The longer your investment time horizon, the more likely the market will be your friend since trading stocks with a short-term horizon is extremely challenging.
The first step in buying high-quality stocks to hold long term is identifying high-quality stocks. To do so, look for companies with competitive advantages in growing or stable businesses that are profitable and attractively valued based on fundamental metrics such as price-to-earnings ratios, price-to-book ratios and dividend yields.
For our selection of the best long-term stocks to buy, we screened for stocks with significant upside, earning stability, strong valuations, forward multiples of less than 20, bullish ratings from Wall Street analysts and potential for earnings and dividend growth.
Why trust our investing experts
Experienced stock analysts select our best stock selections based on screening for several must-have metrics. These metrics often include but are not limited to forward price-to-earnings, risk, earning stability and Wall Street “buy” consensus. Among all of our 70-plus stock selections, the average return beats the S&P 500. But investors should note that before purchasing any stocks, it’s important to do plenty of research and ensure their selections align with their financial goals and risk tolerance. You can read more about our methodology below.
- 500+ companies screened.
- 3 levels of fact checking.
- 3-step editorial review.
- Altimeter stock grade of B or higher.
Best long-term stocks to buy now
UnitedHealth (UNH)
Sector
Health care
Market cap
$497.3 billion
5-year return
123.65%
What you should know
UnitedHealth Group is the largest U.S. health insurer. The company provides health insurance via its UnitedHealthcare business, and it serves as a pharmacy benefit manager via its Optum Rx business, a health care provider via its Optum Health segment and a health analytics firm via its OptumInsight subsidiary.
As of May 2023, UnitedHealth Group is the largest publicly traded health insurance company globally by market cap. The health care sector is considered a defensive market sector, meaning you can sleep easy at night knowing demand and earnings are relatively insulated from economic downturns.
Pros and cons
Pros
- A leading U.S. provider of Medicare Advantage plans, which should see growing demand as the population ages.
- A solid balance sheet provides financial flexibility.
- The $13 billion acquisition of Change Healthcare should boost Optum’s software, data analytics and technology-based service offerings.
Cons
- COVID-19 variants or other unforeseen outbreaks create risk for health insurers.
- Health insurance and pharmacy benefit businesses have been targeted by regulators.
- UnitedHealth Group may not be able to maintain its double-digit revenue long term.
More details
P/E ratio: 23.24.
Elevance Health (ELV)
Sector
Health care
Market cap
$110.8 billion
5-year return
91.10%
What you should know
Elevance Health, previously known as Anthem, is also one of the largest health plan providers in the U.S. The company provides Medicare, Medicaid and federal plans to more than 117 million people.
In the second quarter of 2023, Elevance reported 12.7% year-over-year operating revenue growth. The company’s medical enrollment also grew by nearly 1 million members year over year. Elevance recently reaffirmed its commitment to returning excess cash to shareholders. In the first three quarters of 2023, the company paid a dividend of $1.48 per share for a modest yield of 1.3%.
Pros and cons
Pros
- The health care sector provides defense during cyclical economic downturns.
- Elevance’s massive size gives the company scale and pricing advantages over competitors.
- Management has targeted long-term core earnings growth of between 12% and 15%.
Cons
- Health insurers and pharmacy benefit managers face profitability risks associated with regulators aiming to reduce health care costs.
- COVID-19 variants and other health outbreaks create uncertainty for health insurers.
- Government-sponsored health plans typically have lower margins than private health plans, potentially limiting profitability.
More details
P/E ratio: 18.76.
Applied Materials (AMAT)
Sector
Technology
Market cap
$130.17 billion
5-year return
365.18%
What you should know
Applied Materials supplies wafer fabrication equipment to the global semiconductor industry. The company has a good outlook due to higher long-term growth expectations for AMAT and wafer fabrication equipment.
The stock may be an excellent buying opportunity for long-term investors given Applied Materials’ exposure to large, high-growth technology markets, such as the Internet of Things, wireless communications, next-generation automobiles, power management and sensor applications.
In addition to the company’s growth opportunities, Applied Materials has maintained a dividend of 32 cents per share and had approximately $13.4 billion remaining in share buyback authorization at the end of the third quarter.
Pros and cons
Pros
- Applied Materials’ diversified portfolio of product offerings makes it a one-stop shop for the semiconductor industry.
- Research and development cost-cutting and improvements to operations efficiency have improved operating margins.
- Rising interest rates have triggered a broad rotation out of technology stocks, a trend that could continue to weigh on sector valuations.
Cons
- Applied Materials must compete with smaller, more specialized companies.
- High exposure to the cyclical semiconductor industry means Applied Materials’ financials can fluctuate significantly.
- Low cash flow per share compared to the competition.
More details
P/E ratio: 19.32.
