3 Growth Stocks to Hold for the Next 20 Years

Most of the time, investors should look to buy declining stocks. Why pay more when a little patience (and some short-term market fluctuations) will allow you to get more for your money?

There are times, however, when it makes sense to step into a ticker that is not just high, but downright rising. While a pullback may be in the cards at some point in its foreseeable future, the bigger risk is waiting, just to see the ticker continue to post gains. The trick, of course, is knowing when those opportunities arise.

With that as a backdrop, here’s a closer look at three stocks near rally-driven highs that still represent excellent long-term investments at their current price.

1. Home Depot

The real estate picture is supposedly bleak. New home sales remain roughly in line with pre-pandemic levels, and are only so high because existing home sales remain just above the multi-year low from late last year. Homeowners aren’t turning away from low-interest mortgages, while cash-strapped consumers simply aren’t interested in shelling out a lot of cash for a home that might not hold its value. Spending on remodeling also fell.

So why the home improvement retailer’s actions Home Depot (HD -0.78%) to a new 52-week high, which is consistent with their peak in late 2021 (when spending on homes and home improvement projects was rising)? Because investors look forward rather than backward.

Reality: Number crunching done by real estate sales platform Zillow reports that the current housing shortage in the United States is 4.5 million, up from last year’s number of 4.3 million. Between the nation’s continued population growth and the overall limit on the number of homes the homebuilding industry is capable of building in any given year — around 1.5 million — it could take several years to close that gap . There’s also just a bunch of pent-up home buying waiting to be unleashed, with many potential buyers waiting on the sidelines for interest rates as well as home prices to drop…which they are now.

As the biggest name in the business, Home Depot is perfectly positioned to capitalize on this demand.

Investors who follow Home Depot closely will point out that its results don’t fit that narrative. Last quarter sales were flat, while US same-store sales are down 3.6% year-over-year. The retailer also cut its full-year earnings guidance with its latest quarterly numbers.

Still, the core headwinds appear to be receding, putting Home Depot back in position to dominate the growing home improvement market. Heck, the analyst community thinks Home Depot’s top line will start growing again next fiscal year, with earnings growth set to resume the following year on the back of lower interest rates and more stabilized supply and demand. This is what recent buyers of the stock enter.

2. Coca-Cola

Coca cola (K.O -0.50%) it’s a stock pick so commonly suggested that it’s almost become a cliché. Indeed, it’s arguable that the reason the stock is still within sight of last month’s record high is that it’s one of the few tickers that investors know is safe and reliable enough to hold in these uncertain times.

The thing is, the crowd is right. Coca-Cola is one of the best names on the market, with universal strength, regardless of environment.

That’s not to say the beverage giant has an impressive growth engine to accelerate. This is a slow-moving business, of course. This year’s projected revenue growth of just over 8% is an outlier, in fact, exaggerated by last year’s anemic comparison. Next year’s projected sales growth of just under 5% is in line with the company’s long-term guidance. Likewise for earnings, which have only grown at a slightly faster rate and should continue to improve about as much.

What Coca-Cola lacks in growth atmosphere, however, it more than makes up for in consistency. The company has now increased its dividend every year for the past 62 years, its ability to pay has never been in doubt.

KO Normalized diluted EPS data (quarterly) by YCharts

This is the result of being the biggest name in the business and managing a wide range of top drinks far beyond the namesake cola. See, this company also owns Gold Peak tea, Minute Maid juice, Powerade sports drink, and Dasani water, to name a few. Not only does it always have something to suit the tastes of the ever-evolving world, but it enjoys a great deal of leverage in sales and marketing.

The bottom line? As long as consumers are thirsty, The Coca-Cola Company should be able to generate at least some degree of sales growth.

3. Microsoft

Finally, add some software power Microsoft (MSFT -0.11%) to your list of growth stocks to buy and hold for the next 20 years.

The usual optimistic arguments apply. These are, the world is still very dependent on Microsoft software. About a third of the world’s students, businesses and individual consumers still choose Microsoft productivity tools such as Word and Excel, while figures from Global Stats’ Statcounter show that Microsoft Windows is installed on nearly three-quarters of computers of the world.

Then there is cloud computing. Although Amazon Web Services remains the largest provider of cloud computing services on the planet, there is more than enough business here to go around. Microsoft is the fastest-growing name in the cloud computing arena, in fact, according to data collected by Synergy Research Group as well as market research team Canalys.

Given how much of its software and services are leased rather than purchased, it’s no surprise that Microsoft’s top and bottom lines have grown fairly steadily for years.

KO Normalized diluted EPS data (quarterly) by YCharts

None of that strength, however, is at the heart of why you’d want to get into Microsoft stock, even after the 86% advance from its early 2023 low. The main reason this company is a compelling 20-year investment is its proven willingness and ability to address new opportunities as they arise.

Think about it. Twenty years ago, cloud computing wasn’t even a thing. Twenty-five years ago, the Xbox video game console did not exist. Even just five years ago, Microsoft didn’t think an AI platform would be ready to monetize, yet Copilot Pro is now available to paying subscribers who want to get more out of their computers.

We don’t know what Microsoft’s next big development will be. However, given its track record of innovation, as well as the world’s reliance on so much of existing technology, there is little doubt that it will be able to continue to build on its top and bottom lines.