A narcotics accusation, a cryogenic chamber and a single stock

Your workplace is stormed by well-dressed officials who grab you, throw you into a car, and take you to an interrogation centre. 

You’re part of a deeply rooted narcotics organization, they tell you—conducting its wholesale transactions in the bowels of Mexico’s Copper Canyon.

Despite being innocent, you know that somehow you’re doomed, because that slick, cool little red headed guy with the shades from CSI Miami is convinced you’re the one they’re looking for… and that you’ve killed a couple of his agents… and that you’ve slept with his girlfriend… so you’re screwed no matter what.

But one of the good-looking, 20 year old genius CSI dudes has built a cryogenic chamber set to freeze someone and automatically revive them 80 years into the future.  And he wants to test it.  Horatio (the red-headed guy) thinks this sounds like a good idea—because he figures that your chances of revival will be about as good as Walt Disney’s, and nobody really expects Walt to walk again.

“Hey!” you protest, “Even if this works, my family will be gone, my professional skills will be redundant in 2090, and I’ll have no way of making a living.”

Horatio leans forward.  Slowly taking off his shades he says, “One stock.  We’ll liquidate your bank accounts,” he smirks, “and put your money into one stock.  If it goes bankrupt in the next 80 years, too bad.  But if it makes even 8% a year for the next 80 years you’ll be rich if you survive.  So what’s it going to be?”

???

If you’ve read this so far, perhaps you could name the stock you’d choose.  If this little chat gets around, we could all learn quite a bit from each other.

To see my”One Stock” and reasons, and to add your choice with a short explanation, please use the ‘comment‘ link.





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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26 Responses

  1. Let me be the first to start:

    Coca cola.

    A strong predictable grower. In every three year period I can find, historically, it has increased its net income. The company makes 5X what it made in 1989. If an idiot ends up running it, it will continue to make more money (they have had questionable recent leaders, but have continued to grow profits). They don’t depend on smart, new products (like a tech company) and they don’t have to establish new drug patents (like pharma companies), they’re not capital intensive (like airlines, telecommunication businesses etc) because making the same sweet syrup doesn’t take any research and development costs. They have low debt levels, more customers than any company I can think of (more customers equals more sources of revenue), they don’t have profit squeezes (like computer businesses) because they can increase the price of what they sell each year. They make high profits with very little relative capital, they establish brand name followers (is it addictive?) and China and India are just getting started in their consumption. And if the world turns healthy in 50 years, Coke will serve it with other products, with efficiency, with advertising ability beyond the scope of any newcomer, and with deep pockets.

  2. Jeff howe says:

    proctor and gamble for the same reasons above, product line is a little more diversified, this may hinder profits but could be a little safer.

  3. Jeff,

    I think you're absolutely right about P&G. It would be a great post-freeze choice. More than half of its revenues are derived from overseas sales as well–so it doesn't have to rely on the future of the U.S. economy. Coca Cola's international sales amount to more than 70% of their revenue, so the plus for Proctor and Gamble is also another great plus for Coca Cola. Proctor and Gamble is also a bit of a sleeper itself, in that nobody really thinks of it as a sexy stock. This keeps its price from getting too stratospheric during times of irrational exuberance–allowing for a greater overall power of reinvested dividends during our slumber, which increases overall profits (according to Jeremy Siegel's research) far greater than high growth companies with low dividend yields.

    If you have an alternative choice or a rebutal against Coke and P&G, I'd love to hear it.

  4. Keith says:

    Berkshire Hathaway. With the diverse range of companies/assets that they own, they will no doubt be viable and productive no matter who is at the helm.

  5. I agree. But I'd be reluctant to bank 80 years on it because an idiot couldn't run Berkshire. And I think that you need to be able to put a fool at the helm and ensure that it would still thrive. Berkshire Hathaway, as an insurance company, could be a quickly sinking Titanic if it's underwriting policies get sloppy. Look at GEICO in the early 1970s. If they write sloppy insurance policies, and they're required to make huge payouts, they might have to sell those fine businesses that Buffett spend most of his working lifetime to accumulate. This is why I, personally, couldn't go to sleep on Berkshire. That said, you have just named my favorite company and my largest personal holding.

