Long-Term Analyst: Don’t Play the “Fool’s Game” of Timing the Market and Buy These 10 Stocks

In this article, we will discuss some of the best stocks to buy according to Dave Smith, Chief Investment Officer at investment management company Rockland Trust. If you want to explore similar stocks, you can also look at Long-Term Analyst: Buy These 5 Stocks.

David Smith has been in the financial services industry for over two decades. Mr. Smith has served as the senior vice president and portfolio manager at Mellon Growth Advisors. He has also worked as a senior portfolio manager at State Street Global Advisors. David Smith has an undergraduate degree in economics from the University of Massachusetts Amherst, and a Master’s degree in finance from Suffolk University’s Sawyer Business School. David Smith is also a chartered financial analyst and a member of the CFA Institute and the Boston Security Analysts Society. Since December 2003, Mr. Smith is serving as the Chief Investment Officer at Rockland Trust Co, an investment management company. As of June 30, David Smith oversees a portfolio that contains $1.44 billion in 13F securities.

Photo by Chris Liverani on Unsplash

David Smith appeared on CNBC’s Power Lunch, where the long-term analyst talked about some of Rockland Trust’s long-term positions and what he liked about those companies’ growth stories. David Smith said “time in the market is way more important than timing the market, in fact, timing the market is a fool’s game”.

Smith said:

“We’re big believers that time in the market is way more important than timing the market, in fact, timing the market is a fool’s game. At the end of the day, we’re confident that two or three years out from now this will look like a great time to have bought and just stick to the strategy of staying fully invested all the time…

Veeva is an interesting company and a technology play. It operates a CRM solution and it sits on top of the salesforce platform. It’s focused on the industry and they’ve built out the CRM tool specifically for the healthcare industry, and they’ve garnered a substantial amount of share there… We think there’s an opportunity for them to expand in the healthcare vertical and do more things in the R&D side of health care and there’s lots of potential for continued growth here…

The stock (Berkshire Hathaway) is discounting a challenging economic environment already… Warren has been a great investor for a long time and the businesses that he owns, even though they are cyclical, will likely grow over time. The sum of the parts valuation will continue to grow over time, so not only do you have the opportunity to close the valuation gap, but we think ultimately businesses will grow in value over time as well. So there are a couple of levers here that make us really excited about Berkshire Hathaway…

Linde is a pretty neat company and it’s a pretty consistent grower that has a strong ability to pass through the cost increases that it has on its raw materials side to the end customer. Fortunately for them, for many of their customers, the amount their spending on Linde’s product, industrial gas is relatively small in the context of the overall business from many of their clients. So they have this uncanny ability to pass through price increases, which ultimately in this kind of environment is really really important…We are confident in the future that they will be able to chug away low double-digits earnings growth and that’s the kind of companies we like, because they’re compounders, and that’s what drives value over time.”

Some of the top “compounders” that have the potential to “drive value over time” that Rockland Trust is heavily invested in include Microsoft Corporation (NASDAQ:MSFT), PepsiCo, Inc. (NYSE:PEP), and Merck & Co., Inc. (NYSE:MRK). We have discussed these long-term plays among others in detail in this article. Continue reading to explore companies that can be fruitful long-term plays.

Our Methodology

In this article, we have listed companies that have long-term growth potential according to Rockland Trust’s CIO, David Smith. In addition to the stocks Mr. Smith mentioned during his appearance on CNBC’s Power Lunch, we also reviewed Rockland Trust’s second-quarter 2022 13F portfolio and listed companies that have established business models and long-term growth stories. We have arranged our stock picks in increasing order of stake value of Rockland Trust.

10. Veeva Systems Inc. (NYSE:VEEV)

Rockland Trust’s Stake Value: $12,160,000 

Percentage of Rockland Trust’s 13F Portfolio: 0.84%

Number of Hedge Fund Holders: 45

Veeva Systems Inc. (NYSE:VEEV) is a software company that develops cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. As of June 30, Rockland Trust’s stake in Veeva Systems Inc. (NYSE:VEEV) is valued at $12.16 million and the investment covers 0.84% of the fund’s investment portfolio. Dave Smith likes Veeva Systems Inc. (NYSE:VEEV) because of the company’s healthcare-focused CRM solution and sees significant potential for the company to capture more market share in the health-tech industry.

On August 31, Veeva Systems Inc. (NYSE:VEEV) announced earnings for the second quarter of fiscal 2023. The company reported earnings per share of $1.03 and outperformed EPS estimates by $0.02. The company’s revenue for the quarter amounted to $534.22 million, up 17.26% year over year, and beat estimates by $3.52 million.

On September 1, Raymond James analyst Brian Peterson raised his price target on Veeva Systems Inc. (NYSE:VEEV) to $225 from $205 and reiterated a buy-side Outperform rating on the shares.

At the end of the second quarter of 2022, 45 hedge funds were bullish on Veeva Systems, Inc. (NYSE:VEEV) and held stakes worth $1.0 billion. This is compared to 41 positions in the previous quarter with stakes worth $922.31 million. The hedge fund sentiment for the stock is positive.

