Most investors look to buy low and sell high. However, a few (Warren Buffett included) look to buy low and then hold for a very long time. In fact, Buffett rarely sells an investment unless there is a potential problem on the horizon even if hes in a considerable profit. With this in mind, here are three top-quality blue chips that could have very strong long-term futures. As such, they may be worth buying now and holding forever.
With the banking sector going through a challenging period and sentiment remaining weak, now seems to be an opportune moment to buy shares in HSBC (LSE: HSBA) (NYSE: HSBC.US). Thats because the bank currently trades on a relatively attractive price to earnings (P/E) ratio of 12.1, which is well below the FTSE 100s P/E of 13.8.
However, despite its low valuation, HSBC has huge potential. Thats because it is well placed to benefit from the switch from a capital expenditure-led economy to a consumer-led economy in China, with demand for new loans and credit set to be buoyant over the long term. Furthermore, HSBC rode out the credit crunch better than most banks and so, looking ahead, could prove to have a relatively strong and reliable earnings profile moving forward.
With savage defence cuts taking place across the developed world, its little wonder that BAE Systems(LSE: BA) (NASDAQOTH: BAESY.US) earnings are due to fall by 11% this year. Indeed, the effects of US sequestration are having a negative impact on the entire defence sector.
However, this means that right now could prove to be a great time to buy shares in BAE. Thats because it currently trades on a P/E of just 12 and yields a very impressive 4.6%. Furthermore, defence remains a key industry and spending item for all developed nations. While the current austerity measures in many developed countries are hurting the bottom lines of defence stocks such as BAE, in the long run demand for their products is likely to remain high. This means that, while the short term may prove to be a disappointment, BAE could turn out to be a highly profitable investment in the long run.
British American Tobacco
Although the popularity of smoking seems to be in terminal decline, e-cigarettes could prove to be a high-growth area for tobacco stocks such as British American Tobacco (LSE: BATS). Indeed, the industry is estimated to be worth well over $1 billion and have the potential to grow at a rapid rate in future years.
As an early entrant to the market, British American Tobacco looks set to benefit from the popularity of e-cigarettes. Its product, Vype, has been on the market for over a year and is already building customer loyalty and positioning itself as a major brand within the industry. With shares offering a yield of 4.1% and vast long term potential via e-cigarettes, British American Tobacco could prove to be a stunning long term play.
Of course, HSBC, BAE and British American Tobacco aren’t the only companies that could be worth buying and holding forever. That’s why we’ve put together a free and without obligation guide to where we think the smart money is headed.
The guide could help to bolster your returns and enable you to select the best performing stocks and sectors in the long run. As such, it could help you retire early, pay off your mortgage, or allow you to relax by the pool a little more often!
Click here to access your free and without obligation copy of the guide.
Peter Stephens owns shares of BAE Systems, British American Tobacco and HSBC Holdings. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.