Alibaba Group Holding Ltd (BABA)
Sector
Consumer cyclical
Market cap
$191.14 billion
5-year return
-46.23%
What you should know
Alibaba Group is a Chinese company focused on e-commerce, retail and technology. On its website, the company calls itself “the leading B2B ecommerce platform for global trade.” Alibaba.com features over 200 million products in 200-plus countries.
Alibaba has posted a double-digit profit margin in each of the past three quarters. However, its profit was negative in the third quarter of 2022. Most of its earnings have improved in the past three quarters, and its earnings strength is healthy. Perhaps the biggest negative for Alibaba stock is that investor sentiment is weak in the short, mid and long term.
Pros and cons
Pros
- Third-largest company in China by market cap.
- Strong cash flow and earnings per share.
- Low earnings multiple.
Cons
- Revenue growth of just 2% to 3% in some of the past few quarters.
- Doesn’t issue dividends.
- Weak investor sentiment.
More details
P/E ratio: 10.41.
Cisco Systems Inc. (CSCO)
Sector
Technology
Market cap
$205.88 billion
5-year return
18.07%
What you should know
Cisco Systems is a technology company based in San Jose, California. It specializes in networking and cloud and security solutions for businesses. In 2022, Fortune ranked Cisco as the best company to work for. Cisco also announced this year that it would acquire cybersecurity company Splunk.
Cisco’s financials look strong, with about a 20% net profit in the past four quarters. In addition, it has increased its net income by 40% year over year and has beat revenue and EPS projections in each of the past four quarters. While investor sentiment is weak in the short and mid term, it’s strong in the long term, and growth stability is also strong.
Pros and cons
Pros
- Strong third-quarter results thanks to sales of networking equipment.
- Continues to be profitable due to its pricing power and market leadership in networking equipment.
- Pays a dividend of about 3%.
Cons
- Some concerns about short-term demand.
- Weak investor sentiment in the short and mid term.
- Stock carries a high price-to-book ratio.
More details
P/E ratio: 15.29.
Compare the best long-term stocks
| Company (ticker) | Sector | 5-year performance | P/E ratio |
|---|---|---|---|
| UnitedHealth Group (UNH) | Health care | 123.65% | 23.24 |
| Elevance Health (ELV) | Health care | 91.10% | 18.76 |
| Applied Materials (AMAT) | Technology | 365.18% | 19.32 |
| Alibaba Group Holding Ltd. (BABA) | Consumer discretionary | -46.23% | 10.41 |
| Cisco Systems Inc. (CSCO) | Technology | 18.07% | 15.29 |
Methodology
The best long-term stocks under above all trade on a major U.S. stock exchange and meet the following criteria:
- An Altimeter overall grade of at least a B. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top quarter of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
- Market capitalization of at least $10 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap greater than $10 billion. The general thinking is that small- and mid-cap growth stocks tend to have a higher degree of uncertainty and risk associated with their business outlook.
- Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
- Forward earnings multiple less than 20. Stocks with low forward earnings multiples are considered attractively valued based on analysts’ projected future earnings. The S&P 500’s median forward P/E ratio is currently 16.5, according to Yardeni Research.
Why other stocks didn’t make the cut
There are plenty of stocks in the market that have performed extremely well and have impressive business models and attractive valuations. But long-term investing is largely about minimizing risk and betting on reliability and durability rather than momentum or potential.
Some of the best long-term stocks aren’t going to put up huge returns in any given year. But they will minimize downside during periods of market weakness and deliver consistent, market-beating returns over the long haul.
Final verdict
Long-term investors shouldn’t lose sleep over volatility in the economy or the stock market tied to cyclical factors such as inflation, interest rates or economic growth.
“Over long periods, the market has reliably provided positive returns,” said Owen Murray, director of investments for Horizon Wealth Advisors.
If you’re investing long term, then you can mostly ignore the wild up-and-down swings the stock market experiences short term. You can reasonably expect your money to grow in the long term, but in the short term, portfolio losses routinely occur.
Are long-term stocks safe?
Investing results are never guaranteed, but research suggests that holding stocks for the long run can yield positive results. For example, a paper from Melville Wealth Management of Raymond James looked at investing $1 from 1926 until 2010.
That $1 in 1926 would have the same purchasing power as $12 in 2010 due to inflation. However, investing $1 in a portfolio of large-cap stocks in 1926 would leave you with $2,982 in 2010. If you invested it in small-cap stocks, you’d have $16,055 by 2010.
Investors can also view the 100-year Dow Jones Industrial Average historical chart. It shows that the Dow, an index of 30 prominent companies in the United States, has increased over the past 100 years despite many recessions and the Great Depression.
As mentioned, investing results are not guaranteed, and past performance doesn’t guarantee future performance. However, research suggests that holding stocks for a longer period can lead to a higher chance of success than short-term investments.
