(0:30) - Buy and Never Sell Your Investments (3:45) - Breaking Down The 10 and 20 Year Returns For Stock Market Indexes (10:15) - Have Any Stocks Outperformed The Indexes? (20:40) - Are Dividend Stocks The Best For Long Term Investing? (26:00) - Episode Roundup: GE, IBM, PFE, ABBV, BMY, MRK, JNJ, UNH, MCD, SBUX, MSFT Podcast@Zacks.com
Welcome to Episode #328 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey went solo to discuss buy and hold investing. She recently got a question on Twitter about simply buying a bunch of blue-chip stocks and holding them for an extended length of time, like 20 years.
Can this strategy work?
2 Strategies for Long-Term Investors
1. Buy the major indexes like the S&P 500, the Dow, the NASDAQ or the Russell 2000. Over the last 20 years, the NASDAQ is up 888%. The Russell 2000 (IWM) also outperformed during that time, gaining 400%.
2. Buy a bunch of blue-chip stocks and monitor them closely. Are they growing earnings? Has management changed? Is the company’s business still producing what it is you bought the business for originally?
Sounds easy. But neither strategy is as easy as it seems.
5 Stocks Over the Long-Term 1. General Electric ( GE Quick Quote GE - Free Report)
General Electric was one of the darlings of Wall Street in the 1990s. But over the last 20 years, it’s been a big loser.
General Electric shares are down 62% during that period. By comparison, the S&P 500 gained 380%.
Even in 2022, GE shares are down 24%. Is it cheap? General Electric trades with a forward P/E of 26.5. That’s well over the average of the S&P 500 at 18.
But earnings are expected to rise 29.3% in 2022 on revenue growth of 2.4%.
Is General Electric finally ready to turn it around?
2. IBM ( IBM Quick Quote IBM - Free Report)
IBM is blue-chip technology company which has intrigued investors for decades. Over the last 20 years, shares are up 128%, but this is underperforming the Dow which is up 312% during that time.
Shares are down just 5.2% in 2022, however. And they’re cheap, with a forward P/E of 13.5.
IBM also pays a juicy dividend, currently yielding 5.2%.
Earnings are expected to rise 19.4% this year but revenue is forecast to fall 15.4%.
Should IBM be on your short list?
3. Pfizer ( PFE Quick Quote PFE - Free Report)
Pfizer is a large cap drug company that many have considered a blue-chip for decades. In the 1990s, the drug stocks outperformed, but over the last 20 years, Pfizer shares are up just 68%.
The pandemic has put Pfizer in the spotlight. Earnings are expected to rise 47% in 2022 but are forecast to decline 17% next year.
But shares are dirt cheap, with a forward P/E of just 7. And Pfizer pays a dividend, yielding 3.5%.
Should investors take a second look at Pfizer?
4. Bank of America ( BAC Quick Quote BAC - Free Report)
Bank of America was one of the big national banks that survived the financial crisis of 2008-2009. But those years crushed the banking stocks.
As a result, Bank of America shares are up just 3.3% over the last 20 years, although its 10-year track record of 273% is much better.
The bank stocks are struggling in 2022 again. Bank of America shares are down 26% year-to-date.
They’re cheap, with a forward P/E of 10.5, and it pays a dividend, yielding 2.7%.
Is it time to bet on Bank of America again?
5. McDonald’s ( MCD Quick Quote MCD - Free Report)
McDonald’s has been publicly traded for decades so you might think it was a “mature” company with little left in the tank for investors. But over the last 20 years, shares are up 1,350%, besting even Microsoft during that period which is up just 1067%.
McDonald’s earnings are back above their 2019 pre-pandemic levels. They’re expected to grow 5.9% in 2022 and 7% in 2023.
But investors are paying a lot for the earnings, as McDonald’s sports a forward P/E of 26.
It pays a dividend, yielding 2.2%.
Is it too late to invest in McDonald’s?
What Else Should You Know About Buy and Hold Investing?
Tune into this week’s podcast to find out.