Blue-chip companies are some of the best investments you can make because of their resilience, growth, and ability to build a fortune over very long periods. One of the most exceptional and essential maxims of successful investing is finding stocks that one may hold for lengthy periods. It can help investors take advantage of the magical ramifications of compounding. However, business in today’s world is ruthless as a result of increasing adoption of disruptive technologies and rapid development. This makes finding companies that will not only survive the test of time but thrive very hard. Within the last decade, there’s been an explosion of cheap, simple, and low-risk passive investment products such as ETFs and Income Funds that provide investors a diversified portfolio of the index or theme. An index is a weighted average of your country or sector’s best companies, weighted by size/market capitalization. For instance, the TSX Composite is Canada’s flagship index and, by that extension, includes a few of the country’s most prominent and resilient businesses. However, the diversification of indexes reduces returns over time. If an investor is willing to try to analyze blue-chip stocks individually, they can make outstanding returns for themselves.
Bell – BCE (TSX: BCE)
Canadian National Railway (TSX: CNR)
Algonquin Power and Utilities (TSE: AQN)
Metro (ASX: MRU)
Royal Bank of Canada (RY.TO)
Pembina Pipeline (TSX: PPL)
Brookfield Asset Management (TSX: BAM.A)
Barrick Gold (TSX: ABX)
Shopify (TSX: SHOP)
Canadian Apartment Properties REIT (TSX: CAR.UN)
- Industry – A company’s occupation is essential because of its long-term success. Over very long periods, technology and disruption have been in charge of entire industries disappearing. For example, the rise of mobile internet and social media has had an extremely adverse impact on print media companies. A second example is the shrinking brick-mortar retail industry because of the rise of e-commerce. Hence, investors must look for companies in sectors with a minimal risk of disruption, for example, food and banking. To get more information about, long term stocks to buy Canada
- Barriers to Industry – Companies that operate in industries with high barriers to entry have a substantially higher possibility of long-term success as it creates it problematic for other companies to enter the sector and capture market share or erode margins. High barriers to entry can be caused by factors such as capital intensity or government regulation-for example, power and utility companies.
- Brand Value/Trust/High Switching Costs – Companies in sectors where brand value and trust are critical determinants of success have a high chance of long-term success because brand reputation requires a lot of commitment to make. Companies that make products with high switching costs or rigid customer preferences benefit from the same advantage-for example, banking and cigarettes.
- Growth – Companies that are leaders in high-potential sectors like e-commerce have a high potential for long-term success. Their dominant market position in a growing segment allows those to grow significantly faster than the economy. Other for example telecom because of increasing digitization and connectivity.
- Cashflow Generation – A company’s ability to create cash is key to its long-term success. There’s a cause of the cash-flow statement being called the main of the three types of financial statements. Companies with high cashflow enjoy many advantages such as cheaper debt, the capability to spend money on innovation/research and development continues, substantial dividend history/payouts, etc.
- Cyclicality – Companies in non-cyclical sectors such as power, food, utilities, and pharmaceuticals have significantly more stable and predictable earnings than companies with discretionary products, thus giving them an increased probability of long-term success.
- Permanence – Over an extended enough timeframe, technology can disrupt every industry around; however, some businesses will stand the test of time. For instance, a significant company may or may not exist 30 years from now. However, a bit of land or building over a prime street in the administrative centre of any country will indeed exist and also have appreciated as time passes due to inflation and the growth of the economy. The ultimate way to spend money on these is a REIT.
Final Thoughts
In today’s world, bank savings rates lag inflation, this means the original formula of saving in the lender till retirement will erode wealth, thus making personal finance vitally important. While ETFs and Income Funds are excellent for passive and hands-off wealth creation, buying the right stocks can be hugely rewarding for those willing to try. We hope you prefer this content and consider buying many of these companies.
