Billionaire investor Warren Buffett and famed investment manager Peter Lynch have emphasized the importance of investing in companies with simple businesses and operations that an average investor can understand.
In fact, lots of successful companies that have more than a century of history belong to this category. Think Coca Cola, Campbell Soup Co., P&G, Hershey’s and railway transporter CSX.
These are all household names which have built up their competitiveness over many years. Not only do they have strong brands, they also provide many of the daily necessities everyone needs.
One important attribute of things like chocolate, toothpaste or soda is the core product remains the same; only the ingredients or appearance change over time.
These companies do not have to keep launching ground-breaking products to survive or thrive. Nor do they have to keep coming up with new inventions like technology firms.
Instead, just by doing what they have been doing, they are able to earn substantial profit and create shareholder value.
If these do not qualify as forever stocks, what does?
Full article appeared in the Hong Kong Economic Journal in Chinese on Sept. 19
Translation by Raymond Tsoi
[Chinese version 中文版]
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