  6. Richard says:

    First off, I would NEVER put more than about 10% of my portfolio in individual stocks. But, for the purpose of this imaginary scenario, I would choose a stock that manufactured a product which was: [1] well known, [2] room for growth, [3] available everywhere, and [4] fairly cheap to purchase. For those reasons, I'd probably choose some sort of a drink – either a soft drink or beer. Therefore, my choices would be something along the lines of Coca-Cola/Pepsi or Carlsbad/Heineken. I'd have to do more research on the exact company, but you get the general idea.

  7. Richard,

    I think you're right; the beer business is another great option if you could find the right company: one with high margins, long term loyalty, high returns on capital– and people drink during good times and bad. I used to own Anheuser Busch before Inbev bought it. And if Horatio only gave me a one stock option, I think a great beer company could suffice. I'd love to hear which beer company you'd buy and why.

  8. Jimbo says:

    Yo! I love CSI and the clever look of Haratio!! Here is a lay person's stab at Andrew's hypothetical.. with absolutely no research and very little stockmarket knowledge. Off the top of my head I would say a company like General Electric (GE) is a company to put your chips on in this scenario because of it's very diversified companies/products around the world. This company will be around in 80 years and thriving.

    As for Coca Cola.. hmm.. I am hoping the beginning of the end is coming for the sugary drink company from Atlanta. The American people are starting to get clued into the fact that drinking copious amounts of carbonated sugar water over long periods of time creates obesity (especially in children), and diabetes. As the health care debate rages on.. this in one company that really shouldn't be missed! 🙂

  9. Jimbo,

    If I'm stuck in that cryogenic chamber, I'll just have to hope that the Chinese and the Indians take to Coke if the Americans give up their beverage of choice. In the Coca Cola annual report, it suggests that the average American drinks more than 400 Coca Cola product drinks a year: that's more than one a day. But there are hundreds of drinks affiliated with Coke worldwide (beyond Coca Cola itself), so I'm pegging my hopes on Minute Maid and Dasani, to name a couple that could salvage earnings if Texas decides to slim down.

  10. Jimbo says:

    Andrew, I fully realize that Coca Cola has a stable of sugary drinks under various names and folks around the world gobble them down. Will Texas begin to slim down? Not in any statistically worthy amounts in the forseable future. There has however been talk of a soda tax being levied in the USA. Whether that kicks in, or has any measurable effects only time will tell. If this health care debate continues to rage on in the USA, and sugary drinks somehow get negatively labeled like many foods got labeled with 'Transfat' a few years ago, things go South very quickly for the sugary drink industry. I guess companies like Coca Cola continually bank on the fact that Americans (and people in the world in general) don't actually read the labels of food or drink, or they are so uneducated they can't decipher what the ingredients are, or how they negatively effect them.

    My long term bet still goes to a company like GE that makes a plethora 'things' that often make other 'things' in a variety of different markets around the world. I don't track their stock but long haul, a very diversified company should win the race..

  11. Ian McGugan says:

    Fascinating question. My first reaction—and this may say more about me than the question—would be to to cheat. I would attempt to pick an ETF, like the Vanguard Total World Stock ETF, that tracks the entire universe of equities. Hey, technically it is one stock. And maybe Horatio isn't up on his market minutiae.

    But I don't think that's what you want, is it? Sigh. Okay, let's say Horatio listens to my response, then gives me a rap upside the head. "One company," he growls. "You're ugly already. Don't get stupid on me too."

    All right, all right. In that case, I would be tempted to follow Andrew's lead and pick Coca-Cola. It's a low risk selection because people don't lose their taste for a favorite food. Heck, if medicine advances and I'm still alive in 80 years, my Diet Coke habit will keep Coca Cola profitable all by itself.

    My only reservation about Coke is that it may grow only modestly over the next 80 years. That's no knock on the company. It's just a reflection of global population. Coke's profits are ultimately constrained by how many people there are in the world (and how many sugared drinks each can quaff in a day).

    Coke received an enormous boost over the past 20 years from the collapse of the Iron Curtain and the opening up of China. Both yielded immense new markets of hundreds of millions of throats for Coke. It's difficult to see any event that would suddenly expand the company's future markets by a leap of similar magnitude. So Coke's profits may not grow as much over the next 80 years as they have over the past 20.

    Of course, if I'm just about to be pickled and flash frozen for eight decades, and I'm most concerned about the safety of my money, what's wrong with a bit of slow growth? Coke's a near certain pick to be around in 80 years and still profitable, assuming war or pandemic doesn't obliterate us all. So it's a great conservative choice.