9. Linde plc (NYSE:LIN)

Rockland Trust’s Stake Value: $17,872,000

Percentage of Rockland Trust’s 13F Portfolio: 1.23%

Number of Hedge Fund Holders: 48

Linde plc (NYSE:LIN) is a European manufacturer and provider of industrial gases. The company operates in North and South America, Europe, the Middle East, Africa, and the Asia Pacific. At the close of Q2 2022, 48 hedge funds were long Linde plc (NYSE:LIN) and held stakes worth $3.25 billion. in the company. Dave Smith noted that Linde plc (NYSE:LIN) has the ability to pass on higher input costs to end-consumers and he thinks this ability is important in the current macro environment. Mr. Smith thinks Linde plc (NYSE:LIN) is among the few “compounders” that can “drive value over time”, and sees the company enjoying a “low double-digits earnings growth” in the future.

On July 25, Linde plc (NYSE:LIN) declared a quarterly cash dividend of $1.17 per share, payable on September 16 to shareholders of record on September 2. As of September 1, Linde plc (NYSE:LIN) has a forward dividend yield of 1.64% and trailing twelve-month free cash flows of $6.86 billion.

On July 28, Linde plc (NYSE:LIN) delivered market-beating earnings for the fiscal second quarter of 2022. The company reported earnings per share of $3.10 and beat estimates by $0.14. The company generated a revenue of $8.46 billion, up 11.51% year over year, and beat estimates by $66.23 million. The company also raised its full-year adjusted EPS guidance to a range between $11.73 and $11.93 per share, up 12% from its prior guidance range of between $11.65 and $11.90 per share.

On August 10, Stifel analyst Andreas Heine upgraded Linde plc (NYSE:LIN) to Buy from Hold and raised his price target on the stock to EUR 349 from EUR 257. The analyst sees Linde plc (NYSE:LIN) possessing the ability to grow its earnings even in a macroeconomic slowdown.

As of June 30, Rockland Trust’s stake in Linde plc (NYSE:LIN) is valued at $17.87 million, which covers 1.23% of the institution’s 13F portfolio.

Here is what investment management firm, ClearBridge Investments, had to say about Linde plc (NYSE:LIN) in its second-quarter 2022 investor letter:

“The replacement of demand for Russian gas with green hydrogen positions Linde (NYSE:LIN) well. Green hydrogen, made by using renewable energy to split water into its basic elements, hydrogen and oxygen, and subsequently cleanly burn the hydrogen as fuel, is seen as key to lowering emissions in hard-to-decarbonize industries such as steel and cement, as well as transport. In 2021 Linde announced a long-term agreement to provide European semiconductor maker Infineon (OTCQX:IFNNY) with onsite production and storage of green hydrogen for the company’s site in Villach, Austria. Securing a clean, domestic source of energy for semiconductor manufacturing appears strategic today amid heightened concerns of reliable supply from Taiwan.”

Other cash-rich companies that have impressive long-term growth stories and pricing power include Microsoft Corporation (NASDAQ:MSFT), PepsiCo, Inc. (NYSE:PEP), and Merck & Co., Inc. (NYSE:MRK).

8. Apple Inc. (NASDAQ:AAPL)

Rockland Trust’s Stake Value: 1.41%

Percentage of Rockland Trust’s 13F Portfolio: $20,420,000  

Number of Hedge Fund Holders: 128

On August 17, Bloomberg reported that Apple Inc. (NASDAQ:AAPL) will be launching the iPhone 14 and iPhone 14 Pro on September 7. Wall Street analysts have turned bullish on Apple Inc. (NASDAQ:AAPL) ahead of the launch of its industry-leading smartphone. On August 29, Wedbush analyst Daniel Ives reiterated his buy-side Outperform rating and $220 price target on Apple Inc. (NASDAQ:AAPL). The analyst expects an initial order of 90 million units of the company’s new iPhone 14 series.

Apple Inc. (NASDAQ:AAPL) is among the top holdings of Rockland Trust. The company also possesses pricing power over peers, due to its industry-leading position in the smartphones and PCs market. As of September 1, Apple Inc. (NASDAQ:AAPL) has gained 2.79% over the past twelve months and is offering a forward dividend yield of 0.58%, which the company backs with free cash flows of $107.58 billion. The company has been growing its dividends for the past 8 years and has a 5-year dividend CAGR of 8.45%.

On July 28, Apple Inc. (NASDAQ:AAPL) announced earnings for the third quarter of fiscal 2022. The company reported earnings per share of $1.20 and outperformed EPS estimates by $0.04. The company generated a revenue of $82.96 billion for the quarter. The company’s leadership believes that supply constraints for the computer behemoth will ease in the latter half of 2022 and views its fiscal fourth quarter gross margins to range in between 41.5% and 42.5%, with operating expenditures ranging between $12.9 billion and $15.1 billion.

At the close of Q2 2022, 128 hedge funds held stakes in Apple Inc. (NASDAQ:AAPL) worth $182 billion. Of these, Rockland Trust’s stakes were valued at $20.42 million, which covers 1.41% of the fund’s 13F portfolio.

