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.

Columbus and Stocks?

Some economies and some companies will emerge from the current financial mess stronger. Some will fade away. For the long term investor prediction and an appreciation of the very long term for growth stocks will be key. What will be the growth stocks for the really long term? The money behind the infrastructure that preceded the voyage of Columbus is a distant but useful example of disaster followed by technology transfer and world changing success.

A hundred years before Columbus sailed Christian Constantinople fell to the Muslim Turks and became Istanbul. Venice and other Italian city states lost their trade routes out of the Orient but still had large navies and merchant fleets that policed and traded across the Mediterranean. So what did they do? They sent sons and nephews, expertise, and money to the far end of the Mediterranean and established trade routes along the African coast culminating in the voyage of Vasgo de Gama around Africa to India from 1497 to 1499 and the voyages of Columbus and the conquering of the “New World” from 1492 on.

Take Home Points

Those who do not accept defeat often win in the end. A secure investment may well fade away and the correct “growth stock” may be the best bet ever.

In times like these, watch where those who have money are putting it and watch where they are putting their “growth stock expertise.” As US Homeland Security has effectively closed US borders to a lot of foreign born scientific talent that talent and money will go elsewhere. Already we are seeing many foreign companies with more US patents per year than any US company except IBM. The secure investment in “safe frontiers” may well deny the US the ability to develop the best growth stocks for the long term.

The investments you make in the goals you can imagine often result in unforeseen riches. Engineering and production cycles for new products have become shorter and shorter but when a new concept shows up it changes the world. Think of personal computers and genetic engineering. The point here is not to try to outguess the scientists but to watch who has the talent and where the money is going. Although Europe continued to fight the Turkish advance for a couple of hundred years as its secure investment it invested in the growth stock of American exploration and conquest which changed the world.

Thoughts about Today and Secure Investment versus Long Term Growth Stocks

We have made the argument on these pages that buying US treasuries, especially short term ones, is a secure investment for the coming months. We are seeing advice in the press that the best long term secure investment is to sit on your money. I read that as Venice letting its fleets rot and sending its sailors home to farm.

Where is the money going for R&D? Where are the best and brightest scientists going? Where is the culture conducive to independent thinking and the discovery of world changing ideas? I read this as Venice sending its expertise and money to the other end of the Mediterranean and jump starting the exploration that gave the Americas to the European culture. I read this as Korea, Taiwan, Japan, Great Britain, most of Western Europe as well as India, China, and the rest keeping their scientists at home and developing the ideas for growth stocks for the future.

The promised investment in US infrastructure is a good sign for growth stocks at home.