    Maybe there's a bigger question here, though. We all know that people today are far, far richer than their forebears in 1929. If historic trends continue, people in 2090 will be four to five times richer than we are today. So when I wake up in 2090, I will probably be able to live just as well as I do now even if I wind up making only whatever passes for the minimum wage in eight decades.

    Given the high probability of future prosperity, maybe I shouldn't play it safe. Maybe I should roll the dice and choose a smaller company with more room to grow than Coca Cola. If my pick pans out, I'll be rich as Buffett when I wake up. And if my pick goes kaput? No big deal. I'll still make out okay because of the general rise in living standards.

    If I did decide to be gamble, my pick would be Equifax, the credit bureau. Its business depends on a network of relationships with banks and retailers and would be enormously difficult for a new entrant to copy or displace. Plus, I think US-style consumerism will cover the globe by 2090 and credit reports and credit scores will be just even more important they are now. So while the rest of the world goes into hock, and Equifax's business keeps expanding, my frozen carcass will grow rich.

    As we like to say inside the cryogenics chamber: man, that's cold.

  12. Tico Oms says:

    VT is a global equity index fund run by Vanguard. Current allocations: North America 44.6%, Europe 28.3%, Pacific 14.1%, Emerging 13%. This is the one I would buy.

    If possible, the best product would be something like this that also changed its allocations over time. For example, as I came within thirty years of defrost, a international bond component would be introduced and slowly increased so that it would comprise over half of the fund in eighty years.

    My second choice would be to ask Horatio to let me call Jim Cramer. I am sure he has some great ideas. (Actually, it is more likely that Cramer is the head of the global narcotics gang.)

  13. Buffett-Boy says:

    Horatio knows the difference between a stock and an ETF. I saw what he did when half of Brazil wanted to kill him. You think you could get away with giving Horatio an ETF ticker symbol? What do you think he'd do to you? Plus, five minutes is long term for Cramer. He wouldn't be the guy you'd want to call.

    My pick would be a company like P&G or 3M. They have many of the same attributes mentioned by our host, but they are more diversified than Coke. And with GE's financial arm (you do know why their stock crashed so badly, right?) it always has an albatross over its head if the wrong leader did something silly with derivatives or sloppy loan practices.

  14. James DL says:

    Nice red herring. Of course the answer is dependent on your projection of the future. The key is to access a growth vehicle that meets or exceeds inflation (say 2%) and exposes you to no risk AND is still accessible in 80 years! Stocks and the current market model may not exist in 80 years – but I would want to ensure that my assets do. To ensure this we need to think outside the box and not get snagged by the sole 'stock' option (ok, I'll play, if it does have to be a stock it would be Pepsi Co., critical mass, responsive to public demands, and in a sector that could expand … pun intended. Second choice: Sony) … back to broader options. Gold: while currently the 'standard' I would be surprised that it would benchmark well in 2089. Bonds: I have yet to find an 80 year bond option … maybe we could negotiate one. US Treasury Bills: Oh, a juicy projection of the USA in 80 years. Has anyone else read the history of Rome?

    Property: Ah, finally and option that has a historical precedent and the probability that an 80 year investment would reap a return that would hedge against inflation and guarantee growth. Ok, property taxes may be an issue but at least you will have a place to live when you emerge with Walt. I am sure some property investment guru out that could sharpen our property investment option.

    JDl

  15. Buffett-Boy says:

    James,

    Stocks will likely exist as long as people do. Even before we had structured stock markets, there were still "exchanges" established where people bought and sold assets. And humans –being what they are–will always be driven by assets: the best cave in the canyon, the top food production land etc.

    If I put on my Buffett-cap and live up marginally to my namesake (no boy can do a man's job, however) I would have to agree with your Pepsico stock as a super choice. The one thing we'll always need is food. And it's tough to think of a more broadly reaching "food" distributor than Coca Cola and Pepsi. What other distributors reach as far? Perhaps a better argument exists for Pepsico as a distributor than Coke, because Coke only owns a percentage of its bottlers and distributors, but regardless, they still bring "drinkable" products to the world. As for differing "tastes" over time, these companies supply where there's a demand. And they'll adapt if the demand changes for their products–and they already are adapting…always have been. For a newcomer to sweep in and remove Pepsi and Coke as the biggest worldwide "food"/"drink" distributors…well, that would take some doing. Coke quenches thirst, and Pepsi quenches thirst and "feeds"–so I'd go with your Pepsico choice over Coke.

