What Are Pick and Shovel Investments?

This expression does come from the California gold rush days but does not really mean selling mining equipment. As noted by Investopedia, the pick and shovel expression refers to investing in the technology that underlies the creation of goods and services. As many players fight it out to control an investment niche the few creators of the underlying technology win no matter which of the businesses ends up dominating the niche itself.

What Are Pick and Shovel Crypto Investments?

Rather than buying and selling Bitcoin, a person could invest in a crypto exchange. These folks make money no matter if Bitcoin goes up or down. For example, one could buy Coinbase stock. By doing this an investor only needs to worry about how well that business is run and not about how well individual cryptocurrencies are doing. On the other hand, Coinbase is dealing with an SEC lawsuit charging them with securities violations!

Investing in Tools That Run the Blockchain and DeFi

An investment alternative to DeFi, NFT, or blockchain developers is the computer chip maker, Nvidia. This company stands to make long term gains from crypto while not really being part of the immediate crypto ecosystem. Crypto mining relies on specialized computer chips called GPUs or graphics processing units. These chips are essential for the DeFi projects within Ethereum. It has long been our opinion that Ethereum will bypass Bitcoin in total market capitalization. As decentralized finance grows, so will Ethereum and so will the need for the high-speed, ultra specialized chips that Nvidia makes.

To the extent that AI becomes part of the crypto universe, or not, Nvidia is also central to the artificial intelligence revolution as its specialized processing chips are also essential there as well. While blockchain gaming is a growing part of the crypto world Nvidia prospers there as well because it has long specialized in the high end chips needed for video games.

Long Term Investing

There are individual investors who have become famously rich choosing investments for the long term. One whom we commonly mention is Warren Buffett, the so-called Oracle of Omaha. Buffett says his favorite length of time to hold a stock is forever. To make this work he does a couple of things. First of all he only invests in a company when he fully understands how they make money and how they are likely to keep making money into the long term future. This has to do with things like a strong product line and brand name. He has held stocks like Coca Cola for decades and invests in Apple not because of their technology but because of their devoted following. Buffet and investors like him use a concept called intrinsic stock value to decide if they should buy and hold a stock for the long term. Over the long term we believe that successful crypto investors will be those who follow the same game plan.

A Pick and Shovel Crypto Investment – SlideShare Version

A Pick and Shovel Crypto Investment – DOC

A Pick and Shovel Crypto Investment – PDF

What Is a K-shaped Recovery?

Investopedia explains what a k-shaped recovery is and why it matters. During a recession, economic performance generally falls across all sectors although some sectors may be hit worse than others. And, when the economy recovers, all sectors tend to join in at varying rates. What makes a k-shaped recovery different is that some sectors promptly begin to recover like the tech sector in 2020 while other sectors like hospitality and travel continue to fall. The questions for investors are if the climbing sectors will continue on their path and when the falling sectors will recover, or if they ever will.

What a K-shaped Recovery Means for Your Investing

Those who stayed in, or purchased, big tech in early 2020 have done very well during 2020. Extremely low interest rates have helped as has the pivot to working at home and social distancing brought on by the covid-19 pandemic. Going forward, there should be some concern about how long big tech can continue their current rate of gains. We are seeing increasing concern about big tech monopolies that could lead to breakups. And, when interest rates start going again, it will tend to put a damper on rapid stock market growth. For the falling sectors of the market, the general expectation is that there will be an eventual recovery. But, companies without sufficient reserves or credit may simply go out of business or be taken over for pennies by their competitors. Investors will need to accurately pick the survivors who will benefit from a world free of covid-19 and renewed economic growth. That will require more than glancing at a k-shaped recovery graph and the use of intrinsic stock value as a guide going forward.

Economic Stability or the Lack of It for Your Investments

The Financial Stability Board issued a report regarding stability and the covid-19 crisis.

