of Dow Jones Industrial Average Get a front row seat to how American business is unfolding. Dating back to the late 1800s, the index tracks the 30 most influential companies in the stock market, giving investors a real-time view of the health of the U.S. economy.
Although this index has its drawbacks, it can be a great place to discover companies with strong financial fundamentals and strong competitive advantages. Here are three Dow stocks you can confidently buy and hold for the long term.
1. Visa
The first stocks to buy and hold for the long term are visa (NYSE:V). Visa operates the world's largest payment network, with total payment volume exceeding $14 trillion. That's almost twice as much as the next closest competitor. master Cardand shows just how much influence the payments giant has over the industry.
For more than 60 years, Visa has built a network of merchants, customers and banking partners that is at the heart of today's payment processing business. The company's wide customer base and trust from banks and merchants makes it difficult to shut down, giving the business an incredibly strong network effect.
The company partners with banks to offer branded cards and earns a fee each time a transaction is processed through its network. In return, we share a portion of the fees with our partner banks.
Because Visa's partner banks hold credit card loans, Visa itself assumes no credit risk. Because of this, Visa's business is incredibly resilient and is able to grow with economic growth and inflation, resulting in increased economic spending. This could make Visa more vulnerable during economic downturns, but puts the company in a better position during economic expansions, which tend to be prolonged.
Growth in emerging market economies could also provide a tailwind for the business. According to Grand View Research, the global payment processing market is expected to grow 14.5% annually until 2030, giving Visa significant upside potential for long-term investors.
2.JP Morgan Chase
Here are some stocks that could be the next great holdings for patient investors: JP Morgan Chase (NYSE:JPM). Over the past several decades, JPMorgan Chase has proven to be one of the best-run banks in the United States.
Under CEO Jamie Dimon's leadership, JPMorgan faced the challenges of the 2008 subprime mortgage crisis, more than a decade of ultra-low interest rates, the COVID-19 pandemic, and subsequent post-pandemic inflation. And we have overcome the fastest pace of interest rate increases on record. 40 years. Currently, this bank boasts over $3.4 trillion in assets, making it by far the largest bank in the United States.
What has helped JPMorgan is its approach to managing a stronghold balance sheet, managing possible tail risks and giving flexibility when opportunities arise.
One example is the latest inflationary environment that emerged a few years ago. While many other banks were adding loans to their balance sheets, JPMorgan took a patient approach, effectively “hoarding cash” to protect against higher-than-expected inflation and interest rate tail risks. This cautious approach paid off. JPMorgan won a federal auction last year. First Republic Bankcollapsed amid a series of local bank failures.
JPMorgan's strong financial fundamentals and diversified approach to risk management and weathering economic turmoil make it another great stock to own for the long term.
3. American Express
The last stock on this list can be a good long-term investment. american express (NYSE:AXP). American Express is known for its iconic branding, positioning it as a luxury brand that customers associate with the finer things in life. It's like an exclusive club and everyone wants to be in it.
The Black Card (also known as the American Express Centurion Card) is an invitation-only card that reportedly requires at least $500,000 to $1 million in annual spending to be considered. The more widely used Platinum card has an annual fee of $695 and offers perks and benefits from luxury travel companies, luxury hotels, airlines, and luxury clothing brands.
Similar to Visa, American Express receives fees from merchants when processing payments through its network. Unlike Visa, American Express retains the credit card loans it makes. This allows them to generate fee and interest income, which is an excellent source of growth in today's high interest rate environment.
If American Express continues to carry credit card debt, it may incur losses due to increased credit card delinquencies. However, it has the advantage that its premium customer base allows it to better weather economic downturns and high inflation.
I have long been interested in American Express branding and positioning. berkshire hathaway CEO Warren Buffett has invested in the company's stock since 1993. It's why the company has grown so well with the U.S. economy, and why American Express is another great stock to add to your long-term investment portfolio today.
Should you invest $1,000 in Visa right now?
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JPMorgan Chase is an advertising partner of The Motley Fool's Ascent. American Express is the Motley Fool's advertising partner for his The Ascent. Courtney Carlsen has no position in any stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Visa. The Motley Fool has a disclosure policy.
Bull Market Buys: 3 Dow Stocks to Own for the Long Run was originally published by The Motley Fool.
