By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel has mixed views on Microsoft and Abbott, with concerns about high valuations, patent risks, and potential regulatory headwinds. While some panelists acknowledge the companies' strong fundamentals and moats, others argue that the current multiples do not leave much room for error.
Risk: High valuations and potential multiple compression due to growth disappointments or regulatory issues.
Opportunity: Long-term compounding from durable business models and potential AI-driven growth.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Stocks that can survive and thrive for long periods -- say, beyond 20 years -- are a special breed. These companies typically display one or several of the following characteristics: innovative abilities, leadership in a major industry, a strong moat, or exciting growth potential. That's not an exhaustive list of traits such corporations can have, but they are among the most important.
To find businesses that display them, it can be helpful to start by looking at companies that have already passed the test of time. Let's look at two examples: Microsoft (NASDAQ: MSFT) and Abbott Laboratories (NYSE: ABT). Beyond the strong prospects they offer, these two well-known businesses are also excellent dividend payers worth holding on to for good.
Few companies are more popular than Microsoft. That's an important advantage in and of itself -- it means the company's brand is well known and enjoys relatively high consumer trust.
Microsoft has become synonymous with many of the services it offers. No company gets close to its share of the computer operating system market. Microsoft's productivity tools are the norm for millions of people and businesses, many of which rely on them for their day-to-day activities; that arguably grants Microsoft high switching costs, a potent competitive edge.
Still, Microsoft's OS business isn't much of a growth machine anymore. Thankfully, the company has other exciting opportunities: cloud computing and artificial intelligence (AI). Microsoft is second only to Amazon in the cloud market, though the latter has been closing in on the former.
AI is providing yet another vital boost to Microsoft's cloud business. The company also benefits from switching costs in this field. Microsoft is a leader in every field in which it operates, whether in AI, cloud computing, computer OS, or gaming.
That's excellent evidence that the company is incredibly innovative, an important reason it has performed well over the years.
Everything points to Microsoft still delivering strong financial performances and market-beating returns in the long run. Note the company's free cash flow: $70.58 billion.
A company's ability to generate strong free cash flow isn't just a sign of a robust underlying business. It also allows it to invest in more growth opportunities. Beyond those Microsoft is currently pursuing, the company will undoubtedly find more.
And here's another piece of evidence of the company's strong business: Microsoft boasts an AAA rating from Standard & Poor's. That's a higher rating than the U.S. government itself.
What about Microsoft's dividend? The company's yield isn't impressive; it's just 0.66%. However, the tech giant has increased its payouts by 168% in the past 10 years. Its cash payout ratio of 30.11% is conservative -- perhaps too conservative. Microsoft has ample room for more increases.
Dividend investors can't go wrong with Microsoft, nor can those looking for reliable corporations to invest in for good.
Developing innovative medical technologies is a surefire way to survive for a long time. In that department, there aren't many companies with a better track record than Abbott Laboratories.
The medical device giant has a long lineup of products across its cardiovascular and diabetes care segments. Abbott Laboratories' FreeStyle Libre franchise, a series of continuous glucose monitoring (CGM) systems that help diabetics track their blood glucose levels, has been the company's biggest growth driver in recent years. The company highlighted that the FreeStyle Libre is now the most successful medical device in history in terms of dollar sales.
Beyond medical devices, Abbott Laboratories' nutrition, diagnostics, and established pharmaceuticals segments grant it significant diversification. Abbott Laboratories holds patents that protect its devices from being knocked off, at least for the duration of the patent, an important competitive advantage for companies across many industries, including healthcare.
Here's another critical moat source for Abbott Laboratories: The company has successfully navigated the highly regulated healthcare sector for a long time. It knows its way around and has developed a brand name people trust. That's one reason Abbott Laboratories has performed exceptionally well.
With the world's aging population, the severely underpenetrated diabetes market -- just 1% of adults with the disease in the world have access to CGM technology -- and many other opportunities, Abbott Laboratories can still deliver superior returns.
Abbott Laboratories is also an exceptional dividend stock. It has increased its payouts for 52 consecutive years. It might not be the most exciting business, but it looks reliable enough to sustain strong returns and growing payouts for a long time.
Before you buy stock in Microsoft, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $774,281!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 15, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Abbott Laboratories, Amazon, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Valuation premiums and looming regulatory or reimbursement pressures make both stocks less certain as true forever holds than the article claims."
The article positions Microsoft and Abbott as durable compounders with defensible moats in cloud/AI and diabetes devices. Yet it glosses over MSFT's 36x forward P/E amid Azure growth deceleration and rising capex, plus ABT's exposure to Medicare reimbursement cuts and Libre patent expirations after 2025. Both companies generate strong free cash flow that supports dividend growth, but regulatory scrutiny in tech and healthcare plus potential macro slowdowns could compress multiples and slow payout increases over the next decade. Investors should weigh these second-order risks against the touted 20-year track records.
Microsoft's ecosystem lock-in and Abbott's aging-population tailwinds have repeatedly overcome similar headwinds, suggesting the current moats could still deliver above-market returns even if growth moderates.
"Both are quality compounders, but current valuations price in perfection with minimal margin of safety for a 20-year hold."