Global financial conditions have overall continued to ease since the G20 meeting in July on the back of the decisive policy action taken earlier this year. However, risks to global financial stability remain elevated. Financial conditions may remain vulnerable to sharp shifts in investor sentiment. Deteriorating credit quality of non-financial borrowers poses risks to the financial sector. The intensification of the pandemic, together with the resulting necessary government containment measures as well as greater uncertainty about its duration, is increasing vulnerabilities in the non-financial sector.

Loan losses experienced by banks will affect future credit availability and investor sentiment may swing to the negative if investors believe that the stock market party is over. The huge amounts of government debt coupled with “zombie company” debt create investment risks going forward. Investors who have profited from the tech rally in 2020 may benefit from taking a little off of the table while those who have avoided dull consumer goods stocks and utilities may benefit from accepting lower investment returns in order to provide a little investment security.

Long Term Effects of a K-shaped Recovery on Your Investments – Slideshare Version

Long Term Effects of a K-shaped Recovery on Your Investments – DOC

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Judging the Earning Potential of an Investment

Your investment time horizon is a major factor in how you judge the earning potential of an investment. Stock traders use technical analysis tools to read the sentiment of the stock market but also use market sentiment data from other sources. This is because they are only concerned with how the price of a stock will perform in the near term when they decide to buy, sell, or trade options. On the other hand, long term investors look for intrinsic value. This is potential of an investment to make money over the long term. Using tools like the CAPE ratio a long term investor will purchase a stock during a market downturn because the company has long term potential that is not reflected by the current price.

Profit Potential in Business and Long Term Investing

Investopedia discusses whether profit or growth is more important for a business.

To be successful and remain in business, both profitability and growth are important and necessary for a company to survive and remain attractive to investors and analysts. Profitability is, of course, critical to a company’s existence, but growth is crucial to long-term survival.

Profit in terms of money in the bank is important for keeping a business afloat during good times and bad. But, without assets being plowed back into R&D, expansion, and new products, a company will not grow. The goal of a long term investor is to choose investments that have both qualities namely a margin of safety in terms of cash and potential for steady growth over the years.

Market Timing and Profit

The market loves a stock that shows increases in its quarterly earnings. Thus, quarterly profits are a major driver for short term stock prices. The key to making this work for short term investors and traders is to correctly anticipate quarterly earnings in comparison to estimates. The stock price going into the release of financial a report will have determined the prevailing stock price. That price will jump up or fall down based upon the released earnings.

How Long Will Profits Last?

Warren Buffett was famous for avoiding tech stocks until he became a huge investor in Apple. His concern was always that companies whose profits were based on advanced technology could not guarantee that their proprietary technology would stay in the forefront. He finally invested in Apple because he believed that Apple had a strong brand name and following. This puts it into the same category as Coca Cola and some of Buffett’s other favorites. These stocks tend to be good long term investments. When looking at the earning potential of an investment, investors are wise to follow Buffett’s lead and beware of investments that depend on a momentary lead in technology or companies without a strong brand name and following.

Another concern for offshore investors is the value of the currency in which a stock is denominated. The stock may go way up but if the currency takes a nose dive, that does not help. Sticking with ADRs is a useful way to avoid this problem as American Depositary Receipts are priced in US dollars.

Earning Potential of an Investment – Slideshare Version

Earning Potential of an Investment – Doc

Earning Potential of an Investment – PDF

How Will the Pandemic Change the Economy?

Market Watch writes about a trap awaiting the stock market in the next months. Their thinking is “at all of the good news has been squeezed out of the tube of toothpaste!” These bits of good news include “unprecedented stimulus, an inevitable curve flattening in U.S. cases and deaths, reopening plans and optimism over remdesivir clinical trials.”

Summer could bring “hard economic data collapsing like we’ve never seen before, terrible corporate guidance, stories of pending bankruptcies,” and a second wave of layoffs that will hit the white-collar sector, warned McElligott. Rising trade-war rhetoric from the White House as a presidential election campaign heats up could present more risk, he added.

