While planning my retirement portfolio, I couldn’t find a discussion thread on this topic.
The world’s best companies are those that you can buy and safely forget in your portfolio to generate value—only checking back in, say, 10 years to see how things are going.
In other words, companies that are able to reliably improve their performance year after year.
Examples of such companies, or something close to them, could be Berkshire Hathaway, Costco, CGI, Visa, etc.
Which company do you know that you could buy into today and remain an owner until at least 2040 without the slightest worry about the future?
Which company has convinced you so firmly with its qualitative factors that you would trust a significant portion of your investment assets to its care for 15 years?
And above all, why?
Sampo. A stable business that doesn’t fluctuate much. Growth is modest, but steadily slightly more than inflation. Once a year you check the underwriting result and otherwise you can continue lounging. Dividends.
UPM. A solvent forest giant with many pillars, e.g., in energy and products made from renewable raw materials. Dividends.
As shown in the latest messages in the thread, it has outperformed the Swedish stock market for 13 consecutive years now. Hopefully, it will continue the same way for the next 15 years.
If return expectations are practically solely based on a stable dividend yield, then I would choose Nordea instead of Sampo, as its dividend forecasts for the next few years are significantly higher than Sampo’s.
I also don’t find UPM very attractive for a long-term portfolio at its current price and given its mediocre dividend yield expectations for the coming years.
It’s not just the dividend; I see a lot of long-term (10–15y) potential for growth in both of these by riding the waves of megatrends. Unlike the dividend machines you mentioned.
If the idea of the thought experiment is to try and minimize taking any specific view now and over the next 10 years, then the company should be diversified to the extreme so that its business can withstand, among other things, disruptive innovations and market-driven storms (political, natural disasters, etc.) and benefit from positive drivers. The only such company that comes to mind is Berkshire Hathaway, which to some extent approaches a fund investment in terms of its risk profile.
It is clear that Finnish companies, tied to a few products, a single industry, and the challenges of our own market, are not the kind that can simply be bought and forgotten for a decade without taking a very large directional risk.
Among Finnish companies, Sampo is the first that comes to mind, and it is also in my portfolio. The Nordic P&C insurance market has been very stable, and customers have been slow to shop around for better prices. It seems this trend will continue, as price competition—from either the insurance companies or the customers—doesn’t seem to be picking up, even in a slightly weaker economic climate. Another likely “safe bet” for a retirement portfolio would be Kesko. The grocery trade has long been a duopoly between Kesko and the S Group, with Lidl playing a minor role on the side. Kesko has also seen solid growth in the Nordic building and technical trade in recent years, which is bound to pick up again once the economic cycle improves.
Among the American companies in my portfolio that I believe have the potential to create shareholder value for decades are Visa, Mastercard, S&P Global, and Moody’s. The clearest threat to these is regulation, as there is practically no competition, and the emergence of any is very unlikely. It would require immense effort to replicate the network effect of Visa and Mastercard, or the reputation and mountains of data on companies and markets built up by S&P and Moody’s over decades.
On the watchlist for American companies, there is also Copart (network effect and nobody wants a junkyard in their backyard → difficult to establish new ones in logistically favorable locations), Microsoft (there is no replacement for the operating system and Office, a major player in cloud services → economies of scale, and AI-related developments could become a new pillar), Apple (brand), Costco (loyal customers), and Waste Management (waste/recyclables are always generated for processing, there are a few major players in the industry consolidating the market over time; the downside is a capital-intensive business model).
Personally, I wouldn’t say that some insurance company, engineering firm, or similar operating in the periphery is the ultimate “buy and forget”.
If I had to name something, the Brookfield conglomerate would get my vote. Real estate in the world’s most desirable locations, power grids, railways, data centers, ports, hydroelectric plants, telecom towers, etc. etc.
A business without which the global economy wouldn’t function sounds more like the kind of investment I’m looking for.
This is exactly it. To put it simply, Kesko’s business decline is just one Amazon or one duopoly-related political decision away; an insurance company’s decline depends on a single natural disaster or a stifling regulatory decision; an engineering firm’s decline is one market-disrupting innovation for its main product away. It doesn’t really fit into the category of “without the slightest worry for tomorrow.”
What often seems to be forgotten is that the firms on the Finnish stock exchange are small and thus relatively risky minnows in an ocean of giant corporations. Out of our “large” companies, only 10 are large enough to be, for example, too big for the Russell 2000 small-cap list. Unironically, some mega-tech stock valued at hyper-multiples is probably much more of a “buy and forget ticker” than the little stalls on our peripheral exchange.
