2 Stocks I Plan to Hold for the Next 20 Years

The S&P 500 is hovering near its record high, and the benchmark index looks historically expensive at 32 times earnings. However, many investors are still rushing into this frothy market, expecting the market's top-performing stocks to keep rising.

While many of these stocks might head higher over the long term, they could pull back sharply before that happens. That downturn could shake many bullish investors out of the market. As Peter Lynch once said, "Everyone is a long-term investor until the market goes down."

Image source: Getty Images.

As someone who started investing right before the Great Recession, I know that feeling well. But today, I'm hopefully better at tuning out the near-term noise and staying focused on my longer-term goals. Here are two of my top stocks I'd be willing to hold and forget for the next 20 years: Energy Transfer (NYSE: ET) and Amazon (NASDAQ: AMZN).

Energy Transfer

I started to accumulate shares of Energy Transfer (NYSE: ET) last April. Today, the stock accounts for about 4% of my portfolio, and I don't plan on selling that stake anytime soon.

Three things drew me to Energy Transfer. First, it's a major midstream company that transports natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), crude oil, and other refined products through over 140,000 miles of pipeline across 44 states.

By charging upstream and downstream companies "tolls" to use that infrastructure, it's well-insulated from volatile oil prices and generates plenty of cash to cover its distributions. It currently pays a forward yield of 6.6%, and analysts expect its earnings per unit (EPU) to rise 17% to $1.41 this year, easily covering its forward distribution of $1.34 per unit.

Second, it's a master limited partnership (MLP) that blends a return of capital with its own profits to pay tax-efficient distributions. You'll need to report those distributions on a separate K-1 form every year, but you can also leverage the MLP's losses to reduce your own taxable income. Some investors might think that's a cumbersome extra step, but I think it's worth the extra time. Lastly, Energy Transfer looks cheap at 14 times this year's EPU. Its low valuation and high yield should limit its downside even if the broader market pulls back.

Energy Transfer certainly isn't an exciting investment, but it's a stock I'd be comfortable holding over the next 20 years. I'm simply reinvesting its distributions to compound its returns right now, but it would also be a great way to generate passive income when I retire.

Amazon

I started to invest in Amazon in 2016, and the stock now accounts for 11% of my portfolio. It might seem prudent to trim that stake (especially after a 765% gain), but I don't plan to sell any shares for at least a few more decades. I'm still bullish on Amazon for three simple reasons.

First, it owns the world's largest cloud infrastructure platform, Amazon Web Services (AWS). AWS grew rapidly as more organizations relied on the cloud for data storage and computing power, and it's still expanding as more companies migrate their AI applications to its platform.

By expanding Bedrock (which enables companies to access multiple cloud-based AI models) and rolling out more agentic AI tools, custom AI chips, and AI-driven e-commerce tools, Amazon is evolving into a vertically integrated leader in the booming AI market. AWS also operates at higher margins than Amazon's retail business -- so the growth of the former can subsidize the latter's expansion through discounts, perks, and other loss-leader strategies.

Second, Amazon's advertising business, which sells promoted listings and integrated ads across its platforms, is evolving into a secondary profit engine alongside AWS. That expansion will give its e-commerce business even more room to expand its lower-margin ecosystem.

Lastly, Amazon will remain the largest e-commerce company for the foreseeable future. It will continue leveraging its scale to enter new countries and attract more users into its Prime ecosystem, which has already locked in over 250 million subscribers worldwide. So while its stock isn't cheap right now at 31 times forward earnings, I'm still confident in its ability to expand and evolve over the next few decades.

Leo Sun has positions in Amazon and Energy Transfer. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.