    You're right about Gold being a lousy investment. Gold keeps pace with inflation long term, but a gold bar 200 years ago (if sold) would buy as many potatoes as a gold bar would buy today, in 2009. Buffett laughs about it when saying that people's fascination with gold would completely mystify an alien looking from above. People dig it up, stick it in a room, protect it…but it provides no post-inflation gain, nor is it useful in any way–except as a cavity filler, perhaps.

    Real estate and bond choices are deviating from the game James. Horatio asked for a stock. Plus, with real estate only exceeding inflation by 1.5% per year in North America over the past 150 years, I think I'd be more in line with Ian McGugan, and suggest that you should go for something lucrative.

    But back to the stock game–sorry for diverting! Brand names are huge. And if Buffett was playing this game, I think he'd go for a business with brand name recognition, with high return on assets–consistently. And selling a product (like food or drink) that everyone would need.

    Another tech/game related business could bury Sony in a period as short as 15 years from now. So I don't think that would be a good choice. Plus, their return on assets are low, and they can't generally increase the prices of what they sell over time, and it costs them so much to remain competitive in their industry, so too much of their profits go back to R&D, which provides less for the owners. Sony has had its heyday, and it has grown tremendously, but despite that growth, you would have made more money investing in cigarettes since 1980, than with Sony. Not that I recommend investing in that kind of sin, but it's testimony to how poor tech business can be. Despite Philip Morris' recent 60% drop in stock price, and despite all the lawsuits it has had to pay, and despite the taxes on its products, shares in Philip Morris (now called Altria) would have beaten Sony as an investment, over the past 29 years. With such a lousy past, I doubt they'd have a rosy future:

    http://moneycentral.msn.com/investor/charts/chart

    OK–I'd love to hear a case against Pepsico, not Altria. Buffett-boy, I'll admit, is no Buffett. But I have an open mind for someone who can push me off Pepsico.

  16. Buffett-boy,

    You obviously know your Buffett tenets very well. I'm impressed. But at the same time (if you don't mind me teasing you a bit) your ideas aren't very concrete. It sounds like you're switching from Proctor and Gamble and 3M, on to Pepsico. And I think you have James to thank for Pepsico. You also supported Coke in there as well, but what about your previous picks? Aren't they better than Pepsico or Coke? Why would we want to push you off Pepsico, (which you sportingly challenged us to do) when your initial picks were P&G and 3M, not Pepsico. Perhaps you wouldn't have given Pepsico as your choice to Horatio unless James was in the room with you.

    James mentioned Sony as a number two choice, and you may have been right in your assessment of Sony (only 80 years will tell) but this wasn't James' first pick. That's like giving the guy a tough time for marrying a girl he chose not to marry. Nobody really marries their number two pick. I don't think they do anyway. So Buffett-Boy, Horatio is giving you one pick to hold for 80 years. What's it going to be?

  17. Kimzey says:

    One stock:

    VTSMX

    It has been VERY good to me.

    If you mean one individual stock, I made a killing on GE.

  18. John Heinzl says:

    Easy: Royal Bank of Canada.

    -More than a century of profitable growth and (generally rising) dividends

    -annualized return, including reinvested dividends, of 16.3 per cent over the past 25 years. ($1,000 would have grown to $43,000)

    -The largest of the Big Five banks, which pretty much own Canada and have a rock-solid base of retail deposits

    -Largely insulated from foreign competition

    -Borrowing and lending money never goes out of style; not vulnerable to a game-changing technology or shifting consumer tastes

    -Too big to fail, from the government's perspective

    -Will outlive all of us, all of our children, and our children's children's children. (say that three times fast).

  19. lilikindsli says:

    I want to say – thank you for this!

  20. Joe Lingle says:

    I'm gonna go with MO. Anything that is able to create addicts out of its customers can't lose. Plus, I can automatically reinvest by dividends while I'm chilling out.

