know the metrics that show solid proof of reliable long-term success in order to find them. Things like consistently doing better than the S&P 500 and dodging the big short-term drops (and gains) that stocks that are doing well tend to see.
MBA Advisor has found 8 stocks that might be good investments for the long run. There is a steady rise in earnings and sales for all of our picks, and their prices have dropped less than 89% of the stocks in the market.
|Cadence Design Systems, Inc. (CDNS)||+27.8 percentage points|
|Synopsys, Inc. (SNPS)||+24.0 percentage points|
|Tractor Supply Company (TSCO)||+10.7 percentage points|
|Intuit Inc. (INTU)||+9.9 percentage points|
|CDW Corporation (CDW)||+9.8 percentage points|
|Brown & Brown, Inc. (BRO)||+9.3 percentage points|
|Arch Capital Group Ltd. (ACGL)||+9.2 percentage points|
|Costco Wholesale Corporation (COST)||+8.9 percentage points|
Cadence Design Systems, Inc. (CDNS)
Software for automating circuit design is sold by Cadence Design Systems. The business’s goods assist semiconductor firms in automating the process of creating chips.
In the last few years, the company’s earnings have grown very quickly. Next year, experts predict that EPS will grow by 13.9%. In the next five years, earnings should rise by an average of 17.5% per year. That’s the second-best long-term growth rate for EPS on our list.
Cadence has outperformed the S&P 500 each year by an average of 27.5 percentage points over the last five years, thanks to strong earnings like this. This makes it a great long-term investment.
Morningstar gives CDNS an A rating for its financial health, which means the company is in a good financial situation. A buyback rate of 1.4% means that the company will buy back its own shares. In other words, it has been buying back its own shares. This helps investors get better returns over time because gains are shared among fewer shareholders.
In the past five years, the stock’s P/E ratio has been between 18 and 79. The current number is right on the high end of that range. A good value can be seen in the forward P/E ratio.
Companies that grow quickly don’t come cheap, but they can be worth it in the long run. As an example, the forward P/E ratio of 40.9 is much lower than the current P/E ratio of 75.2, which seems very high. It seems like the current price is more reasonable if CDNS keeps growing quickly, because better future earnings make the current stock price look cheaper.
Synopsys, Inc. (SNPS)
Synopsis, like Cadence creation Systems, makes software that helps chipmakers make the creation of their chips more automated.
In our list of companies, this one had the fastest rate of earnings growth over the last five years. Analysts think that EPS will grow by 13.8% next year and by an average of 17% each year for the next few years.
Don’t think that this much growth in earnings will come cheap. In the past five years, SNPS’s P/E ratio has been between 30 and 311. The forward P/E ratio is much better at 35.3, which is a pretty good deal for this stock. The current P/E ratio is 73.5.
Morgenstar gives Synopsys a “A” for financial health, and the company has a buyback return of 1.4%. In 2023, the stock price is going up after moving in a flat line in 2022.
Tractor Supply Company (TSCO)
The Tractor Supply Company runs more than 2,000 stores that sell supplies and tools for farms and ranches.
According to analysts, TSCO’s earnings will grow by 9.9% next year and by 8.8% each year for the next five years. Morningstar gives the business a “B” grade for its financial health.
With a P/E ratio of 22.8 and a forward P/E ratio of 19.2, Tractor Supply stock is a good deal. Within the last five years, P/E levels have been around 15 to 33.
It pays 1.9%, which is the most of any stock on the list. With a 2.4% buyback yield, it also has the highest return. The stock had been going up since the middle of 2022, but it fell in May, which gave investors a chance to buy the drop.
Lululemon Athletica Inc. (LULU)
Lululemon makes and sells athletic wear in a chain of shops and on its website.
Earnings have been slowly going up for the company. Analysts predict that EPS will grow by 15.1% next year and by 16.8% each year for the next five years. It has a “A” grade from Morningstar for its financial health. A shareholder return of 0.7% is caused by ongoing share buybacks.
In the past five years, LULU’s P/E ratio has been anywhere from 32 to 94. The stock is selling at a fair price, though it is almost never cheap, as shown by the current P/E ratio of 50. The forward P/E ratio also shows that it is a good deal right now.