“That’s why I think folks are getting ready to hit the wall again, with this idea we’ve moved out of stabilization and now we’re back into the harsh reality of what this is,” without having a Federal Reserve boost and no more stimulus checks until things get a lot worse, he said.

These folks look to the fall as a time of market recovery but only after a fall in stock prices this summer. Their thinking is that as the pandemic persists, or even worsens, it will negatively affect stock prices..

Which Business Models Won’t Work Any More?

The pandemic will go on for at least two more years if there is no vaccine or medicine to will kill the virus. If it then mutates and comes back every year, the effects on society and the economy could become permanent. This would give us a world in which travel is curtailed. Cruise lines, airlines, travel agencies, and vacation spots will no longer have sufficient customers to stay in business in their current forms.

If social distancing becomes a way of life, restaurants, casinos, bars, and sporting events will all find it hard to remain profitable with smaller customer bases. When no one can travel by car, plane, train, or bus, the consumption of gasoline and will drop and keep the price of oil down into the distant future.

Online business will likely become increasingly dominant as will those that deliver or do “curbside” service.

Thinking about how the coronavirus will reshape the economy will help traders and investors make the most profitable decisions going forward.

How Will the Pandemic Change the Economy? – PPT

How Will the Pandemic Change the Economy? – DOC

Investing in Robotics Stocks

Robotics Investing News writes about the seven top robotics stocks.

Spending in the USA on drones and robotics passed $100 billion a couple of years ago and is rising at close to 20% a year. These firms make two-thirds of their money selling robots or robotic equipment and the rest from software.

Here are the top seven (listed on exchanges in the USA) that they list alphabetically.

• Cognex
• FANUC
• iRobot
• KUKA
• Medtronic
• Rewalk Robotics
• Rockwell Automation

Each of these companies has its own niche. For example, Medtronic makes medical devices and their automation is aimed at manufacturing in the core market. The listing gives a snapshot of each company and the article has financial info.

Are Robotics Good Investments?

There are three main themes to concern yourself with when investing in robotics. The first is the industry for which the robotics or automation are intended and the second is how well run the company is. The third has to do with how inventive they are and good at keeping up with or staying ahead of the completion.

Today the biggest markets for robotics are the auto and electronics industries. Today, with the trade war and now the Chinese coronavirus, trade has slowed, sales are down, and robotics sales are suffering. But, over the longer term, this technology will find more and more uses, and will be a true wave of the future. Thus, you need to consider are robotics good investments for the long term when picking investments.

Intrinsic Stock Value of Robotics Investments

Is it better to invest in companies that make the robots or those that design and upgrade the software? Large companies like Siemens do both but many smaller concerns focus on one or the other. The bottom line here is that, aside from paying the programmers, there is a low overhead to creating and upgrading software while making new machines requires more money than a smaller company may have access to.

And, you can certainly invest in Siemens via an ADR to take advantage of their robotics and automation prowess, but that aspect of their business is only a fraction of what they do so that the effects of growing automation sales are diluted. Three billion euro in sales would be huge for a standalone robotics company but is only a portion of the pie for Siemens.

The winning companies in this long term race will be those that keep ahead of the pack in regard to automation technology and run their businesses efficiently in order to maintain their customer base and produce steady profits.

As we enter 2020, long term investors are thinking of investments for the next decade rather than just for the next year. In that regard, we noticed an interesting snippet in Market Watch. They believe that some of the best investments for 2020 and beyond are offshore and in India in particular. Their rationale includes the fact that two-thirds of their 1.2 billion person population is 35-years-old or younger. The point is that anyone who finds ways to sell to this growing pool of consumers will do well into the distant future. This will be happening as the US-China trade war enters a more-permanent phase.

Will Last Decade’s Winners Continue Be Good Investments?

The sort of reasoning needed for picking long-term winners is not the sort of thinking that investors use for predicting quarterly swings in stock prices. Besides thinking about the global struggle between the USA and China for hegemony and growth in countries like India, what are some other things to take into consideration for picking decade-long winners?