This article conflates 'proven survivor' with 'buy now.' MSFT trades at 34x forward P/E on 11% expected EPS growth—a 3x premium to historical average despite slowing cloud growth and AI monetization still unproven at scale. ABT's 52-year dividend streak is real, but the article ignores that FreeStyle Libre faces patent cliffs (key patents expire 2024-2026) and intensifying CGM competition from Dexcom and Medtronic. Both stocks are quality businesses, but quality ≠ attractive valuation. The article provides zero valuation framework—a critical omission for 'hold forever' recommendations.
MSFT's AAA rating, $70B FCF, and AI optionality genuinely do justify a premium multiple; ABT's diversification and moat are durable. If you're truly buying for 20+ years, entry price matters far less than compounding quality.
"The article conflates high-quality business models with high-quality entry points, ignoring the significant valuation risk present in current market pricing."
Microsoft and Abbott are classic 'sleep-well-at-night' picks, but the article ignores the valuation trap inherent in 'forever' stocks. Microsoft trades at roughly 35x forward earnings, pricing in flawless AI execution; any deceleration in Azure growth or regulatory antitrust headwinds in the EU/US could trigger a painful multiple contraction. Similarly, Abbott’s reliance on the FreeStyle Libre franchise creates a single-point-of-failure risk as GLP-1 weight-loss drugs potentially alter the long-term demand curve for diabetes management. While their balance sheets are fortress-like, buying these at current multiples assumes zero margin for error in an era of shifting macroeconomic policy and aggressive tech competition.
If you hold for 20+ years, entry-point valuation matters significantly less than the compounding power of dominant market moats and consistent capital allocation.
"The ‘hold forever’ thesis for MSFT and ABT ignores important rate, regulatory, and competitive risks that can erode long-term returns and should be stress-tested with more credible facts and scenarios."
The piece leans on a ‘hold forever’ thesis for MSFT and ABT, but it hand-waves credibility gaps and risks. It markets MSFT as AAA-rated by S&P (not true—MSFT is AA+), and highlights a 0.66% dividend yield as compelling income, which ignores that true total return hinges on growth and buybacks in a high-rate regime. Abbott’s moat via CGM faces competition and payer dynamics, plus regulatory/patent risks that could curb growth. The narrative also glosses over valuation risk in a still-tight market and the exposure of both names to AI/healthcare cycles that may underperform if growth slows. missing context on rate sensitivity and bear-case scenarios.
If you prize durability and cash flow, these are industry leaders with long dividend streaks and strong balance sheets; upside from AI/Cloud for MSFT and CGM adoption for ABT could far exceed fears, making the ‘hold forever’ thesis more compelling than it looks here.
"AI monetization and diversification could sustain above-market returns for MSFT and ABT despite current valuations."
Claude flags MSFT's 34x forward P/E against 11% EPS growth as excessive, yet this ignores the potential for AI services to lift long-term growth above 15% once monetization scales. The $70B free cash flow provides ample buffer for continued buybacks and dividends even amid higher capex. ABT's patent risks are real post-2025, but diversification into structural heart and nutrition reduces single-product dependency more than acknowledged. Over 20 years, compounding from these moats likely outweighs entry valuation concerns.
"Strong cash flow and diversification reduce downside risk but don't justify current multiples if growth moderates."
Grok assumes AI monetization scales to 15%+ growth, but that's precisely the unproven bet priced into 34-35x multiples. Claude's point stands: we're paying for flawless execution. The $70B FCF cushion doesn't justify valuation if growth disappoints—it just means MSFT can maintain dividends through a contraction. ABT's diversification is real, but Libre still represents ~40% of diabetes revenue; patent cliffs don't disappear because of nutrition exposure. Both arguments conflate 'fortress balance sheet' with 'attractive entry price.'
"The current valuation of these 'forever' stocks ignores significant duration risk and opportunity costs in a higher-for-longer interest rate regime."
Gemini and Grok are ignoring the macro-volatility of capital allocation in a high-rate environment. By focusing on 20-year compounding, they dismiss the opportunity cost of holding 35x P/E stocks when risk-free rates remain elevated. If MSFT's Azure growth decelerates even slightly, the 'fortress balance sheet' won't prevent a multiple compression back to 25x. We aren't just buying companies; we are buying duration, and the duration risk here is currently mispriced by the market.
"Valuation discipline remains critical: a 35x forward MSFT multiple is only defensible if AI monetization and Azure growth meet expectations; otherwise duration risk and rate shocks can drive significant multiple compression."
Gemini overextends on duration risk by treating a 35x forward multiple as forgiving. MSFT’s moat and FCF buybacks do provide cushion, but Azure deceleration or a sustained rate shock still threatens multiple compression. Diversification helps, yet the valuation implies markets are betting on flawless AI monetization. Until we see credible, scalable AI upside and a steadier macro backdrop, the 'hold forever' thesis needs a clear exit-risk framework.
The panel has mixed views on Microsoft and Abbott, with concerns about high valuations, patent risks, and potential regulatory headwinds. While some panelists acknowledge the companies' strong fundamentals and moats, others argue that the current multiples do not leave much room for error.
Long-term compounding from durable business models and potential AI-driven growth.
High valuations and potential multiple compression due to growth disappointments or regulatory issues.