One of the reasons I got into investing as a kid is because I figured it was the easiest way to be lazy and still make money. Pick the right investment and you can just watch it grow without lifting a finger. That certainly sounded better than all the lawn-mowing and newspaper-delivery work I did.
I found out later in life that investing wasn't quite that easy. But wouldn't it be nice if we could just pick a stock and watch it fly higher for the next decade?
Sometimes that works out, say, if you happen to get into Apple, Netflix (NAS: NFLX) , or Microsoft before they plateau or fall. But there are some companies that have essential businesses that will be around in 20 years even if you don't follow them on a regular basis. These companies aren't likely to turn $1,000 into $1 million, but they also aren't likely to turn it into $0 -- and these days that means something.
What are these magical companies I'm talking about?
Disney (NYS: DIS)
When most people think of Disney, they think of Mickey Mouse and theme parks. But nearly half of Disney's revenue comes from media networks like ABC and ESPN. What could be more essential to mankind than ESPN?
When it comes to making money, the networks are head and shoulders above the rest of Disney's businesses. Of the $2.7 billion in operating income Disney generated last quarter, $2.1 billion came from media networks.
As the owner of the distribution channel and the content, Disney has us exactly where it wants us. The company has pricing power over us and as the sole provider of some of the most desired live-action events on television, there's less of a competitive threat.
What about disruptive technologies like Netflix, you ask? Well, answer this: Where do you think Netflix gets its content?
Disney is like the goose that laid the golden eggs. And those eggs turned into Mickey, Minnie, and ESPN.
Intel (NAS: INTC)
I bet most of you are like me and have no idea how the inside of a computer really works. I like it that way, and all I really want is for my devices to become smarter, faster, and cheaper. That's where Intel comes in.
Not only are Intel's products essential to making our gadgets work, there's also a strong barrier to entry into its business. A chip plant costs billions of dollars, not something a start-up has lying around to come after Intel.
Intel may not be the rocket stock it was in the '90s, but it's still the leader in computer chips, despite competitors like Advanced Micro Devices (NYS: AMD) having made some inroads in PCs and mobile devices. With more than 80% market share in microprocessors, Intel is still the big kid on the block.
Donaldson (NYS: DCI)
This stock may seem like a fish out of water, but Donaldson provides a service that is only growing in need: filtration.
Donaldson doesn't make the air filters we have in our furnace or car, and it doesn't make water filters for Brita. Instead, the company makes very-high-end filters for Caterpillar's (NYS: CAT) giant machines, John Deere tractors, and gas turbines. Not exactly the kind of machines you want to skimp on a cheap filter for.
They're also the kind of machines that are becoming more precise, requiring cleaner air in dirtier locations. It wouldn't be good if a tank shut down in the middle of the desert because the air filter jammed, would it?
That puts Donaldson in a very strong position as a high-value product to its customers. Since the company has been specified into many of these manufacturers, their business has become stronger.
The stock's performance is nothing to blush at, either. Donaldson's 10-year average return is almost 16% annually, easily outpacing the 3.3% average annual return of the S&P 500.
Another thing that impressed me about Donaldson is how invested management is in the company. Officers must own between two and 10 times their base salary in stock, depending on level, and directors must own five times their retainer. If you're investing for the long term, you should want management to be, too, and Donaldson fits the bill.
Filtration might not be fun to discuss over a drink at the bar, but if you forgot you owned this stock for the next 20 years, you'd likely still find a nice return waiting for you.
Foolish bottom line
Sometimes we overthink our investments, and sometimes we fall in love with the sex appeal of a company. I'm guilty of it, too, but if we can focus on the simple, sustainable, and necessary companies we should be putting our money into, we can buy a stock and forget about it.
I'm putting my 96 CAPS rating on the line by adding Disney, Intel, and Donaldson as green-thumb picks in My CAPS Portfolio with a five-year-plus outperform target. Create your own portfolio to track your stock picks here.
At the time thisarticle was published Fool contributor Travis Hoium owns shares of Disney and Intel. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of Apple and Microsoft. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel, Walt Disney, Netflix, Apple, and Microsoft, as well as creating bull call spread positions in Intel, Microsoft, and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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