Here is what Wedgewood Partners had to say about Apple Inc. (NASDAQ:AAPL) in its second-quarter 2022 investor letter:

“Apple Inc. (NASDAQ:AAPL) grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple Inc. (NASDAQ:AAPL) is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”

7. Johnson & Johnson (NYSE:JNJ)

Rockland Trust’s Stake Value: 1.5%

Percentage of Rockland Trust’s 13F Portfolio: $21,723,000  

Number of Hedge Fund Holders: 83

On July 19, leading healthcare giant Johnson & Johnson (NYSE:JNJ) announced earnings for the second quarter of fiscal 2022. The company generated a revenue of $24.02 billion, up 3.04% year over year, and outperformed Wall Street consensus by $195.47 million. The company reported earnings per share of $2.59 and beat expectations by $0.04. As of June 30, Rockland Trust’s stakes are valued at $21.72 million, which covers 1.5% of the fund’s 13F portfolio.

Johnson & Johnson (NYSE:JNJ) has a rich dividend history. The company has been growing its dividends for roughly 60 years, and has a 5-year dividend growth rate of 5.95%, with an annual payout ratio of 43.14%. As of September 1, Johnson & Johnson (NYSE:JNJ) is offering a forward dividend yield of 2.80% and has free cash flows of $19.95 billion.

Wall Street is bullish on Johnson & Johnson (NYSE:JNJ). On July 20, Citi analyst Joanne Wuensch revised her price target on Johnson & Johnson (NYSE:JNJ) to $201 from $205 and maintained a Buy rating on the shares. This July, SVB Securities analyst David Risinger revised his price target on Johnson & Johnson (NYSE:JNJ) to $194 from $200 and reiterated a buy-side Outperform rating on the shares.

At the end of the second quarter of 2022, 83 hedge funds were eager on Johnson & Johnson (NYSE:JNJ) and held stakes worth $6.76 billion.

Here is what asset management firm, Mayar Capital, had to say about Johnson & Johson (NYSE:JNJ) in its second-quarter 2022 investor letter:

“J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.

Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.

To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…” (Click here to see the full text)

6. Berkshire Hathaway Inc. (NYSE:BRK-A)

Rockland Trust’s Stake Value: $26,760,000 

Percentage of Rockland Trust’s 13F Portfolio: 1.85%

Number of Hedge Fund Holders: 109

Dave Smith noted that even though most of the businesses that Berkshire Hathaway Inc. (NYSE:BRK-A) owns are cyclical, i.e. transportation, power, manufacturing, home furnishings, railroads, and housing among others, they are expected to grow over the long term as he has confidence in the company’s leadership. Dave Smith thinks Berkshire Hathaway Inc. (NYSE:BRK-A) is “discounting a challenging economic environment already”, and sees a 30% upside for the stock from current levels. He sees the company’s sum-of-the-parts valuation to continue its growth in the long term. As of June 30, Rockland Trust’s stake in Berkshire Hathaway Inc. (NYSE:BRK-A) is valued at $26.76 million. The investment covers 1.85% of Rockland Trust’s 13F portfolio.

On July 13, Berkshire Hathaway Inc. (NYSE:BRK-A) disclosed, in a regulatory filing, that it has bought an additional 4.3 million shares of oil giant Occidental Petroleum Corporation (NYSE:OXY). Berkshire Hathaway Inc. (NYSE:BRK-A) now owns 19.2% of Occidental Petroleum Corporation (NYSE:OXY) and is the largest shareholder in the company. Shares of Occidental Petroleum Corporation (NYSE:OXY) have surged 172.21% over the past twelve months, as of September 1.

On August 6, Berkshire Hathaway Inc. (NYSE:BRK-A) announced earnings for the fiscal second quarter of 2022. The company generated a revenue of $76.18 billion, up 10.22% year over year, and beat estimates by $3.67 billion. The company reported earnings per share of $6,312.49 and beat expectations by $,689.87. As of September 1, Berkshire Hathaway Inc. (NYSE:BRK-A) has trailing twelve-month free cash flows of $20.77 billion.

Wall Street is bullish on Berkshire Hathaway Inc. (NYSE:BRK-A). On August 7, Keefe Bruyette analyst Meyer Shields raised his price target on Berkshire Hathaway Inc. (NYSE:BRK-A) to $535,000 from $480,000 and maintained a Market Perform rating on the shares.

At the close of Q2 2022, 109 hedge funds were long Berkshire Hathaway Inc. (NYSE:BRK-A) and held stakes worth $17.3 billion in the company. This is compared to 104 positions in the preceding quarter with stakes worth $19.06 billion.

Investment management company Diamond Hill Capital mentioned Berkshire Hathaway Inc. (NYSE:BRK-A) in its “Diamond Hill Large Cap Fund” first-quarter 2022 investor letter. Here is what the firm had to say:

“Diversified holding company Berkshire Hathaway reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”

Berkshire Hathaway Inc. (NYSE:BRK-A) is among Rockland Trust’s top 13F holdings. Other top holdings of the investment management company include Microsoft Corporation (NASDAQ:MSFT), PepsiCo, Inc. (NYSE:PEP), and Merck & Co., Inc. (NYSE:MRK).