As a veteran Wall Street Analyst, it pains me to think how many investors consider 'long term' to be 9-12 months. Actually, I have known many who would generously define 'long term' as 6 months. Such harmful thinking causes investors to be whipsawed by the market - buying and selling at just the wrong moments. What if instead of thinking about an investment horizon in months, we were to take a really long view and consider making an investment for 100 years? If you could buy one stock today and hold it indefinitely for you and your descendants, which one would you pick? This is not meant as purely an abstract exercise, but instead is a method of looking beyond current and obvious trends and finding winners that will ride out the next big depression, war, climactic change or other disaster, all of which will surely arrive.
Let's start by looking at the top 20 largest companies today and ask ourselves if they are likely to 1) be in business in 100 years and 2) likely to see continued growth over the next 100 years, come hell or high water. Today, Apple Inc. (NASDAQ:AAPL) is by far the largest company by market cap, and there is much to like about Apple and its long-term prospects. The problem is that Apple must stay on the ever slippery slope of technology and continuously improve its products to stay on top. What are the odds that some newer, better, faster, cheaper or superior technology will be invented in the next 10 decades that will supplant Apple's? Probably fairly high. What are the odds that Apple can maintain its 'Mojo' and that a new Steve Jobs (or really several new Steve Jobs) will appear on the horizon to lead the company on to even greater glory? Probably fairly low. I fully expect Apple will still be in business in 100 years, but I doubt it will still be on top. There are too many ways that unforeseen tech market shifts can rapidly erode the base of even such a great company as Apple.
Similarly, look at other large tech companies like Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM), which all suffer from the same systemic problems: It's really, really hard to predict which way technology will go, and to create products and services that consistently win. All it takes is one major miscalculation to land on the dust heap of technology - just look at Gateway or Palm.
Banks should be long-term stable bets, except that they have a nasty habit of being acquired or going under at the worst moments. Wells Fargo (NYSE:WFC) is today the largest commercial bank, and arguably a great company (I once worked for Wells), but Wall Fargo is really just the brand that Norwest Corporation kept after the two banks merged in 1998. I expect Wells Fargo and JPMorgan Chase (NYSE:JPM) will likely survive the next 100 years, but commercial banking is too competitive and commoditized to sustain the kind of growth needed to get to the top of the market cap heap.
Energy companies like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) have had great runs for quite a long time, but I seriously hope that in 100 years we will have far better fuel alternatives that don't involve drilling for scarce natural resources. Big oil companies will do everything possible to resist change, but in the final analysis, their days are surely numbered. If my great-grandchildren are still filling up their cars at the pump with gasoline in 2114, I promise to come back to haunt them!
The list of the other 20 largest companies in the US today includes Berkshire Hathaway (NYSE:BRK.A), Johnson & Johnson (NYSE:JNJ), GE (NYSE:GE), Wal-Mart (NYSE:WMT), Procter & Gamble (NYSE:PG), Verizon (NYSE:VZ), Pfizer (NYSE:PFE), AT&T (NYSE:T), Coca-Cola (NYSE:KO) and Merck (NYSE:MRK). They are all solid companies, for sure, but I can find compelling reasons why I don't expect any of them to be either the largest or even one of the largest companies in 100 years. Berkshire Hathaway without Warren Buffett will struggle to be more than a large holding company. Pfizer and Merck are in the same boat as the tech companies - innovating and creating the next blockbuster drug is just as hard as creating the next iPad 7 or iPhone 12. Verizon and AT&T offer services that, one can seriously hope, will be supplanted by some other great leap in technology that does not involve counting and billing minutes or data packets. GE has been a long-term growth story, and could very well continue to innovate and thrive, but it's hard to imagine GE being able to sustain growth across so many different lines of business.
All that's left of today's top 20 are Wal-Mart and Coca-Cola. Over the last few years there have been countless online retailers cutting into Wal-Mart's low cost strategy (e.g. Amazon (NASDAQ:AMZN)), and I believe it is unlikely that Wal-Mart can sustain growth against so many competitors for 100 years. Coca-Cola, on the other hand, has thrived and survived a couple of World Wars, serious economic depressions and other world turmoil, and somehow always manages to remain near the top. 100 years from now, I would not be surprised to see that people still like sugary beverages, and that Coca-Cola is still very relevant. But the largest company? It seems doubtful to me.
So here, at last, is my bold prediction: In 2114, the largest company in the US, or anywhere else on the planet for that matter, will be the Walt Disney Company (NYSE:DIS). You scoff. Disney - a cartoon company? Really? So why will Walt Disney be the one that not only survives the next 100 years but also thrives? Because, to simplify it to its investing essence, and in the ironic words of Bill Gates: 'Content Is King.'
If you have been to Disney World in Florida recently, and especially if you have not, you may be amazed to discover that a silly cartoon character created in 1928 by the name Mickey Mouse is doing pretty well for himself. What's more amazing is that Mickey does not appear to have aged at all in his 80+ years, and still draws big crowds. More importantly, Disney has been able to create worlds where characters like Mickey blend seamlessly with Disney's latest and greatest 'Elsa and Anna' characters from "Frozen," plus scores of other notables including Snow White and Cinderella. Disney has the unique ability to generate new content that has a nearly infinite shelf life. There have been a few duds, and not everything Disney touches turns to gold, although it's difficult to come up with anything recently that has not. Every one of Disney's business lines, including especially ESPN, has compelling growth projections, and Disney's content knows virtually no borders. Every company goes through ups and downs, and none is immune to the vicissitudes of life, but Disney by almost any measure is an unstoppable machine.
Since Disney went public in 1957 at a split-adjusted price of $0.0361 per share, the company's stock price has grown at a CAGR of 14.4%, approximately 4% of which is attributable to inflation. I don't believe that 14% growth, or even 10% growth, is sustainable for the next 100 years, but I do believe that Disney can generate 5% growth almost indefinitely. Remember, unlike technology companies that create products that become obsolete in a matter of months, Disney creates content that maintains value for decades and possibly centuries. Frozen 2 and Frozen 3 are probably not far down the road, and let's not forget the Star Wars franchise. Disney has the unique ability to manufacture, organize, distribute, market and spin-off nearly infinite iterations of content. Every winner will spawn new characters, themes and product tie-ins; every loser, however few those may be, will quickly be forgotten.
Let's assume Disney's stock price grows 5% for the next 100 years, a share today will be worth roughly $11,500 in 2114. Market cap in 2114 (drum roll please): $20,000 Billion or $20 Trillion, if you prefer. Even taking into account possible inflation, that's a seriously big number. No other company has such a compelling upside. No other company generates so much content with such a long shelf-life. Disney's management does not need to be exceptional, but merely good - thanks to the vision of Walt Disney himself who created a culture of fun, success and prosperity that transcends generations and cultures. The Disney product is consistently good, and every once in a while it's great. That's a winning formula.
Please print off a copy of this article on acid-free paper and keep it in a safe deposit box with your most valuable possessions to be handed down to future generations. Hopefully, if you bought the stock and keep the article, your ancestors will thank you - and me.
Disclosure: The author is long DIS. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.