My Forever Portfolio: 3 Undervalued Stocks to Buy Now and Hold Forever

Diversification is a key concept of Foolish investing. These days, The Fool suggests holding at least 50 different stocks across various sectors, or achieving a similar effect through index funds.

I'm taking a hybrid approach. As of Aug. 25, my portfolio holds 56 stocks, cryptocurrencies, and exchange-traded funds (ETFs).

The holdings aren't equal, though. Some are smaller, tentative bets. One fund is simply a higher-yielding alternative to holding cash in my brokerage account. Most are strong convictions with long ownership histories, but I hesitate to buy more in this market.

Image source: Getty Images.

But you're here to see the stocks I'd recommend buying right now for the long haul. The ones combining robust business models with dominant market positions -- and affordable valuations. I do have a handful of those.

Read on to see why I'm tempted to buy more of Duolingo (NASDAQ: DUOL), Netflix (NASDAQ: NFLX), and International Business Machines (NYSE: IBM).

Netflix at a discount? Yes, please.

Netflix is my biggest winner with a 6,794% return on the shares I picked up during the Qwikster panic of 2011.

The media-streaming pioneer basically owns the digital video industry it popularized. Trailing revenues are $48.8 billion, up 45% from fiscal year 2023. Over the same period, free cash flow rose 61% to $11.1 billion. I never really know what this innovator will do next, but I'm keeping a close eye on Netflix's video games and the fledgling Netflix House chain of real-world entertainment centers.

And I'm serious about the "undervalued" angle. Wall Street has been shunning this stock since the summer of 2025, when the first rumors of a Warner Bros. Discovery (NASDAQ: WBD) buyout surfaced. The rumors turned out to be true, and then Netflix backed down from an expensive bidding war. The stock is still down 32% over the last year, trading at a very reasonable 21.6 times forward earnings projections.

IBM's secret weapon is patience

IBM's stock has traded sideways over the last year and underperformed the S&P 500 (SNPINDEX: ^GSPC) since I bought my first shares in the spring of 2015.

But the 11-year gains nearly triple from 53% to 142% if you look at total returns instead. Big Blue is fully committed to its dividend policy, with a 2.9% annual yield more than doubling the S&P 500's 1.1% yield. Meanwhile, the company is a leader in quantum computing technology and a heavyweight in business-class AI tools.

Trading at just 17.8 times forward earnings and 16 times trailing free cash flow, IBM is an AI-powered cash machine hiding in plain sight.

Duolingo is teaching me Spanish and investing

I've owned Duolingo stock since shortly after the IPO in July 2021, but my daily streak of taking language lessons (or chess, more recently) goes back to June 2016. I've seen the service evolve from ho-hum rote repetition to deeply engaging mini games and chatbot-driven video calls.

Duolingo aims to "develop the best education in the world and make it universally available." That mission statement is repeated on the first page of every earnings report, filling the page. I find that enthusiasm as inspiring as the statement itself.

I want to own a small part of that vision, and the business is in great shape. The Q2 2026 report showed 58.7 million daily active users, $299 million in top-line revenue, and $78.6 million of free cash flow.

Yet Duolingo's stock is down 55% in 52 weeks and trades for 16.7 times free cash flow. That's a long-term bargain in my book.

Anders Bylund has positions in Duolingo, International Business Machines, and Netflix. The Motley Fool has positions in and recommends Duolingo, International Business Machines, Netflix, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.