CNBC notes that last year the two tech titans, Apple and Microsoft, outpaced everyone else in contributing to the growth of the S&P 500.

Apple and Microsoft, which surged 85% and 55% this year respectively, together accounted for nearly 15% of the S&P 500′s advance in 2019, according to S&P Dow Jones Indices. Their influence on the cap-weighted index this year is greater than the next 8 biggest contributors combined. Through Monday, the S&P 500 was up 28%.

Apple sold for $30 a share in January of 2020 and starts 2021 at close to $300. It offers a 1% dividend which, if you had purchased your shares in 2010, would be a 10% dividend on those shares. Microsoft passed into 2010 at $28 a share and sells for nearly $160 a share as we begin 2020. Its dividend yield is 1.3% making that a 7.5% dividend on share value when purchased a decade ago.

Both of these companies are technology leaders and have broadened their products and services in efficient and profitable ways that are likely to remain profitable going forward. As such, they both have strong intrinsic stock value despite years of impressive gains. If you are looking for stocks to invest in for the next decade, or longer, these are both solid choices.

Where Is the Smart Investment Money Going?

We periodically look at the World Bank’s information on foreign direct investment. This information does not tell you which individual stocks to pick but rather which countries are attracting investment capital. What stands out in the most recent report is that direct foreign investment is down almost everywhere with the notable exceptions of South Asia and Vietnam as well as Indonesia in particular (as the anywhere but China movement takes hold). And, India is up as well as foreign investors appear to be looking at the demographics of India and potential profits.

Investing Offshore with ADRs

If you want to put part of your investment portfolio to work outside of the USA, the best approach (since you probably don’t speak a lot of foreign languages) is to use American Depositary Receipts. You can find a list of Indian ARDs on Top Foreign Stocks. Likewise, a list of Indonesian ARDs is available as well. When you pick the top-level ADRs, these companies abide by the same reporting requirements as stocks on the NYSE and NASDAQ which makes fundamental analysis possible.

Investing in Walt Disney Company

Walt Disney Company (DIS) has been a part of the Dow Jones Industrial Average since 1991. It was founded in 1923 by Walt and Roy Disney and was called the Disney Brothers Cartoon Studio. After several name changes, the company settled on Walt Disney Company by 1986. Disney “wrote the book” as the dominant figure in the animation industry in the USA and then went on to produce live-action films and television shows. And, they opened their theme parks.

Today, Disney is a mass media and entertainment producer, still headquartered in Burbank, California after nearly a century. Today its stock sells for $130 versus less than $1 forty years ago. Their dividend yield is 1.3% and DIS has a 15 P/E ratio. This is a venerable old entertainment company. But, why buy and hold Disney? After all, Kodak was old and venerable and virtually died when new technology made their business plan obsolete. The difference lies in an analysis of the intrinsic stock value of this company. The acquisitions and changes that they have made over the years ensure a continuing flow of valuable content that will generate profits well into the future.

Investing in Disney for Its Unique Content and Steaming Assets

Although many of us grew up watching the old Disney “family” movies and cartoons, the Disney of today has developed and bought a lot more content with a much broader appeal. Disney now has divisions to manage each of its content sources.

• Walt Disney Pictures
• Pixar
• Marvel Studios
• Lucasfilm
• Walt Disney Animation Studios
• 20th Century Fox
• Fox 2000 Pictures
• Fox Searchlight Pictures
• Blue Sky Studios
• Disney Media Networks
• Disney Parks, Experiences and Products
• Disney Direct-to-Consumer & International
• ABC Broadcast Network
• Disney Channel
• ESPN
• National Geographic Channel
• FX
• Freeform

While the timeless Mickey Mouse character is still the “mascot” of Disney, you are watching Disney content when you watch sports on ESPN, the news on ABC, and any of the Star Wars, Avengers, or old 20th Century Fox movies!