Since the beginning of 2022, the stock price has been flat. It is now close to the top of its most recent range. Long-term investors are looking for a breakout to the upside.
Intuit Inc. (INTU)
Intuit makes accounting tools for both businesses and people. QuickBooks and TurboTax are two of the most important tools.
Our list shows that INTU has the worst five-year average return compared to the S&P 500. However, the stock has still done very well over the long term.
As time goes on, analysts expect earnings to grow quickly. EPS will likely rise by 11.3% next year and by an average of 16.2% each year for the next five years.
Morningstar gives Intuit a good “B” grade for its financial health. It has a 0.7% dividend yield and a 1.6% buyback return. Over the last ten years, the amount of the annual payout has steadily gone up.
The P/E number for INTU is 58 right now. Over the last five years, it has been between 33 and 91, so this is a normal P/E for this stock. The forward P/E number is better because it shows that future earnings will grow faster.
CDW Corporation (CDW)
Businesses can get IT services and solutions from CDW. Products include gear and software, as well as services for the cloud, security, and infrastructure.
Analysts think that earnings will grow by 9.7% next year and by 14.5% each year for the next five years. Morningstar gives the company a “B” grade for its financial health.
The dividend on this tech stock is 1.3%, which is the second biggest on the list (after TSCO). The buyback yield is 0.8%.
The present P/E ratio of 23 and the forward P/E ratio of 17.6 for CDW show that the stock is trading at a fair value. In the past five years, P/E levels have been around 17 to 34.
The price of the stock has been in a narrow range for over a year. It is now in the lower half of that range.
Brown & Brown, Inc. (BRO)
The main types of insurance that Brown & Brown sells and brokers are property, liability, and employee benefits insurance. The company gets paid to be a broker and doesn’t take on much financial risk.
Because BRO’s business is stable, its profits tend to rise slowly over time. Analysts think that EPS will grow by 9.9% next year and by 13.2% each year for the next five years.
Morningstar gives Brown a “B” grade for its financial health, and the company has a 0.7% dividend return. For more than ten years, the yearly dividend has grown in a steady way. The company also buys back its own shares, which give investors a 0.5% profit right now.
The current P/E ratio for BRO is 28.3, and the forward P/E ratio is 24.8. These numbers are close to the middle of the ranges for the next five years (16 to 36). Since the company is steadily rising, that price is fair. It’s a great stock to hold for a long time.
Arch Capital Group Ltd.
Arch Capital Group helps people all over the world with their insurance needs. The company, which is based in Bermuda, offers many specialized insurance plans to deal with difficult threats.
The company has the second-highest rate of earnings growth over the last five years, just behind SNPS. Going forward, analysts see strong growth in EPS of 9.9% next year and 18% per year for the next five years. That’s the fastest rate of EPS growth that any of these stocks is predicted to show.
Stocks in the financial area tend to trade at lower P/E ratios. Over the last five years, ACGL’s P/E has been anywhere from 6 to 28. With a current P/E ratio of 14.4 and a forward P/E ratio of 10.9, the stock seems to be fairly priced.
The price of Arch Capital shares has been going up steadily since late 2022. It has been buying back shares, which gives it a 1.2% buyback return.
Costco Wholesale Corporation (COST)
A cult-like following has grown around Costco among both regular customers and investors. This is because of its low prices and membership-based shopping.
In the past few years, the company’s profits have slowly gone up. Analysts think that EPS will grow by 10.5% next year and by 8.3% each year for the next five years.
M&A gives COST a “A” for financial health, and the company pays a 0.8% dividend return. Every two to three years for the past ten years, it has paid out a special payout that makes the yield much higher that year. The most recent one was in 2020.
The price of the stock rarely goes down. The P/E ratio right now is 39.8 and the P/E ratio for the next year is 34.7. In the past five years, P/E ratios have been between 27 and 52. The stock is currently selling at a fair to slightly high price.
After staying the same in 2022, COST stock prices are going up in 2023.
data are sourced from Trade That Swing, effective as of Sept. 5, 2023.
Also Read: 8 Best Long-Term Stocks Of September 2023