This is a food for thought article.
Is it possible to find long term investments that will remain stable investments and secure investments over generations? If so, what will these investments look like? What kind of return will they give and will they be subject to the ups and downs of temporary market conditions? Is it possible to successfully make very, very long term investments?
This subject came to mind the other day when this author walked down a street he had not visited for some time and noticed a clothing store. The sign above the door indicated that the store is a branch of a store that was founded in Seville, Spain in 1892. El Caballo started as a shop making tack (harnesses, etc.) for horses and branched out into clothing for riders. Today the store has 32 outlets in Spain alone and is a name in women’s fashion.
In the case of this company excellent management and attention to quality have been passed on generation by generation. However, is this company a good very long term investment, a secure investment?
Another case in point might be Hormel which started in 1891. Hormel pays a 2.5% dividend each year. The company is controlled by the Hormel Foundation whose sole purpose is to provide for the welfare of Austin, Minnesota where the company has its home plant. Because of the controlling interest of stock held by the foundation this company is pretty much immune to takeovers and is a yearly cash cow that processes meat in the American Corn Belt and sells its products all over the world. This stock is never going to go very high or very low and will keep paying dividends, probably forever. Perhaps this will be the very long term investment we are looking for. Hormel is certainly a stable investment and a secure investment if not a fast grower.
Seeing into the future for successful very long term investments is not easy. However, certain types of businesses tend to be immune to fluctuations in management, current trends, and takeovers. Companies with a family or foundation in control of the majority of stock such as Hormel, Campbell Foods, or Hershey also have strong brand names that have survived for more than a century. Stability of ownership of a strong brand name would seem to be an indicator for a good very long term investment. In addition, these companies make food, or, in the case of Hershey, candy. Very long term investment in something that people eat is probably a good idea. Food is a secure investment and with century long track records these companies are stable investments.
In the last century American Telephone and Telegraph was considered the best secure investment and very long term investment, the “widow and orphan stock.” However, AT&T was based upon a strangle hold on technology and a monopoly, with of which evaporated with a court ruling and competition.
Power plants come to mind as very long term investments and, in today’s world of looming scarcity, water purification plants.
Again, this is food for thought. There is an old story of a man who passed on his wealth as stock in a stable investment, a carriage factory and bridle shop specifying in his will that the stock could never be sold. It became worthless when Henry Ford started mass producing cars.