In fact, Disney is the majority owner of major streaming services in countries like India.

We are not the only one to think that Disney is well-positioned for the future.

Disney Is an Investment to Hold for 20 Years or Longer

The Motley Fool includes Disney in an article about three stocks to hold for 20 years.

Over the past few years, Disney has been positioning itself to become an even bigger and more dominant force in the media landscape than it already was. One of the first big moves came back in 2009 when the company purchased Marvel Entertainment, giving it ownership of one of the most successful superhero franchises of all time, and access to a seemingly unending list of characters and stories.

Then, Disney made another huge investment in 2012 when it purchased Lucasfilm for about $4.05 billion, giving Disney the massively popular Star Wars franchise and ownership of its characters.

They go on to detail the many acquisitions that Disney has made in order to dominate the world of content. And, they note that Disney has also developed Disney+ which is a video streaming service that will challenge Netflix and Amazon. Not only does Disney have a lock on mountains of old content and the rights to develop new content. They are also positioned to take advantage of the movement of viewers away from standard TV programming and cable to internet streaming.

The bottom line is that Disney is definitely a long term buy and hold investment that belongs in virtually any investment portfolio.

How Will the Trade War Affect Investments?

To the extent that you are invested in China, you may need to worry about the companies that will be sanctioned or cut off from high tech American products. The New York Times writes that the USA blacklists more Chinese tech companies over security concerns.

The Trump administration added five Chinese entities to a United States blacklist on Friday, further restricting China’s access to American technology and stoking already high tensions before a planned meeting between President Trump and President Xi Jinping of China in Japan next week.

The Commerce Department announced that it would add four Chinese companies and one Chinese institute to an “entity list,” saying they posed risks to American national security or foreign policy interests. The move essentially bars them from buying American technology and components without a waiver from the United States government, which could all but cripple them because of their reliance on American chips and other technology to make advanced electronics.

The entities are one of China’s leading supercomputer makers, Sugon; three subsidiaries set up to design microchips, Higon, Chengdu Haiguang Integrated Circuit and Chengdu Haiguang Microelectronics Technology; and the Wuxi Jiangnan Institute of Computing Technology.

US policy makers have worried for years about China moving past the mass production of products to becoming dominant in ultra high tech. This is seen as a concern for US national security seems to have been the red line that China crosses when it set its sights on dominating supercomputing, artificial intelligence, and other ultra high tech areas.

For investing during a protracted trade way you will need to look at who loses markets and sales because of these restrictions. US chip makers are still at the forefront of manufacturing the highest quality of the fastest and most powerful chips. To the extent that they lose their markets, it will hurt anyone invested in these companies. To the extent that you are invested in a company like Huawei which seeks to dominate the newest and highest tech levels of telecommunications, you need to be concerned about the US and perhaps the Europeans banning their products and technology outright and continuing to do so for years. Then, a smart investor will look around to see who else is working in these echelons of high tech to see where to invest next.

The Trade War and Investment in Raw Materials for High Tech

We recently wrote about investing in non-Chinese rare earth producers. As we noted, the rare earth minerals that go into computer chips and other high tech products are not really rare. But they don’t exist in concentrated amounts that make mining economically feasible in most areas. China has invested in mining these minerals because it can do so cheaper than companies working in the West. And, they are doing it to control the market. To the extent that mining rare earth minerals outside of China because a defined national security concern, look to see government subsidies and support for these types of operations and more profits for investors.

Investing and Manufacturing Anywhere But China

There is a belief now that ABC is the best place for supply chains. “ABC” means anywhere but China. However, much of the manufacturing in Asian nations outside of China is taking place by Chinese companies setting up shop in places like Vietnam. Beware of investments in these countries if the USA starts looking closer at who owns a company, where the profits are going, and how much control the Chinese government is still exerting. To the extent that manufacturing is taking place in countries like Mexico, and the Trump administration is not applying punitive tariffs, these might be safer investments.

