Use These 7 Criteria To Increase Your Odds of Picking Stocks That Will Last Decades

Criteria # 1: Company has a long history.

The company has survived the test of time, having been through multiple recessions and crises. Added to that the change in customer sentiment and preferences.

Criteria #2: Company can be managed by a successor.

The founder has appointed a successor and the company has a framework on continuity. An example is Apple. Steve Jobs founded Apple in 1976. After he passed away in 2011, Tim Cook took over the reins. During the decade that Tim Cook was in charge, Apple's market cap grew from $348 billion to $2.5 trillion, seeing its share price grow tenfold under his leadership.

Criteria #3: Company is more B2B than B2C.

Consumer preferences change over time. What’s hot now may not be so hot in 10 years’ time. The B2C space is where disruption happens the most. Selling only to consumers limits your market size. The sweet spot will ideally be serving both the B2B and B2C markets.

Criteria #4: Company is in a non-tech industry.

This may seem somewhat counterintuitive, given the huge role that technology plays in our daily lives. Technology is fast-moving, meaning it is more susceptible to disruption.

It is in non-tech industries where disruption is slower. Companies which can show growth in non-tech industries will benefit.

Criteria #5: Company is in non-energy related industry.

With the rise of clean energy, the world could be carbon neutral in the future. Companies engaged in non-energy related industries will be less affected if (when) the world transits to clean energy.

Criteria #6: Company is Diversified

Most businesses serve a very specific niche. As such, it’s not always easy identifying a diversified business.

A good example of a diversified business is Berkshire Hathaway. In addition to owning and operating numerous businesses engaged in manufacturing, services, and retailing, Berkshire also has insurance businesses, a freight rail transportation business and a group of utility and energy generation and distribution businesses. Essentially, owning a piece of Berkshire is like owning a well diversified ETF.

Criteria #7: Dividend Aristocrats

A dividend aristocrat is an S&P 500 company with at least 25 years of consecutive dividend raises. Not many companies can meet this demanding criteria.

While this is a good metric, it is not the most important criteria. This is especially so when it comes to growth stocks, which normally don’t pay a dividend.