  21. I used to think that Canadian banks would one day be swallowed up by the U.S. banks–that the deep pockets south of the border would eventually buy the Canadian banks. I never expected that the U.S. banks would actually become the target. In Pennsylvania and New Jersey, the most prolific banks you'll likely see are Toronto Dominion Branches. But nobody down there seems to know what "TD Bank" actually stands for. I wonder if they'd be as popular if the average American knew that it was a Canadian bank.

    I think Honda, Toyota, Mitsubishi, Nissan and Mazda should have done that. If they could have swept in incognito, pretending to be "America's most convenient car companies"–yep, that's what TD claims to be—"American's most convenient bank", then the U.S. automakers might have sorted themselves out a lot earlier. Either that, or they would have been crushed a lot earlier.

    From what I have seen, traveling in the U.S., the most loyal states to the U.S. car companies are the southern states. But if they thought Toyota was American? Now that would be interesting.

    As for the Royal Bank of Canada– which was the stock named by John Heinzl. Maybe they'll end up owning Citibank one day, and soldiering on a conquering campaign well into the next century. You never know.

  22. Bill Boutilier says:

    Our vacation is over and here is a reply to your stock question. I will go with Vevendi Universal.

  23. James DL says:

    Let me justify my Sony choice as a viable stock option for the related scenario. I appreciate the issues to the tech segment that ‘Buffet Boy” has raised. However, these are historical issues – we are forecasting value (and existence), not to mention possible profitability through 2089. The Sony response was actually a choice based on an analysis of industry sectors, not the performance of a sole stock. I think Andrew’s question is a valuable one, not necessarily for the singular response of the identified stock, but to uncover the methodology we would utilize when making our choice … allowing, of course, for the added pressures of sitting in an interrogation room preparing to be frozen.

    While the final response will be a single stock, I would suggest that the path to that decision would be largely based on an analysis and crystal ball gazing of industry sectors. In the past 10 years ‘Household and Personal Products’ with companies such as Proctor and Gamble and Kimberly-Clark, have led the industry growth charts with a median ROE (return on equity) of 22.7%. Pharmaceuticals, Tobacco, and Food Consumer Products feature as 2, 3, and 4, with median ROEs of 22.3%, 21.6%, and 19.6% respectively. (PepsiCo is the leader in the FCP industry). Buffet Boy is correct in stating that the Technology industry (Electronics / Electrical Equipment) features much lower on the list at number 19 with a 13.0% ROE. (Sony has not even done this well over the same time period). However, Sony is much more than an electronics company. In the past 5 years it has expanded its audio, video, television, information and communication, semiconductor, entertainment, and electronic component branches considerably (they have 15 separate ‘groups’ in all). Digital expertise has opened new doors for Sony and related digital companies. Will they be around in 80 years? With their new diversification I would suggest that they will be thriving in 80 years. Their CEO, Howard Stringer, has taken the company a long way from its 1946 beginnings … did I mention that Japan has a space programme … guess who has the most R&D contracts for their related digital components … that would be Sony.

  24. I enjoyed reading your thoughtful response James. Philip Fisher may have been right there with you. In his final lucid days, he joked about buying a stock he could hold for 80 years–and he was in his 80s at the time. He was a brilliant thinker, investor, and writer–author of Common Stocks and Uncommom Profits….a timeless classic. I think your analysis might have pleased him.

  25. The Rat says:

    Too funny. Love the thread's build-up and climatic ending!

    If I were to choose, I think I would choose KO. The last time I checked, I think 75% of their sales accounts for overseas markets. What's also interesting is that water will be a major commodity of the future, and coca-cola has invested in bottled water and distribution.

    Awesome thread!

  26. Andrew Hallam says:

    Rat, you're so right about the overseas market potential for Coke. And there's one thing I find interesting about the emerging markets. If I was an American capitalist, I certainly wouldn't fear China and India. As they grow wealthier, do you know what they want?

    It plays into Western hands, really. I live in South East Asia, and it's easy to notice what they aspire to have when they grow wealthier: BMWs, Starbucks coffee, Rolex watches, Tiffany jewerly. Walk down Singapore's Orchard Road, or any big city shopping street in Korea and you see what the Chinese are scrambling for as they grow rich–name brand western products. There's no underestimating the importance of name brands for Asians. We think, in North America, that we're "hung-up" on name brands. In comparison, we're not even close to the Singaporeans, Koreans, Japanese, and yes…the Chinese. They aren't going to create their own cola drinks to surpass Coke. Where's the status and name brand recognition with that?

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