Stocks For the Long Term

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A friend of mine asked me today what some good stocks to invest in for the long term were and it occurred to me that I have never wrote about that here. Lately, we’ve been focused on short term trades so today I wanted to share a few picks for the long term.

I’ll call this The Penny Daily’s Long Term Portfolio and I’ll be adding more and more stocks to it as time passes by. And by long term, I mean stocks that will do well in the 5+ year range.

So what are the stocks I would have in my long term portfolio?

  1. Caterpillar– I like Caterpillar because it is the biggest manufacturer of construction vehicles. And years from now, the emerging economies will continue to grow (look past the difficulty they are having now) and Caterpillar will be a huge beneficiary of this. Emerging economies are going to be building more offices and infrastructure, and the first thing they will do is put in orders with Caterpillar for equipment. It is an excellently run company with a nice dividend. As emerging economies and developed countries continue to grow, watch for Caterpillar’s earnings to sky rocket.
  2. Pepsi Co. – I like the direction management is moving Pepsi in. Pepsi is looking to get healthier products, and as health seems to be all the craze, Pepsi should do very well in the years to come. Pepsi has been acquiring healthy food companies like Tropicana. Indra Nooyi, Pepsi’s CEO, is very serious about growing Pepsi Co., and ensuring it fits the new demands of consumers. Look for Pepsi to perform exceptionally well in the years to come.
  3. Verizon– Verizon is a company that is going to benefit from a growing global economy. As emerging economies become wealthier and wealthier, Verizon is going to find a global market for its products. And as the population of the world grows, people will look for new global communication solutions, and Verizon should be leading the way. Their new FIOS T.V is sweeping America. FIOS is what sets Verizon apart from its competitors. Verizon has shown it is not only constrained to the telecommunications industry, they are looking to grow their business in different ways, including T.V and the internet.
  4. Colgate-Palmolive– This company has products that are here to stay. People will always need personal hygiene products and home care products. As the population of the world increases, Colgate-Palmolive’s earnings will increase as well. Colgate-Palmolive is unique from its competitors, including Johnson & Johnson in that it is not in the pharmaceutical business. While you might think that is a negative, it’s actually not. With the new Obama Administration in office, new health care policies will favor generic brands of medicines, rather than the typical brand names. J&J and other pharma companies will take a hit when consumers move away from their medicines and go to generic brands.
  5. General Electric– GE is leading the way in new energy. GE windmills have seen a growing demand and as the economy picks up, people will be looking to GE for new environmental solutions, and I have no doubt GE will deliver. GE is going to see its business sky rocket once we come out of this economic mess and energy/environmental solutions take front stage. GE is one of the best companies in America, boasting a AAA credit rating and a huge dividend. GE is also big enough and has enough cash to buy any competitor, so they are here to stay.
  6. IBM– There is no doubt that this is the era of information technology, and IBM is the leader. IBM is growing its business in all directions, and is breaking frontiers in technology. IBM is not only a tech company, its quickly getting its hands into infrastructure. IBM is doing everything from building a more efficient grid to health care solutions. The world is moving in the direction of utilizing the internet and making it more prevalent in everyday life. IBM is going to be in that business.
All these companies have something in common. They are huge companies that are not going anywhere, hence protecting your investment for the long run. The world is changing and new consumer demands are developing, all these companies are going to be in those industries. These companies will offer good dividends, giving your investment a steady income.
This is just the start of The Penny Daily’s Long Term Portfolio, I will be adding more and more stocks that I think will give you safe, good returns for your investment.


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8 responses to “Stocks For the Long Term”

  1. WideMoat says:

    Your description of Verizon’s opportunity strikes me as most persuasive. In terms of truly expansive growth potential (i.e., entering a new market with a new product), FIOS looks like a promising area. I’d be curious to hear anyone’s thoughts about potential market penetration. Will they get 1, 5, 10, 30% of the market? Does FIOS have distinct cost or quality advantages to other TV providers?

    For the others you cite (particularly CAT, GE, and PEP), the growth areas are definitely there, but they look to me as offsetting growth. That is, for health drinks, people will move away from Pepsi’s current products to their more healthy alternatives; net-net maybe not that much growth. Same for CAT–growth in emerging markets vs. stagnation in developed markets. And for GE, increases in the sales of wind technology may be offset by declines in the engines and turbines used in current energy production.

    WideMoat’s last blog post..Ebay–What’s It Worth?

  2. Jae Jun says:

    Commenting on Verizon, it certainly is a toss up between ATT and VZ. As for FIOS, we’ll have to see whether the strategy will work. Fiber optic is a great technology and I would love to have it in my home anytime, but the main problem is that USA is such a huge nation. Is the scalability for fiber optic possible to cover the major cities of the USA? Im on the pessimistic side.

    On the other hand, their wireless business is doing great.

  3. Hi Jae,

    I was waiting for you to come out a with a long term list. Great job. I really appreciate you linking to me in your weekly roundups. Your website is really becoming addicting keep up the great work. Also, I see you have enjoyed the Art of Short selling. What a great book. I’ll keep you posted if I find any more of her work.

    Best Regards,

    Miguel Barbosa
    Enriching Ideas for Intelligent Investors

  4. Jae Jun says:

    Thanks to Penny Daily for letting me put up the list. I must admit that although I’ve been investing in some long term companies I haven’t had the opportunity to write anything on them. The special situations have been keeping me busy lately.

    I did enjoy Art of Short Selling and am looking forward to finding more quality books.

  5. KC says:

    Good post. A few comments on GE. The author mentions it’s huge dividend and AAA credit rating. Currently with 10.5 billion shares, if the dividend is unchanged this year they will pay out all of their earnings to share holders which could result in GE losing their AAA rating. More likely story is that they will trim or cut dividends to keep the cash on hand. Point being although GE currently appears to be a paying a huge yield at its current price. I would not expect that continue. I am long GE and think its a great company but just think these points should be clear to people interested in buying it.

    KC’s last blog post..WSC Dividend Increase

  6. KC says:

    With regards to Verizon and FIOS. FIOS is just IP television. Meaning its television that is packetized to be delivered over data networks.

    While its a great service that I would love to have where I live in Seattle, I think the only moat is that currently the are only ones offering it. That will change. Other companies will offer the same service as their last mile networks get faster. Currently comcast offers speeds in some locations that come close to FIOS offering but they have yet to the best of my knowledge started offering an IP based television service.

    I guess my overall point is that the big players in telecom and cable television are extremely competitive. Verizon may have an edge today but there is nothing proprietary to their offering that will protect their moat in the long run.

    KC’s last blog post..WSC Dividend Increase

  7. Jae Jun says:

    Verizon FIOS is digital but the medium stll remains on fiber optic. These cost so much more than cable for the last mile.

    I would think that if Verizon does manage to lay out a fiber optic network and can maintain it, they can charge competitors to use their network which would in fact create a moat.

    FIOS may not be a long term advantage as it is only TV, phone and internet but the network could prove valuable if they can get the scalability and cost.

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