What is a Forever Stock?
The word “forever” is often hyperbole.
What do you say if you’ve been waiting a long time in line at the DMV or on hold with your cable provider? “I’ve been waiting forever!”
The term “forever stocks” is a similar exaggeration. You don’t necessarily hold on to these stocks “forever.” But you do hold onto them at least until retirement.
Forever stocks are stocks that are fairly evergreen. Typically they are industry leaders that have been growing for a while and should continue to grow for decades to come. They're stocks you can count on to be viable not only today, but 20 or 30 years from now.
There are five key attributes you want in forever stocks:
- A product or service or business model that is revolutionary.
- A mass market.
- A company that’s still small enough to grow rapidly.
- A company that is not respected—perhaps not even known—by the majority.
- And last but not least, a stock that’s trending up, indicating that investors’ perceptions of the company are improving. This is important because perceptions are always at least as important as reality, at least on Wall Street.
Forever stocks aren’t synonymous with safety stocks or even dividend stocks, necessarily. You’re not searching for the next Procter & Gamble (PG) or Johnson & Johnson (JNJ)—reliable, low-beta dividend growers that will deliver a steady stream of income and decent, if unspectacular, returns. Their purpose is to make you rich.
You want to find the next Apple (AAPL), Google (GOOG) or Amazon (AMZN)—stocks that if you had bought them 10 years ago (or more), you would have earned 10, 20, even 100 times your initial investment. Those are life-changing investments. And that’s what forever stocks are supposed to be.
Not every forever stock will deliver those kinds of returns, of course. In fact, you’ll be lucky to find a single buy-and-hold stock that will provide the same kind of return as you would have gotten by investing early in Apple or Amazon. But if one or two of these stocks can gain half the long-term return of an Apple or an Amazon, you can position yourself for a nice financial windfall by the time you retire.
At Cabot Investing Advice, we regularly search for those kinds of life-altering stocks in an advisory called Cabot Stock of the Month. Every month, our company president and chief investment strategist Timothy Lutts picks a stock—a growth stock, value stock, momentum stock, international stock or dividend stock—that has the potential to deliver major returns for years to come. To learn more about Cabot Stock of the Month, click here.
Each write-up features commentary on the picks from one or more of our expert stock market analysts, as well as company details and a stock chart.