The recipe for successful long-term investing is theoretically simple, but difficult in practice: buy stocks from high-quality companies; pay reasonable prices for these shares; and hold them for many years unless there are legitimate reasons to sell them. The failure of any of these steps will cause trouble.
Each share could double in the next decade, but only a few have an above-average chance of doing so. These Motley Fool investors think Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) Blackberry (NYSE: BB) and Berkshire Hathaway  (NYSE: BRK.B) are three such stocks. Here's what you need to know.
This tech giant is just starting
Steve Symington (Alphabet ): It may seem crazy to predict the stock of one 750 billion dollar company could double from here. But I think Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has the potential to do just that.
As the parent company of Google, Alphabet already has seven products, each of which gives at least one billion active users, including Google Search, YouTube, Gmail, Android, Chrome, Google Maps and Google Play Store , But it is easy to forget that around 4.5 billion people – two-thirds of the world's population – still have no access to the Internet. And the network effect surrounding Alpha's core portfolio, which is already huge, is well positioned to benefit when these people go online.
Not to be forgotten is Alphabet's smaller Other Bets segment, which is primarily composed of early-stage companies that are promising in the long run. Think Nest Connected Home Products, Fiber High Speed Internet, Verily Life Sciences Solutions and Waymo Self-Propelled Vehicles, to name just a few
Other Bets revenue jumped nearly 50% last year to $ 1.2 billion -Dollar. However, many smaller companies are still in the pre-sales phase, with the segment experiencing a significant operating loss of $ 3.4 billion over the same period. But with nearly $ 103 billion in cash on hand at the end of last year, thanks to its tremendously profitable Google activities, Alphabet can afford to promote these operations with a long-term mindset. If one of them really starts to stand out in the coming years, it could fuel the proceeds of Alphabet so much more.
A Humble Tech Giant
Leo Sun (BlackBerry): Blackberry controlled about one-fifth of the smartphone market in 2009. But it eventually lost the entire market for iPhones and Android devices. When John Chen became CEO of BlackBerry in 2013, he controlled less than 1% of the market
Instead of trying to make a comeback in smartphones, Chen expanded BlackBerry's enterprise software, services and licensing business. The company's key growth driver is BlackBerry Enterprise Service (BES), which enables organizations to secure and monitor their employees' mobile devices.
In 2016, BlackBerry manufactured its own smartphones and licensed its brand to Chinese smartphone maker TCL which created a new subsidiary called BlackBerry Mobile. TCL pays BlackBerry royalties, a high-margin revenue that complements software and service revenues.
Last year, BlackBerry software and services revenue (including royalties) increased 20%, accounting for 80% of revenue. Unfortunately, this growth was offset by falling mobile phone sales and service fees, and BlackBerry's total revenue declined 29%. With sales of handset and service access approaching zero, the growth of its software and services should gradually offset these losses.
Wall Street expects BlackBerry revenues to increase by only 8% this year and 10% next year. With rising sales, earnings growth is expected. Blackberry growth and valuations are looking chaotic now, but I think investors could warm up to this humble technology giant over the next decade – and eventually its stock could double.
Many Years of Growth Are Available
Tim Green (Berkshire Hathaway): Warren Buffett's Berkshire Hathaway is already worth nearly half a trillion dollars. But it's not crazy to think that the stock could double in the next 10 years. Doubling over a decade requires an average annual growth rate of only about 7.2%. That's a little more than a third of the historical growth rate of Berkshire's book value and its stock price.
In other words, Berkshire does not have to double homeruns for the stock from here. It just has to go on doing what it did. Under the leadership of Buffett, the conglomerate has built a number of high-quality companies with lasting competitive advantages that should shed more and more cash over time. This money can be invested in even higher quality companies selected by Buffett or his later successors.
Of course, Berkshire could follow suit if the broader market does nothing in the next decade, perhaps because valuations are historically high today and not double. But Berkshire's earnings are likely to increase significantly over time, making the stock more attractive and creating the seeds of future profits.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Leo Sun has no position in any of the above stocks. Steve Symington has no position in any of these stocks. Timothy Green owns shares in Berkshire Hathaway (B-shares). The Motley Fool owns shares of and recommends Alphabet (A-shares), Alphabet (C-shares) and Berkshire Hathaway (B-shares). The Motley Fool has a disclosure policy.