No one can predict the future.
That’s why long-term buy-and-hold investing is the best method for success in the stock market. As a strategy, it doesn’t guarantee success, but it gives investors more time for their investments to compound — which studies show is one of the best ways to consistently deliver a positive return.
Another way to maximize your chances of success is to invest in companies with great business models and solid fundamentals. Let’s examine two of my favorites.
Image source: Getty Images.
Visa
First up is Visa (V 0.90%). I like Visa for a simple reason, best explained by a Warren Buffett quote: “The secret of life is weak competition.”
To put it bluntly, Visa has little competition. Sure, its great rival, Mastercard, operates an extensive payment network similar to Visa’s, but it’s not entirely identical.
Moreover, given the complexity of the global payments system, neither company is out to crush the other root and branch. Rather, Mastercard and Visa’s competition is more similar to other famous corporate rivalries, like Coca-Cola and Pepsi or Home Depot and Lowe’s Companies.
In other words, both companies recognize that there is plenty of room for the other in their respective markets. More to the point, Visa and Mastercard compete by enticing card issuers, such as banks and credit unions, to offer their customers access to a wide variety of global merchants.
In turn, there are over 4.3 billion Visa-branded credit, debit, and pre-paid cards in circulation today — that’s more than half the world’s population of roughly 8 billion.
That’s a lot of cards. And it adds up to a tremendous amount of revenue, profits, and free cash flow, as Visa collects fees on each transaction processed on its network.
V Revenue (TTM) data by YCharts
What’s more, Visa is growing rapidly for a company of its size. Analysts expect the company’s sales to increase 21% this year and a further 11% in 2025. With that level of growth — coupled with the company’s already lucrative profit margin — investors should be happy to own Visa for many years to come.
Amazon
If you’re going to hold a stock forever, you should have supreme confidence in a company’s business model, management, and track record. That’s why I’ve owned Amazon (AMZN -0.68%) for years and plan to own it for as long as I’m around.
Amazon began as a humble bookselling business, operating out of a nondescript garage in Seattle. Today, the company is massive. Its annual revenue of $590 billion is larger than the total economic output of Nigeria, Greece, and Croatia — combined.
For most people, Amazon’s e-commerce network is its most visible business segment. But the company also makes over $25 billion quarterly from its industry-leading cloud services segment, Amazon Web Services (AWS).
Image source: Statista
All in all, despite its enormous size, Amazon continues to deliver double-digit revenue growth. In turn, that revenue drives fantastic free cash flow per share, which is an excellent driver of long-term stock price growth. In fact, Amazon founder Jeff Bezos went so far as to say that free cash flow per share was his “ultimate financial measure.”
At any rate, with Amazon’s combination of growth, diverse revenue streams, and profitability, long-term investors would be wise to consider buying and holding shares of Amazon well into the future.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Amazon, Coca-Cola, and Visa. The Motley Fool has positions in and recommends Amazon, Home Depot, Mastercard, and Visa. The Motley Fool recommends Lowe’s Companies and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.