Punch-Card Investments

forever is a heck of a long time

A Framework for Long-Term Investing

We all dream of finding the next Microsoft in its early days and holding on for decades, watching it grow into a portfolio cornerstone. But let's be honest, holding onto any stock for more than a couple of years is a challenge for most investors (myself included!). The market throws temptations and anxieties at us constantly.

So, how can we approach finding those elusive "forever" or, realistically, very long-term hold stocks? This post offers a framework and explores industries—and specific companies within them—that might fit the bill.

Start with the Punch Card Mindset

Warren Buffett popularized the "punch card" investment idea: imagine you have a card with only 20 punches, representing the total number of investments you can make in your lifetime. This forces a critical shift in perspective. You're no longer looking for the flavor of the month or the next hot trend. Instead, you're laser-focused on certainty.

The primary question becomes: How sure am I that this business will not only be bigger and better in 20 years, but that it will even exist?

This mindset steers us away from chasing the "next big thing"—the disruptor—and towards businesses that are incredibly difficult to be disrupted. If I'm parking my capital for two decades, I want the immovable wall, not the seemingly unstoppable train. In my experience, those "unstoppable trains" often find ways to derail.

A Top-Down Approach for a Long-Term Game

Normally, I advocate for bottom-up stock picking, focusing on individual company merits. However, when the goal is identifying "forever" businesses, the resilience of the industry itself becomes paramount. Over decades, industry stability matters far more than short-term catalysts or cyclical trends.

So, what kinds of industries possess the characteristics we need? I'm looking for businesses with:

1. Irreplaceable Assets: Physical infrastructure or unique locations that are practically impossible to duplicate.

2. Enduring Brands: Names that command loyalty and pricing power across generations.

3. Entrenched Critical Services: Essential functions deeply embedded in the economy with high switching costs.

I'm specifically excluding regulated utilities (due to potential profit caps) and broad conglomerates like Berkshire Hathaway (as that sidesteps the exercise of identifying resilient business types).

Here are some industries that fit the framework, along with potential stock ideas for your own research:

1. The Unshakeable Rails: Railroads

• Why: Railroad networks are vast, established, and prohibitively expensive (and politically difficult) to replicate. They are the most efficient way to move heavy, bulk goods over long distances, a need unlikely to be replaced by technology soon.

• Potential Candidates (US/Canadian Listed):

  • Union Pacific (UNP): Dominant player in the western two-thirds of the US, known for operational efficiency.

  • Canadian National Railway (CNI): Operates across Canada and into the US, offering geographic diversification.

  • Canadian Pacific Kansas City (CP): Formed via merger, creating a unique network spanning Canada, the US, and Mexico.

  • Note: BNSF, another major railroad, is owned by Berkshire Hathaway.

2. The Gatekeepers of the Sky: Airports

• Why: Prime locations near major cities are essentially impossible to duplicate. While often state-run, some private or publicly-traded entities exist. Air travel remains fundamental for long-distance passenger and cargo transport.

• Potential Candidates (US Listed, operating internationally):

  • Grupo Aeroportuario del Sureste (ASR): Operates airports primarily in Mexico and Latin America.

  • Grupo Aeroportuario del Pacífico (PAC): Another operator of airports in Mexico and the Caribbean.

  • Note: Finding pure-play, publicly listed airport operators in North America is challenging due to government ownership models.

3. The Sweet Spot: Enduring Chocolate Brands

• Why: Certain brands hold immense nostalgic and perceived quality value. While snack trends evolve, core chocolate demand remains remarkably stable.

• Potential Candidates (US Listed):

  • The Hershey Company (HSY): Iconic American brand with strong domestic market share and brand loyalty.

  • Mondelez International (MDLZ): Global giant owning brands like Cadbury, Toblerone, and Oreo, offering broad diversification.