Living in an age of low trading costs is both a blessing and a curse. We no longer need to save up money just for the privilege of buying a stock. At the same time, the financial ease of these trades only encourages more trades — which is hazardous to your wealth.
That’s why we here at the Motley Fool encourage long-term, buy-to-hold investing. While we’ll never hold you to these ideals — we break the rules ourselves from time to time — we like to think that we’ll keep our holdings under lock and key.
I’m in this robotic surgery pioneer’s stock for the long haul
Brian Feroldi (Intuitive Surgical): One of the most disruptive technologies in healthcare of the last few decades has been the robotic surgical system. These devices greatly enhance a surgeon’s ability to visualize and access the human body, allowing complex procedures with vastly smaller incisions. These advantages lead to less blood loss and faster recovery times, both of which create better health outcomes.
Intuitive Surgical has long been the leader of this technology, boasting a worldwide installed base of more than 3,919 daVinci systems. This huge install base is great news for investors for a few reasons.
First, each da Vinci surgery requires the purchase of instruments and accessories, as well as annual servicing. Both are sources of high-margin recurring revenue. Next, learning how to use a da Vinci system takes time. That will make it hard for surgeons to switch to competing products as they become available. Finally, having a big install base makes it easy for Intuitive to get the word out and retrain surgeons as new surgical procedures are invented and approved.
What’s more, the company continues to use its vast financial resources to innovate, and is on the cusp of rolling out two new systems in the near future. With plenty of room for growth on the horizon, Intuitive is one stock that I can’t see myself ever parting ways with.
This mini-Berkshire is built to last
Steve Symington (Markel): I’ve owned shares of this specialty insurance and financial holding company for the better part of the last decade.
The source of Markel’s strength is threefold, with the company’s results balanced by the combination of its insurance segment, investment operations, and its growing portfolio of diversified non-insurance businesses operating under Markel Ventures. Rarely is an unsatisfactory performance by one of these segments not offset by the relative strength of the others.
Last quarter, for example, the profitability of Markel’s insurance operations was disproportionately affected by an unusual decrease in the Ogden rate (its first change since 2001), which required Markel to increase its loss reserves on the reinsurance side. And revenue at Markel Ventures increased only slightly from the same year-ago period, albeit primarily due to an expected decline in its more cyclical businesses as the company remained on the lookout for potential acquisition candidates that meet its stringent standards. “Same stuff, different day,” explained Markel co-CEO Tom Gayner at the time.
Meanwhile, returns on Markel’s investment portfolio helped singlehandedly drive a 5.2% year over year increase in the company’s book value per share. To that end, this modest growth isn’t indicative of Markel’s typical performance; the company’s book value per share has climbed a much better 13% annually for the past 20 years.
In the end, I’m confident Markel will continue to deliver those market beating returns for the foreseeable future, and have no plans to sell my shares anytime soon.
E-commerce? Sure, but it’s the stuff we can’t see that’s exciting
Brian Stoffel (Amazon):It’s a scary thought, but the pace of change in our world is actually accelerating. One look at the steady rise of e-commerce is example enough; and in that realm, no one has dominated like Amazon.
Through the build-out of an impressive network of fulfillment centers — 104 locations domestically, with an additional 97 in other countries — no one can match Amazon’s ability to store and deliver products in two days or less. That advantage is creating a network effect: with Amazon Prime rosters growing, third-party vendors are listing on Amazon and using the company’s “Fulfillment by Amazon” services. It’s a virtuous cycle that’s making Amazon even stronger.
But like I said, change is accelerating. What helps me sleep at night is not the moat Amazon has now, but its history of optionality — trying out thousands of small bets, finding new services that stick, and pouring resources into them. This institutional flexibility is what allowed the company to go from an online bookseller to the Everything Store to leading cloud company.
I don’t know what the next big service the company offers will be, but I rest easy knowing that founder/CEO Jeff Bezos is obsessed with trying out new ideas. I have confidence that he’ll hit on enough of them to make owning the stock indefinitely a very wise move.
Brian Feroldi owns shares of Amazon and Intuitive Surgical. Brian Stoffel owns shares of Amazon and Intuitive Surgical. Steve Symington owns shares of Markel. The Motley Fool owns shares of and recommends Amazon, Intuitive Surgical, and Markel. The Motley Fool has a disclosure policy.