10 stocks for the next 10 years

By Kiplinger's Personal Finance Magazine

When it comes to stocks, big isn't always better. But if you choose well, big companies are more likely than small ones to deliver consistent returns over the long haul. And they're far more likely to withstand the economic, political and technological shocks that can derail small companies.

Since 1926, big-company stocks, as measured by the Standard & Poor's 500 Index ($INX), have returned a bit more than 10% annualized. We here at Kiplinger put our heads together in search of 10 giants (which we defined as companies with a market value of at least $10 billion) that we think can better the market's long-term results over the next decade.

We came up with an eclectic list that contains a number of names you'd expect to see and some that may surprise you. Below are our 10 picks for the next 10 years:

Procter & Gamble

If you're a Procter & Gamble (PG, news, msgs) shareholder, it must feel nice to go to bed knowing that hundreds of millions of consumers around the world will use Gillette razors, Crest toothpaste and Head & Shoulders shampoo the next morning. People need to shave, bathe and brush their teeth in any economy, and P&G's brands are so powerful that the company can pass on price increases in raw materials to its loyal customers.

This consistency has allowed P&G to compound earnings by 10% a year over the past 10 years. Wall Street projects a similar result over at least the next five years.

Factor in a 2% yield and a rising dividend stream, and P&G equals an attractive 10-year holding.

Electronic Arts

"Spore," the latest game from Electronic Arts (ERTS, news, msgs), is a metaphor for the company itself. In the game, a single-celled organism evolves by eating other animals and eventually masters the universe. Electronic Arts has grown mainly by acquisition to become the biggest video-game software company; sales for the fiscal year that ends next March should top $5 billion.

Electronic Arts dominates a rapidly expanding video-game universe. Sales from consoles and software together hit $18.8 billion in 2007, a 43% increase from 2006, says NPD Group. Not even the torpid economy is likely to dent the industry's -- or Electronic Arts' -- rapid growth. Analysts expect the company's earnings to rise 21% annually over the next three to five years.

First Solar

Solar energy is as hot as the sun, and few companies are hotter than First Solar (FSLR, news, msgs).

Based in Tempe, Ariz., First Solar produces solar modules using a proprietary thin-film semiconductor technology that requires far less silicon than other production processes. The company sells the majority of its modules in Germany, which subsidizes solar energy, but First Solar has deals with utilities to build photovoltaic generating plants in California, Florida and Nevada.

First Solar's growth has been breathtaking. In 2006, when the company went public, it earned 7 cents a share on $135 million in revenue. In 2008, analysts estimate, the company will earn $3.72 per share on sales of $1.2 billion. And analysts see earnings growing 56% annually over the next few years.

The stock, which is up 13-fold from its initial public offering, is risky, but it could continue to deliver big rewards as long as oil prices stay high and governments continue to subsidize solar power.

Gilead Sciences

Gilead Sciences (GILD, news, msgs) has built a formidable franchise in drugs that treat HIV. They provide about 75% of the company's revenue, which is expected to exceed $5 billion this year. Those drugs should provide the Foster City, Calif., biotech company with robust growth in the coming decade, even as it diversifies into other promising areas, such as medicines that treat hepatitis, hypertension and influenza.

Gilead's portfolio of drugs faces little threat from generics, and the company can use its ample cash reserves ($3 billion as of midyear) to supplement its development pipeline via acquisitions and partnerships.

Google

Google (GOOG, news, msgs) is the single most visited Web site in the U.S., a cultural phenomenon and a verb. And in just four years as a publicly traded company, it has achieved the status of Internet behemoth, with a market value in the neighborhood of $150 billion.

As a business, Google is an advertising company. Pay-per-click search-engine advertising represents 90% of revenue, and all advertising taken together brings in 99%.

Enormous profits over the past five years have endowed Google with the cash to pursue such lofty goals as projecting interactive satellite images of the cosmos onto your computer screen and digitizing all books ever written.

Yet Google's strength in its basic ad business is reason enough to love it. As more ad dollars shift from old media to new media, Google's scale and formidable brain trust give it the strength to remain the market leader. And despite the company's immensity, analysts expect earnings to grow at a hefty 30% annual pace over the next few years. Ten years? Sure.

Continued: More big names to consider

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