2022 wasn’t a banner year for most investors. Major American equity markets fell into bear market territory. Most international markets didn’t fare much better. Meanwhile, fixed income failed to protect investors from volatility amid an unprecedented surge in inflation. However, the big drop in asset prices has created some real opportunities for investors in long-term stocks. 2022 was interesting in that almost all companies sold off meaningfully, regardless of how well they’d fared in the past. This has put some tremendous long-term stocks at more approachable starting valuations.
For the list below, all the long-term stocks profiled have increased in value at least 300% over the past 10 years. And, that’s even counting 2022’s declines. These seven companies have all showed amazing historical success. While some are currently facing significant short-term headwinds, all seven of these have a good probability of returning to their high-octane performance ways once this current market downturn lets up.
|HIFS||Hingham Institution for Savings||$275.49|
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After losing roughly half its value in 2022, Netflix (NASDAQ:NFLX) might not seem like a winner anymore. However, don’t let the recent past color your perspective too much. NFLX stock, even after its large drop in 2022, is still up nearly 2,000% over the past 10 years. Shares were trading at just $14 (split-adjusted) at the start of 2013, after all.
The company’s subscriber slowdown is well-known. The streaming wars have put pressure on everyone, including the market leader, Netflix. Shares plummeted in early 2022 as Netflix shocked the market with net subscriber losses.
However, Netflix has now returned to growth, with subscriber Q3 numbers surging ahead of expectations. Netflix, unlike many tech companies, is also already significantly profitable, giving it plenty of flexibility while working through this current slowdown in the streaming space. It won’t be an overnight return back to all-time high stock prices, but the Netflix story is picking up steam once again, and may be one of the most solid long-term stocks to consider.
Roper Technologies (ROP)
Roper Technologies (NYSE:ROP) is a software conglomerate, and is another one of the most solid long-term stocks to consider. The firm initially focused on industrial manufacturing, but, over the years, it has exited most direct industrial businesses and instead evolved to become a software provider to those sorts of companies. Today, Roper has software for managing power plants, insurance, architecture and engineering, trucking, and much more.
ROP stock has posted exceptional returns primarily for two reasons. One, management is constantly buying more software companies to add to the fold. And, since it operates in less glamorous markets than many software rivals, it can buy businesses at much more reasonable valuations.
In addition to acquisitions, Roper has another tool at its disposal. The company earns a lot of license fees for software in advance. This is called deferred revenue, as Roper gets paid up front but delivers those contractual software services over a period of months and years. In the meantime, Roper can immediately roll that upfront revenue into making more software acquisitions, which helps keep the ball rolling.
Roper’s tremendous capital allocation skills over the years have led to the company producing a 15.1% annualized total return over the past decade. That’s an excellent result from a seemingly mundane collection of software assets.
Zoetis (NYSE:ZTS) is the largest player in the animal health industry. The company produces vaccines, parasite-killers, and anti-infective drugs for animals. It also sells diagnostic tools and instruments for animal care. Zoetis has a fairly even sales split between pets and commercial animals such as pigs, livestock, and poultry.
Despite the company’s considerable success over the past decade, Zoetis might not be a household name yet. That’s probably because the company was the long-time animal health division of Pfizer (NYSE:PFE). It only became an independent company and completed its initial public offering (IPO) in 2013. However, Zoetis’ roots, within Pfizer, go back to the 1950s.g
ZTS stock is now up more than 330% since its 2013 IPO. However, gains were much larger prior to 2022. That’s because shares pulled back 40% over the past year. Investors dumped any and all stocks related to animal health as the pandemic-related animal adoption boom came to an abrupt end. Regardless, while animal companionship enthusiasm has returned to more normal levels, the longer-term demand for better quality pet care isn’t going anywhere, and Zoetis will be back to its winning ways soon.
