10 Best Long-Term Stocks to Buy Now in 2020
In times of economic uncertainty, investors tend to bail on stocks and head to bonds or cash. But bonds and other fixed income have nearly no yield right now, and cash, even in the bank, barely pays any interest. That leaves common stocks as the best investment, provided it’s done right, with a focus on the long term.
Investors who pivot towards longer-term investments in individual stocks right now can do much better than an index fund, by betting on future capital gains when economic uncertainty wanes. Even better, many long-term stocks have better dividend yields than cash right now, meaning uncertainty can work in an investor’s favor.
With retail investors focused on penny stocks and companies with a great story but no performance behind them, now is the time to look at some quality companies with a strong market capitalization that are capable of delivering the best returns going forward.
The best long-term stocks are those that can stand the test of time thanks to their flexibility. This includes a number of established, blue-chip names. But it also includes a number of stocks with some great growth potential ahead. These are companies worth owning for the long-term, and for adding to during bear markets.
Best Long-Term Stock #1: Pinterest (PINS)
Describing itself as a “virtual discovery engine,” Pinterest (PINS) isn’t quite a social media company like Facebook or a search engine like Google. Rather, it’s tried to take the best elements of both. That’s created a unique niche in the market with no real competition.
Conceptually, the idea sounded good. But ever since the company went public in 2019, shares haven’t performed too well. They’re down about one-third from their initial public offering price on a stock exchange.
Yet this is the kind of trend that also occurred in shares of Facebook when it first went public. Shares subsequently more than quadrupled from its IPO price as it got its act together and focused on generating revenue.
That’s a trend that should play out here. Pinterest’s visual-heavy nature is likely to keep subscribers on pages for a long time, which provides some big opportunities for advertisers. That should allow the company to become a consistently profitable operation in time.
Given the company’s size, as soon as it starts to look successful, it may end up getting gobbled up by a bigger name in the tech space. So it’s possible this is a great long-term play… you just may end up with shares of Google or another big tech name as a result.
Best Long-Term Stock #2: AT&T (T)
For investors thinking ahead years, not months, there’s a lot to like about AT&T (T). As a telecom company, its heavily regulated structure leads to steady and predictable earnings.
While that usually means slow earnings growth, the company has expanded in recent years with acquisitions of DirecTV and Time Warner.
That means the company has the infrastructure to deliver the content that it’s now creating. This vertical integration gives it a competitive advantage over pure content creators or pure information infrastructure providers.
The acquisitions should be accretive in the long term, and the company has already started to pay down its debt more rapidly thanks to its massive cash flow. For the moment, however, the balance sheet does look a bit leveraged, which has kept the share price down.
At the same time, the company pays a generous dividend, with a yield over 6 percent right now. There’s been some growth there, although not much.
With a high starting yield and the company’s debt picture improving, however, chances are today’s buyers who plunk down the funds will be well paid. And they’ll see solid capital gains in the years ahead with this company, given the disconnect between its value now and the market price.
Over the past few years, shares have traded in a wide range from the high-$20 to high-$30 range. Investors can follow this range to add more shares cheaply. Right now, the stock price is near the low end of its range. When shares reach the higher part of their range, they can use a tool like covered call writing to add more income off this already high-income play.
Best Long-Term Stock #3: Apple (AAPL)
The consumer technology giant is no stranger to any “best of” list. The company is simply a living legend. Over the years it has innovated in personal computing, smartphone technology, and even owns the world’s highest-profit-margin music store with iTunes.
It’s no wonder you can find shares in just about any mutual fund or ETF. But that’s for a reason.
So, yes, it’s a pricey company. And it carries a market cap of nearly $1.5 trillion right now. But this is a company that’s likely going to continue being a long-term winner. Despite having to pay for a lot of costly manufacturing for its physical goods, the company has a 21 percent profit margin and operating margins of 24 percent. That’s closer to a purely-tech play like a software company than a firm best known for making smartphones.
Earnings and revenue growth have stalled out in recent quarters, putting it ahead of some of the dire headlines about the economy right now. But that’s what makes it a time to buy—a fact many traders have already recognized.
Consumers will still download music from the store. And they’ll still need to upgrade their iPhones on a regular basis. And with newer technologies and services in television and screening coming along, there’s still a lot of profit opportunity ahead. The stock returns here will likely continue to beat the market.