As you will note, we have not made any specific investment recommendations, which we rarely do. But, we hope this article has provided “food for thought” as the trade war goes forward and even lasts for another generation or two. We suggest that you read an article in the South Morning China Post about prolonged tensions with the US. A better way to view this subject is perhaps not to think in terms of trade but to look at who wants to dominate the planet for centuries to come and how much suffering they will inflict on their own people in order to achieve that goal.

Investments in China

For the average investor, the best ways to invest in China are through a mutual fund or other stock fund that holds Chinese assets or by purchasing ADRs. You don’t need to speak Mandarin or deal with a foreign stock market and can let someone with the time and expertise pick the individual stocks. But, if you want to pick and choose the right individual stocks, you can buy ADRs of large Chinese companies who provide financial reports on a par with what US companies provide when they are listed on the US stock exchanges. In regard to our concern about safe investments in China, here is where our focus is. Investor Place looks at 3 Chinese stocks which they say you should buy and hold. Their article not only offers three stocks that may be safe investments with high returns over the years and therefore safe investments for retirement. They also give us some insight into the current state of the Chinese economy what the future holds for investing in China.

To say that Chinese stocks have been a roller coaster over the last year would be an understatement. Already, China has seen slower growth as it shifted from being a solely manufacturing-based economy to one based on services/consumerism. But with the trade war, Chinese stocks have been hit even harder, only to bounce back as a deal with the United States seemed to be within grasp.

Then, President Trump tweeted. With no deal in sight, tariffs rising and even lower growth on the horizon, Chinese stocks have continued to sink over the last week or so.

But this could be an interesting opportunity for long-term investors. China continues to dominate on the world stage and is arguably one of the most important economies. And while a deal may not be in sight today, there’s a good chance that one will be ironed out eventually. Meanwhile, with its huge and growing consumer base, domestic growth continues despite various trade pressures. In the end, Chinese stocks could be a wonderful long-term play. And the recent hiccups have provided a “reset” in valuations ripe for the picking.

At this point, we are looking for safe investments in China and investments with high return. As China’s foreign sales level off or are rolled back due to trade war and cybersecurity issues, they have a huge internal market to develop and that may well be where to invest in China. And, in that regard, the first Investor Place choice fits right in.

Investing in Alibaba

Alibaba is generally thought of as the Chinese Amazon.com. They serve as a marketplace for selling products online but do not hold any inventory. As such, they may be more similar to eBay. Either way, Alibaba is a huge and growing company in the huge and expanding Chinese market. And, like Google, Alibaba is not resting on its laurels but reinvesting its profits in a variety of other businesses such as social media, cloud computing, mobile devices, and peer-to-peer lending.

In our article, Is There a Safe Fifty-year Investment, we noted that companies like AT&T, General Motors, Coca Cola, Kodak, and others were uniquely positioned to provide products and services to the growing US economy over much of the twentieth century. Their level of success and even dominance did not last forever, but it lasted for a long, long time. This is a good way to look at Alibaba. They are positioned very well in a very large and growing market. Their wide range of virtually recession-resistant products and services protects them again be totally devastated by a prolonged or permanent trade war.

Are there safe investments in China today? Yes, and Alibaba seems to be one.

Investing in Baidu

Baidu is often referred to as the Chinese Google. They control 80% of internet searches in China. Like Google, they make billions of dollars a year on selling ads. And, like Alphabet, Google’s parent company, Baidu has diversified into other tech areas such as autonomous vehicles, artificial intelligence, and video with its iQiyi subsidiary. Baidu’s growth is based on still-expanding use of the internet in China and not on exports to saturated and increasingly trade-protected North American and European markets.

Are there safe investments in China? Baidu is one and will likely be for a long time.