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Another one of the top long-term stocks to consider is Visa (NYSE:V), one of the world’s two primary credit card networks. It, along with Mastercard (NYSE:MA), has a dominant position in commerce virtually everywhere across the globe. The company’s results were disrupted during the pandemic. The card companies rely heavily on international payments as they can charge much higher fees on cross-border transactions as opposed to domestic ones. Visa shares have remained depressed over the past year as it has taken longer than hoped for international tourism to fully recover to pre-pandemic levels. Meanwhile, the threat of a recession lingers as the calendar turns to 2023.
That said, Visa has been an incredible compounder since going public, and its long-term prospects are as strong as ever. If anything, the past couple years were a boon to the company, as many vendors — particularly in emerging markets — finally started adopting touchless payments while trying to de-emphasize the use of physical cash.
In any case, V stock has been flat for the past three years, which sets it up for a solid breakout once this consolidation period ends. Besides that, shares are now at less than 25 times forward earnings, whereas Visa has historically traded closer to 30 times earnings.
Oftentimes, the biggest market winners are found in unlikely places. One such case is airplane parts manufacturer Heico (NYSE:HEI). It produces components for jet engines, structural and mechanical plane pieces, insulation and so on for various types of aircraft.
This may sound like a dull business, but its returns have been anything but. HEI stock is up a jaw-dropping 775% over the past decade. How has the company achieved such a feat? It is an M&A machine, constantly buying up other small aerospace parts makers. Meanwhile, competition is limited as there is a high regulatory barrier to getting approval for making new airplane components. In effect, Heico has something close to a monopoly for many of the parts that it makes.
This sort of unbeatable economics tied to a large and growing industry with numerous acquisition candidates has made Heico an all-star performer. Shares may seem exceptionally expensive at 50 times earnings today. However, Heico has a tendency to grow earnings so quickly that the starting valuation hasn’t mattered too much. If shares pull back during a potential 2023 recession, investors should put Heico at the top of their long-term stock watchlist.
United Rentals (URI)
United Rentals (NYSE:URI) is another firm with an unbelievably profitable niche. The company owns a variety of expensive equipment and rents it out to contractors and other professionals that need a specific tool for a short period of time. United offers backhoes, loaders, earthmoving equipment, water pumps, power tools and so on.
Like Heico, this may seem like a mundane business, but shares are up more than 700% since 2013. United Rentals has created a powerful business model, buying equipment with cheaply-borrowed capital and then renting it out at a substantial premium to its ownership cost. The firm has a scale advantage over mom-and-pop rental shops since it can borrow funds more cheaply and get better terms when buying equipment in large quantities.
United Rentals also benefits from having a large pool of acquisition targets. It can buy up the countless smaller rental companies that come onto the market during economic downturns or when an owner wants to get out of the business.
Shares are currently at a muted valuation, trading at just 11 times forward earnings. This is presumably due to worries that the business will slow down during a potential recession. However, United Rentals has proven adept at navigating complicated economic conditions before, and long-term investors will likely be richly rewarded for hanging in there during the current uncertainty.
Hingham Institution For Savings (HIFS)
Most investors probably don’t think of banks as big long-term stock winners. The skepticism certainly makes sense after the horrific performance we saw from the financial sector in 2008. That said, not all banks are created equal. Hingham Institution For Savings (NASDAQ:HIFS) is America’s most efficient multi-branch bank. Efficiency, in banks, is a metric of a bank’s income versus its overhead expenses. Hingham’s unmatched efficiency is thanks to its laser focus on costs, along with having a large amount of deposits per branch, giving it unmatched scale effeciencies.
Hingham has shown superior capital allocation skills, which has powered its double-digit annualized total returns dating back to the mid-1990s. Over the past ten years, HIFS stock has soared 325%. Despite that rally, shares remain at a reasonable price, going for 14 times forward earnings. Adding to that HIFS stock pulled back around 30% in 2022 thanks to economic uncertainty, giving investors a much better entry point going forward.
On the date of publication, Ian Bezek held a long position in HIFS, ROP, and V stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.