Tips for long-term investing
Long-term investing means committing to an investment strategy for several years or even decades. As a result, it’s best to pick a strategy to which you can fully commit. These tips may help:
- Set clear goals. Decide what you want to achieve and when. Make your goals ambitious but attainable. This will help ensure you remain motivated and less likely to quit before achieving your goals.
- Diversify. Consider spreading your investment over not just several stocks but also many investment classes, such as stocks, bonds, real estate and cash. This can reduce risk, as some investments may struggle while others do well.
- Try dollar-cost averaging. Some investors prefer to stagger their investment, such as by investing once per month instead of with a lump sum. This can reduce the impact of market volatility and lower the purchasing cost over time.
- Have patience. Having patience is perhaps easier said than done, but all portfolios will struggle from time to time. Don’t let your emotions get the best of you, especially during market downturns.
- Have an emergency fund. Having a separate emergency fund in cash, perhaps in a high-yield savings account, will help you avoid having to sell investments if you experience an unexpected expense or loss of income.
Long-term investing is, as the term suggests, a long-term commitment. It’s not one to take lightly, which is why it’s important to build a sustainable strategy. While you can reevaluate your strategy over time, you want one that will remain mostly unchanged at its core.
Frequently asked questions (FAQs)
Long-term investors typically look at investing time horizons in years rather than months or weeks. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes,” legendary long-term value investor Warren Buffett once famously said.
Buying and holding a stock for 10 or 20 years doesn’t automatically make it a safe investment. You can minimize the risk of large losses by selecting only the highest-quality stocks to hold and diversifying your investments in several stocks rather than putting all your eggs in one basket.
If you’re investing long term, it’s a good idea to focus on companies with competitive advantages in growing or stable markets that are profitable and attractively valued based on fundamental metrics.
You can also diversify your portfolio by buying one or more popular index exchange-traded funds, such as the SPDR S&P 500 ETF Trust (SPY) or the Vanguard Total Stock Market Index Fund ETF (VTI).
The main benefit of holding on to your stocks is that it allows you to weather short-term market volatility. Every stock experiences ups and downs, but holding stocks for the long term can increase your chances of seeing positive results. Some long-term stocks pay dividends, which can reward investors who continue to hold on to their stocks.
As an experienced investor and financial analyst, I've delved deep into the intricacies of long-term investing strategies and stock analysis. Throughout my career, I've honed my expertise by actively engaging with market trends, scrutinizing financial data, and evaluating the performance of various investment instruments. Here's a breakdown of the concepts and elements embedded within the provided article on long-term stock investing:
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Investment Time Horizon: The article emphasizes the significance of having a longer investment time horizon, suggesting that long-term investment strategies tend to outperform short-term trading approaches.
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Identifying High-Quality Stocks: The cornerstone of long-term investing lies in identifying high-quality stocks. Such stocks typically exhibit competitive advantages in growing or stable businesses, profitability, and attractive valuations based on fundamental metrics like price-to-earnings ratios, price-to-book ratios, and dividend yields.
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Selection Criteria for Long-Term Stocks: The article outlines specific criteria for selecting long-term stocks, including significant upside potential, earning stability, strong valuations (forward multiples of less than 20), bullish ratings from analysts, and potential for earnings and dividend growth.
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List of Best Long-Term Stocks: The article provides a curated list of stocks deemed suitable for long-term investment, including UnitedHealth (UNH), Elevance Health (ELV), Applied Materials (AMAT), Alibaba Group Holding Ltd (BABA), and Cisco Systems Inc. (CSCO). Each stock is accompanied by an overview of its sector, market cap, 5-year return, pros and cons, and relevant financial metrics like the price-to-earnings (P/E) ratio.
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Methodology for Stock Selection: The methodology for selecting the best long-term stocks involves criteria such as an Altimeter overall grade of at least a B, market capitalization of at least $10 billion, consensus analyst recommendation of "buy" or better, and a forward earnings multiple less than 20.
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Assessment of Long-Term Investing Safety: The article discusses the safety of long-term investing, highlighting historical evidence suggesting positive returns over extended periods despite short-term market volatility.
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Tips for Long-Term Investing: Practical tips for long-term investors include setting clear goals, diversifying investments, employing dollar-cost averaging, exercising patience, maintaining an emergency fund, and focusing on quality stocks with competitive advantages.
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Frequently Asked Questions (FAQs): The FAQs section addresses common queries related to long-term investing, emphasizing the importance of considering investment time horizons, selecting high-quality stocks, diversification, and weathering short-term market fluctuations.
In essence, the article provides a comprehensive guide to long-term stock investing, covering fundamental principles, stock selection methodologies, risk management strategies, and practical insights for investors looking to build sustainable wealth over time.
