2 Great Stocks I Will “Never” Sell

Long-term investors are driven to identify and buy great companies, not to be forced to sell them. Warren Buffett once said that his favorite holding period is forever. After all, why not make one great decision and let it reward you for years to come? To be clear, Never Selling is an aspiration — there are certainly compelling reasons to sell stocks. But I think setting the default to “never” to sell results in better results.

Here are two companies that have made it onto my “never” sell list. Each has competitive advantages in its industry, a history of success, and plenty of room for continued growth and strong financial results. Let’s take a look at what makes these stocks long-term picks for my portfolio.

Amazon

There is a good chance that if you have recently purchased something online, you did so Amazon (NASDAQ: AMZN)Put simply, that could be a thesis for owning a company. As long as Amazon continues to be an online marketplace for millions of people, there’s a good chance it will remain a winning stock for investors.

That might not have been so believable in early 2023, when shares had returned to post-pandemic lows and investor sentiment toward the e-commerce giant had soured. But the stock has since soared as the company has figured out its cost structure and improved its bottom line.

While people think of Amazon when they think of online shopping, it’s also important to remember that it’s a leader in cloud infrastructure with Amazon Web Services (AWS). Amazon’s market share leadership should continue as the company sees increased demand for its services to meet the rush toward artificial intelligence (AI).

Interestingly, AWS is no longer the fastest-growing part of Amazon’s business. In the first quarter of 2024, AWS’s 17% revenue growth was outpaced by advertising, which grew 24% to $12 billion. Advertising revenue is still significantly lower than both e-commerce and AWS, but its rapid growth is another reason to be optimistic about Amazon’s future.

Winmark

Although Amazon is one of the most famous companies in the world, Winmark (NASDAQ: WINE) escapes attention. Winmark is a franchisor of stores that resell used items. Its brands include Play it Again Sports, Plato’s Closet, Once Upon a Child and others. Winmark has long been a profitable stock, but it is still relatively small, with a market capitalization of $1.4 billion.

The appeal of owning Winmark stock comes from its business model. As a franchisor, most of the costs associated with owning a retail business fall on the franchisees. This provides Winmark with attractive margins.

For example, in Q2 2024, Winmark’s gross margin was 95.8%. Looking further into the income statement, this translated to a net profit margin of 51.8%. These margins have also slowly but steadily increased over time.

WINE Gross Profit Margin (Quartery) data by YCharts

While it’s clear that the economics of being a franchisor work well for Winmark and its shareholders, there’s evidence that its franchisees are happy, too. In Q2 2024, Winmark had a 100% renewal rate across four of its five brands.

Winmark is adding stores throughout the year, but the pace is deliberate. So far in 2024, the company has increased its total store count by 1.2%. The fact that its franchisees are renewing in such large numbers is a good sign for the company’s future, as it helps supplement slow but steady store growth.

Is it worth investing $1000 in Amazon right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeff Santoro holds positions in Amazon and Winmark. The Motley Fool holds positions in and recommends Amazon and Winmark. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.