Shares even pay a dividend yield, albeit a low one just under 1 percent. But given how much the shares move in a given year, and the company’s already strong record of dividend growth and share buybacks, today’s investors are likely to continue to see excellent returns buying and holding this long-term play.
Best Long-Term Stock #4: The Blackstone Group (BX)
When it comes to the world of finance, most investors think of bank stocks. But those companies can be volatile, particularly when there’s a bear market. A better approach is with insurance companies, which tend to be steadier. But another group, alternative asset managers, tend to do best of all.
While their shares will sell off when markets slide, these institutions often short the market or own other exotic assets that tend to rise. In this small universe, The Blackstone Group (BX) is a major player, and a great long-term stock to hold as a result.
The company engages in various trading strategies, including those in the credit market, real estate, private equity and even providing support to buyout and development projects. These hedge fund-type strategies gives Blackstone a huge competitive advantage over big Wall Street banks.
It’s no surprise that this kind of business will do well. At a time when the stock market has been essentially flat over the past year, shares of Blackstone have risen over 17 percent.
We see this well-managed company as a winner—and traders can piggyback on their exotic trades just by buying shares and being a partial owner. The company’s sizeable 3.6 percent dividend will also go a long way to ensuring adequate dividend income in the years ahead.
Best Long-Term Stock #5: Facebook (FB)
Shares of Facebook have been range-bound for a few years now. Just when it seems shares can head far higher, a new development comes along to send shares down.
Two years ago, it was privacy concerns on the network. Now, it’s an ad boycott from major companies, given the company’s lackluster response to limiting speech on the platform.
Even with the recent ad boycott from major companies, we still see Facebook as a long-term winner. The company dominates the social media space in terms of time spent on site, meaning that advertisers will still continue to flock to the site, even if major names are stepping back right now.
It’s one of the dominant companies of the modern internet era, yet it’s lagged other big names that dominate as well such as Google. That gives the social media firm a solid relative valuation. Facebook’s “network effect” makes it a cornerstone of the Internet, and the company will find plenty of ways to continue monetizing its site.
Unlike many established tech names, Facebook doesn’t pay a dividend yet. That policy may change in the next few years, given the company’s declining growth of new subscribers. All told, this is a company with some short-term headwinds that has some excellent reasons to belong in a long-term portfolio. Take advantage of this stock market bargain now.
Best Long-Term Stock #6: Square (SQ)
The most successful long-term stocks are established companies. Square (SQ) is no exception, although the 11-year-old firm may not be a household name like many other companies on this list.
That’s too bad, because the payment processing company has some tremendous long-term growth in the years ahead.
The company provides point-of-sale software and hardware to make selling easier between buyers and sellers. Their technology includes magnetic stripe cards, contactless chip, and a variety of other payment service solutions. They’re also working on Cash App, designed to transfer cash between parties at a lower cost than traditional banks.
Payment processing is a small part of doing business outside the realm of cash. The space has been dominated by credit cards for generations, and companies like Square are able to break up that oligopoly. Square aims to provide those services at a far lower cost, making it a disruptor for the space.
That’s why this is play that could provide massive growth to owners over the next few years as Square increases its miniscule market share. Today’s buyers are foregoing a dividend, but they’re likely to more than make up for that now with this growth stock.
Best Long-Term Stock #7: Microsoft (MSFT)
Microsoft is a tech giant to say the least. If you’re still thinking of it as a provider of operating systems for computers, you’re only getting a fraction of the picture.
The company is heavily invested in a number of next-generation technologies, to say nothing of having its own video game console (the Xbox), video communications (Skype) and social media site (LinkedIn).
What’s most impressive is the company’s growth in cloud services. That’s a huge potential market, and Microsoft has quickly built out its functionality there to compete with the likes of Google and Amazon.
All in all, this makes for a fascinating tech conglomerate that’s focused on being the best or second best in a few areas that have high revenue potential. Most investors have no clue that video game sales exceed box office sales for moves—and that first occurred in 2018, well before the pandemic.
Microsoft has been a fast adaptor to the times, increasing tools and functionality to the work-from-home workplace. This is a company likely to benefit from accelerating trends in technology in the years to come. That means this behemoth can get even bigger.
