Most investors look to buy low and sell high. However, a few (Warren Buffett included) look to buy low and then hold for a very long time. In fact, Buffett rarely sells an investment unless there is a potential problem on the horizon – even if he’s in a considerable profit. With this in mind, here are three top-quality blue chips that could have very strong long-term futures. As such, they may be worth buying now and holding forever.
HSBC
With the banking sector going through a challenging period and sentiment remaining weak, now seems to be an opportune moment to buy shares in HSBC (LSE: HSBA) (NYSE: HSBC.US). That’s because the bank currently trades on a relatively attractive price to earnings (P/E) ratio of 12.1, which is well below the FTSE 100’s P/E of 13.8.
However, despite its low valuation, HSBC has huge potential. That’s because it is well placed to benefit from the switch from a capital expenditure-led economy to a consumer-led economy in China, with demand for new loans and credit set to be buoyant over the long term. Furthermore, HSBC rode out the credit crunch better than most banks and so, looking ahead, could prove to have a relatively strong and reliable earnings profile moving forward.
BAE Systems
With savage defence cuts taking place across the developed world, it’s little wonder that BAE Systems’ (LSE: BA) (NASDAQOTH: BAESY.US) earnings are due to fall by 11% this year. Indeed, the effects of US sequestration are having a negative impact on the entire defence sector.
However, this means that right now could prove to be a great time to buy shares in BAE. That’s because it currently trades on a P/E of just 12 and yields a very impressive 4.6%. Furthermore, defence remains a key industry and spending item for all developed nations. While the current austerity measures in many developed countries are hurting the bottom lines of defence stocks such as BAE, in the long run demand for their products is likely to remain high. This means that, while the short term may prove to be a disappointment, BAE could turn out to be a highly profitable investment in the long run.
British American Tobacco
Although the popularity of smoking seems to be in terminal decline, e-cigarettes could prove to be a high-growth area for tobacco stocks such as British American Tobacco (LSE: BATS). Indeed, the industry is estimated to be worth well over $1 billion and have the potential to grow at a rapid rate in future years.
As an early entrant to the market, British American Tobacco looks set to benefit from the popularity of e-cigarettes. Its product, Vype, has been on the market for over a year and is already building customer loyalty and positioning itself as a major brand within the industry. With shares offering a yield of 4.1% and vast long term potential via e-cigarettes, British American Tobacco could prove to be a stunning long term play.