1 Reason Apple Is Still My Favorite Stock I'd Hand Down to My Grandkids

There are certain stocks that many investors hold on to forever -- or at least hold on to some shares. They may sell some shares to cash out, but they typically come back to add shares on a dip, because the stock displays such dominance in its marketplace that it will keep charging higher over the long run.

One of the most preeminent forever stocks is Apple (NASDAQ: AAPL). If you look at its returns over time, it has made millionaires out of patient investors.

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Over the past 10 years, it has increased over 1,000% and averaged an annualized return of 29%. If you go back to 1980 when the computer company went public, it has averaged a 20% annual return per year, for 46 years. If you invested $1,000 at its IPO in December 1980 and reinvested the dividends, you'd have nearly $3 million right now -- and that's without any additional investment.

Apple stock is one that I think will still be a dominant player for decades to come and one to perhaps pass on to future generations. And there is one reason why -- its brand.

The brand is the thing

While the powerful Apple ecosystem, or walled garden, as its called, has been a powerful driver for Apple, it is impossible to know how long that will stand up to regulatory and other pressures.

The walled garden is a metaphor for the ecosystem that Apple has created, with the interoperability of its products, the incompatibility of competing products, the ability to lock in users with multiple devices, and the control it gives Apple over its designs and technology, among other benefits.

There have been some efforts, particularly in Europe, to lower the garden walls, as it were, and make its apps and technology more interoperable with other non-Apple devices. Can Apple maintain that advantage for years or decades to come? It's impossible to say, but it would be challenging.

What Apple has been able to maintain is fierce brand loyalty, and that has helped it walled garden model thrive.

96% loyalty

A recent brand loyalty survey published this month found that 96.4% of iPhone users plan to upgrade and buy another iPhone -- that's up from 91% five years ago. That's 10 percentage points higher than Android loyalty ratings.

Another recent survey revealed that iPhone had a 92% customer retention rate, which is higher than that of its competitors. Further, its net promoter score (NPS), which measures customer loyalty and satisfaction, is 61, which is higher than the tech industry average and considered excellent.

There are a lot of factors that go into that brand loyalty, including quality, convenience, and service, among others. So Apple must strive to keep its customers happy, which it has successfully done over the years.

So, ultimately, even if the wall comes down, the Apple brand is still there and will drive customers to Apple whether its for iPhones, its other services, or some new business we haven't even seen yet. And it will keep investors buying and holding Apple stock for years to come.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.