And right now, shares also pay a 1 percent dividend yield. It isn’t much compared to the share price, but over the past few years the company has been consistently increasing that payout.
Best Long-Term Stock #8: Altria Group (MO)
Some see the cigarette companies as a one-stop shop for all stock market investing needs. And in a way, they’re not wrong. The space has low but steady growth, and tends to pay out huge dividends that can be reinvested to best compound returns.
And the volatility on the tobacco firms tends to be lower than average for the market, making it a worthy alternative to a savings account. Tobacco stocks in general act like a bond fund, making it perfect for investors with a low risk tolerance.
In this space, Altria Group (MO) is the winner of the category. Despite the moniker of tobacco stocks as “sin” stocks, the companies have been angels to shareholders over the years. However, with the rise of the cannabis space, and slow growth opportunities relative to other markets, the valuation in the space is at its best levels in years.
That can be seen with Altria shares. Prices have dropped 20 percent in the past year, even as revenues have risen 15 percent and earnings have risen by 38 percent.
That drop, combined with the company’s high and growing dividend, has pushed the yield up to a staggering 8.4 percent. Investors who buy today are getting a great starting yield on a dividend aristocrat that will keep growing over time. Reinvested dividends can produce better returns than simply buying and holding.
Given how the company uses the remainder of its earnings for buying back shares or investing in higher-growth spaces like cannabis, shares are likely far below their intrinsic value. They’ll likely see a recovery in the years ahead before heading to all-time highs.
Best Long-Term Stock #9: McDonald’s (MCD)
In 2008, just 2 of the 30 stocks in the Dow Jones Industrial Average closed the year higher than they started. Amidst a global meltdown and a 30 percent decline for the index on average, McDonald’s shares held up phenomenally well.
While past performance is no indication of future performance, McDonald’s tends to fare well during recessions. That’s because customers tend to dine out less, and when they do, they go downscale. And when it comes to the fast food space, McDonald’s has its profitability down to a science.
The company’s low-cost advantage and best-of-industry real estate locations for its properties ensures that it dominates the market.
But this isn’t a one-trick pony company either.
When things get better, McDonald’s works to innovate its menu. Over the past few years, it’s kept customers coming back by adding all-day breakfast and its inexpensive McCafé coffee to compete with coffee and donut shops specifically.
This is another great long-term hold thanks to its steady dividend growth over time, with the dividend more than doubling in the past decade. The company still has ways to improve its profitability in the United States, and there are still international expansion opportunities abroad. This is another big, established name that continues to deliver and will for years to come.
Best Long-Term Stock #10: Wal-Mart (WMT)
Our final long-term holding is the other Dow Jones stock that gained in 2008. As America’s foremost low-cost retailer, Wal-Mart tends to pick up market share during recessions as consumers shop at less expensive locations.
But the big box retailer has also spent billions of dollars over the last several years on expanding grocery operations, as well as building out an online presence that could compete against digital juggernaut Amazon.
And that looks successful. Wal-Mart has seen a massive surge in physical and online traffic as consumer spending downshifted at the start of 2020.
Shares are up 7 percent in the past year—which sounds like a slow year, but with the S&P 500 relatively flat, the company is once again shaping up to be a solid recession-resistant play.
And with over half the company’s shares owned by insiders, mostly the Walton family, the company’s long-term interests are aligned with shareholders.
This is another dividend growth play, which works perfectly with a long-term mentality. Today’s starting dividend of 1.8 percent isn’t that much, but the company has been growing its dividend over time, and maintains a healthy 50 percent payout ratio. That leaves plenty of capital for more investments in online and remote spending needs, revamping stores, or training and paying personnel.
Stocks like Wal-Mart, bought and held for long periods of time, make investing look easy.
FAQs
What is the Long-Term Capital Gains Tax?
For any asset class owned for at least one year, the long-term capital gains tax rate applies. This rate is lower than the short-term rate, which is usually taxed at your rate of income. The long-term rate, depending on the income level involved, is a rate of either 0, 15, or 20 percent. These rates can and do change over time.
And don’t forget, dividend stocks are great for long-term holdings, thanks to the low tax rates on dividends. A successful investment strategy takes these lower tax rates for long-term investments into account.