Investing in Ctrip.com

This is not a big company but rather a normal company that is well-positioned in a growing niche market. They run accommodation and travel booking sites. Airlines, hotels, cruises, and others use Ctrip.com to list their unsold services. This is an extremely low-overhead business in a growing market. As China shifts to a consumer-driven economy and focuses more on internal growth, this company has the potential to keep expanding the Chinese travel more and more. The risk of investing long term in these folks, like the rest, is that this is a business that competitors can mimic and take market share.

Safe Investments for Beginners in Chinese Stocks

Beginners at investing should typically stick with investments that they know and investment vehicles that protect them against undue risk. In regard to risks of investing in China, ADR’s of companies doing business solely in China, like Alibaba, Baidu, and Ctrip.com are a good idea. At this point, we prefer the few stocks mentioned because of their Chinese consumer focus. Our concern about Chinese tech companies and exporters is that the trade war with the US is not going to end soon and may spread to involve other nations. China has grown fast and is getting to a point where it wants to display regional and global dominance. This will meet resistance across the globe and make much of China’s export-driven growth slow even more.

Chinese Debt and Investment Safety in China

Much has been made of China’s increasing debt at a time when their economy is cooling off. Comparisons to Japan thirty years ago are appropriate and China seems to be concerned about following the same path into economic stagnation. There has been money flowing out of China for years is wealth investors there have been hedging their bets. Chinese banks and exporters in heavy industry are at substantial risk of a hard landing due to a debt collapse and loss of external markets. However, China has $3.25 trillion dollars in cash reserves which will provide a cushion if needed. It should be noted, however, that they had nearly $4 trillion in reserves just four years ago.

To sum up, there are safe investments in China, safe investments for seniors and safe investments for beginners. The first trick will be to invest in companies you can track. This means investing via ADRs. And, the second is to pick companies with a strong consumer focus in the still-expanding Chinese economy.

In today’s world of high-speed trading and short attention spans, it might seem unfathomable to hold any given stock for years, let alone decades. But the world’s best investors know all too well the best way to consistently beat the market is to buy high-quality stocks and hold them for extended periods.

To that end, we asked three Motley Fool contributors to each discuss a growth stock they think investors could do well to buy and hold for the next 50 years. Read on to learn why they chose Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), iQiyi (NASDAQ:IQ), and Shopify (NYSE:SHOP).

The rationale for each of these stocks is that they have the potential for significant long term growth. People who invested in American companies like AT&T, General Motors, Coca Cola, or Eastman Kodak early in the 20th century had at least 50 years of growth. These stocks grew with the US economy as phone service was extended to every corner of the land, more and more people had a car or two or three, everyone took photos, and everyone loved to have a Coke. It is useful to note that only Coca Cola has passed into the century relatively unscathed while digital photography essentially killed Kodak, General Motors lost out to foreign competition and passed through bankruptcy, and AT&T was broken up in anti-trust proceedings.

Reasons to Invest in Alphabet Stock

The rationale for investing in Alphabet is that they are using the dominance of the world of internet searches to fund their expansion into multiple, potentially very profitable arenas. Today eight of their products have more than a billion users each. These are Google Play Store, Gmail, YouTube, Android, Chrome, Google Drive, Google Search, and Google Maps. With their restructuring, they are now active in self-driving cars with Waymo, lifespan extension with Loon, drone delivery with Wing, life science products with Verily, and high-speed internet with Fiber. This “multiple bets” approach takes advantage of the huge number of smart people working for Alphabet and positions them for further growth in markets that are not dependent on the original internet search focus. This strategy will, hopefully, help them avoid the fate of Kodak whose business model became extinct, AT&T which was taken apart by anti-trust action, or General Motors whose product line came under unceasing attack from foreign competition.

Reasons to Invest in iQiyi

iQiyi is a Chinese company that was spun off from Baidu a year ago but which maintains a close relationship. The company is referred to as the Netflix of China. They aim to make premium subscription videos their core business. Right now they serve 20% of Chinese households compared to the 70% of American households that use Netflix. Considering that China has 1.3 billion people compared to 311million in the USA, the company has a lot more room to grow. Additionally, they are in video games and working on virtual reality. Right now the stock price is attractive because of the trade war between the USA and China. But, this is a Chinese company doing business in China and, would seem to be a Chinese company safe from tariffs. This company can be compared to Netflix, Microsoft, Apple, and other tech stories or to the early to mid-twentieth century stories of General Motors, AT&T, Coca Cola, and Eastman Kodak.

