As you read this, I’m likely in line at Thunder Mountain in Disney World. Monday is my daughter’s fifth birthday.
To say these five years have gone by quickly would be an understatement. In those five years, we’ve had four houses — one in Chicago and three in Florida.
What’s even crazier to think about is that my daughter has technically lived through three significant market corrections in her young lifetime.
The 2018 market turmoil fueled a 19.8% drop in December of that year.
The COVID-19 crash ignited a more than 30% drop in March 2020.
And this year, the S&P 500 is off by roughly 17.7%.
Talk about an economic whirlwind!
With that type of perspective, it’s important to think about “forever stocks” — even when you’re thinking about a 5 year old’s college account or what might come down the road.
So, this week… while I spend all of my disposable income on churros and plastic junk while standing in line wondering how the father behind me made his life choices… I thought I’d share with you a few stocks and trends I believe my daughter should follow in her lifetime.
I’ll add shares to her portfolio later this week. Let’s dive in…
Rules for the Road
It’d be easy to give that fatherly lecture — but this requires less eye-rolling.
Several trends will endure in her lifetime. And regardless of how many crypto-like frenzies or next-generation ideas emerge, these are the places money will always flow to.
Look at it as a series of forever investments that will never go away.
Before we get to my first pick, I want to briefly cover the trends that will remain over the next few decades. I’ll assign a stock for each one as we cover one trend each day.
- Energy Scarcity and Expansion: Despite calls for dramatic investment in alternative energy systems, the U.S. oil and gas industry will remain a dominant force of energy generation through the 2050s. Don’t take my word for it — the Energy Information Administration says so in every Short-Term Outlook Report.
- Defense Budgets Break the Bank: The United States will spend more than $800 billion in 2023 on its global defense operations. Despite the calls for world peace, we never seem to get there. There’s always money in war, defense and other ugliness around the globe.
- Logistics Move the World and Money: Global supply chains made the world flat in the 1990s, but a shift in political realignment has put America’s procurement operations on the map. In the U.S., supply chains will become more localized, boosting the need for more warehouses, workers and capital solutions.
- Aging Americans Boost Medical Demand: The American population continues to age, and demand for senior housing, medicine and biotech will expand over the decades. There will always be money in life-saving drugs and necessities to help Americans thrive. In addition, an aging, healthier population is good news for life insurance and health insurance companies in the future.
Amelia’s Stock Portfolio No. 1: Berkshire Hathaway B Shares
I’ll start the conversation with a simple stock that’s already a cornerstone of her portfolio — Warren Buffett’s conglomerate Berkshire Hathaway Inc. (NYSE: BRK.B). You might be asking what Berkshire Hathaway has to do with the four trends above. The answer is everything…
Berkshire Hathaway is a global conglomerate with its hands in almost everything. In addition to being a massive investor in life insurance (talk about a way to make money off an aging population), the company is now a major investor in one of my favorite Permian basin oil producers: Occidental Petroleum Corp. (NYSE: OXY).
Berkshire has historically invested in many companies with monopolistic or duopolistic qualities as they dominate their industries. For example, Buffett’s portfolio carries all three major payment companies in American Express Co. (NYSE: AMP), Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA). It also owns a railroad in Burlington North Santa Fe (BNSF Railway), the dominant railcar company for the oil-by-rail transport sector.
Berkshire owns Charter Brokerage in the logistics category, Kern River Pipeline in the long-distance natural gas space, and electrical gas and distribution giant NV Energy. It also owns a large stake in the public kidney dialysis giant DaVita Inc. (NYSE: DVA) — the dominant player in the space — and a sizable amount of Johnson & Johnson (NYSE: JNJ) shares.
The point is she doesn’t need to own one specific company with one concentration. Berkshire checks all of the boxes above.
I’ll dig deeper into each trend this week, and share the one stock that will remain a part of her portfolio for at least the next decade.
To your wealth,
Garrett
