According to investing legend Warren Buffett, “be greedy when others are fearful.” It’s a mentality I’ve adopted with the stock market enduring two substantial pullbacks since the start of 2020. In the last 29 months, I’ve added nearly three dozen new investments to my portfolio, as well as increased existing holdings.
My objective is to allow time to perform its magic, just as the Oracle of Omaha does. Even if my investments do not all turn out successful, allowing them to run can lead to significant financial gains. I intend to keep the following two surefire stocks for the next 20 years.
For more than two years, I’ve owned Amazon (AMZN -1.43%), the e-commerce behemoth.
According to eMarketer, Amazon will account for 39.5 percent of all online retail sales in the United States this year, according to a recent survey. That’s 8.5 percentage points over numbers 2 through 15 combined. Despite unimpressive retail margins, Amazon’s primary marketplace is the springboard that allows it to compete on price and invest in higher-growth channels like Prime subscription services and advertising. For example, Amazon collects annual subscriptions from its 200 million Prime members each year, allowing it to undercut rivals on pricing while also funding higher-growth activities.
What’s more thrilling for the future of the company is Amazon Web Services (AWS). The world’s major cloud infrastructure service provider is AWS. Enterprise cloud spending is still in its early innings, which means the high-margin area could more than double Amazon’s operating earnings flow many times over the next two decades.
Amazon has a long history of being considered a bargain. Since 2010, Wall Street and investors have paid Amazon an average of 23 to 37 times cash flow. I’m looking forward to seeing what the future holds after Amazon is valued at approximately 10 times Wall Street’s predicted cash flow in 2024.
I added payment processor Mastercard (MA 1.08%) to my portfolio in March 2020, when the coronavirus epidemic hit.
I like Mastercard for its cyclical links the most. Even though recessions are unavoidable and financial shares take a beating when the economy contracts, expansions last far longer than recessions. It’s a straightforward arithmetic problem; and Mastercard spends far more time in the sun than under the rain.
Mastercard also avoids lending. Although it would probably have no trouble producing interest income and costs as a lender, doing so may expose the organization to loan losses during economic downturns. Mastercard’s not-so-subtle secret to high profit margins and swiftly recovering from recessions is to stick to payment processing alone.
Mastercard also has a lot of runway to grow its payment reach. Most payments in the world still happen in cash, allowing Mastercard to expand into underbanked developing countries and maintain a high growth rate.