Reasons to Invest in Shopify

The rationale for investing in this company is that they appear to be well-positioned to take advantage of an expanding market in e-commerce. They are the “pick and shovel” approach when everyone wants to dig for gold. That is to say, Shopify assists businesses both large and small in selling their services and products online. This business niche is expected to grow to $25 Trillion by 2025. This company has a nice growth story but not the same sort of story as Alphabet or iQiyi when it comes to a fifty-year investment.

Is There a Safe Fifty-year Investment?

As we noted at the beginning, the Motley Fool article with its three suggested investments brought us to ask the question, is there a safe fifty-year investment? We write about the concept of intrinsic stock value so much that our readers can be forgiven if they get bored with the idea. Nevertheless, the best stocks to invest in are almost always ones that do well in intrinsic value analysis. However, this sort of fundamental analysis needs to be repeated on a routine basis. That is simply because the fundamentals change over time. New technologies replace old and Kodak goes from being the king of film, process, and printing photos to a footnote. Antitrust actions catch up with AT&T and break it up. The development of container shipping to support the Vietnam War effort brings cheap foreign products to America and undercuts American businesses including General Motors. The point is that in order to pick a safe fifty-year investment you need to be able to see into the future. What sort of investments will still be paying off half a century from now?

Your Home Is a Safe Fifty-year Investment

This is another point that we bring up every time that we write about how to start investing. You need a place to live and it is cheaper to own than to rent. The federal tax break for mortgage interest is unlikely to go away in the next fifty years. It is popular on both sides of the political divide and serves a good purpose of societal and financial stability. So, is there a safe fifty-year investment in home ownership? You bet there is and you should be taking advantage of that as early in your investing life as possible.

Are Investments That Don’t Lose Money Really Safe Investments?

We have written about how to invest without losing any money. Over the duration of a US Treasury, Bank CD, or AAA Bond, these are safe investments. You give up the potential for larger gains in return for protection against financial loss. But, over a fifty-year time span is there a safe investment in this arena? The problem with long term bank deposits, Treasuries, and AAA Bonds is that they may barely keep up with inflation or may even fall behind. As such, you will preserve your dollars at the same time that your dollars inflate and become less valuable. The closer you are to needing your investments in retirement the more you will want to be invested in this manner but over a fifty-year timespan, you need an investment that grows faster.

Dividend Stocks for Long Term Investing

In our article about dividend stocks, we provided a list of companies that have been paying dividends for more than 120 years. To keep paying dividends for this long the company has to be making money. Over the years, dividend stocks tend to outpace the market. As such, a safe fifty-year investment might come from a list of dividend stocks.

Technology Stocks for Long Term Investing

Is there a safe fifty-year investment in the tech arena? The telephone, automobile, and the film camera were “high tech” at the beginning of the 1900s. Companies that got in early and performed well dominated American business for nearly a century. And then they didn’t. The risk with tech is that you need a company that can “think on its feet” and not “rest on its laurels.” IBM comes to mind as a company that dominated the computer world until they missed the boat with small computers. Their mistakes allowed companies like Apple and Microsoft to become giants in the ever-evolving computer world. In this regard, we like Alphabet as much because it is diversifying and hedging its bets as for its dominance of internet search.

Safe Fifty-year Investments Are Ones That You Keep an Eye On

The bottom line for picking long term investments is that you need to choose wisely and, more importantly, you need to stay in touch with your investments. Whether your choice is an ETF that tracks the S&P 500 or an individual stock like Alphabet, you need to know why you choose that investment and you need to keep track to make sure that the investment still meets your criteria.