How to Pick Stocks for the Long Run

Some things never change. And some things seem to change all the time.

I I had recently watched a funny video about different children’s reactions to the first ever iPod (a portable MP3 music player in case anyone doesn’t remember!) that was launched by Apple Inc in 2001.

The children were all younger than the original iPod, which made for a few amusing moments. One little girl even remarked that the original iPod was so old that dinosaurs were alive when it was around.

Humor aside, the short clip reminded me about how much electronic devices have changed since 2001 – it was unthinkable to the children that the original iPod had no internet connection and a touch screen, features which are now regular staples for the young generation.

The short clip is also a good reminder of how hard it can be to invest in companies which are subjected to massive change all the time.

The appeal of lack of change

Yet, it’s important to note that we do not necessarily have to invest in fast changing things when it comes to the stock market. Here’s billionaire investing guru Warren Buffett on the topic:

“Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it’s lack of change that appeals to me. I don’t think it is going to be hurt by the Internet. That’s the kind of business I like.

Buffett’s favourite companies for investment often rely on things that do not change as much even with the passage of time and technology. As such, he does not have to worry about what new gizmo will capture the hearts of children and adults alike in the far away future.

This is a valuable lesson from Buffett which even investors in Singapore can take to heart – our personal lives can be filled with things that don’t change very much and they can make for great investments too.

Curry puff maker Old Chang Kee Ltd  (SGX: 5ML) has been serving its delectable snacks (think curry puffs, fried fish balls, chicken wings, and more) since 1956. Elsewhere, BreadTalk Group Limited (SGX: 5DA) is still serving the same pork floss bun that it made its name with since the original iPod came out.

As a result of strong profit growth, shares of Old Chang Kee and BreadTalk are up by 254% and 415% in price, respectively, since their listing dates of January 2008 and June 2003.

As is the case with Wriggley’s chewing gum, if we start with a company with a business that can last the long run, we may be one step closer to finding a company that is a suitable long-term investment candidate.

A Fool’s take

Focusing on industries or products which do not change a lot over the years is not the only way to proceed for investors looking for great long-term investments. But, it’s still one good way to look for satisfying long-term investments.

There's plenty more to talk about when it comes to long-term investing. If you'd like to do so in person, come meet David Kuo and the Fool Singapore team on August 15!

Please join us at Invest FAIR Singapore on 15 August. (Suntec Centre, Booth B-16). Come chat with us at our booth, and see our MAS-licensed Director, David Kuo, give his official SGX investor presentation.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Apple Inc.