Three Stocks for a Long-Term Portfolio: Linde, Zefiro Methane and SAP

Linde: Good Is Not Good Enough This Time

In the long term, investors should add stable stocks to their portfolios—ones whose businesses are well protected by so-called moats. Pricing power, few competitors, and close ties with customers, as seen at Linde, are a prime example. As a result, the stock rose steadily and solidly through the end of June. However, the half-year results released shortly thereafter did not quite resonate with otherwise optimistic investors. This was due to a series of minor disappointments, which investors saw as a reason to take profits. Yet the company's Q2 revenue still rose strongly by 9% compared to the same quarter last year—thanks to high volumes and positive currency effects. However, due to its record order backlog, Linde had invested more during this period, which naturally weighed on cash flow and margins.

The stock lost about 15% of its value within a few weeks. But now the downturn appears to be coming to an end. The stock seems poised to end its bottoming-out phase with an upward breakout, though it has not yet done so. From a technical analysis perspective, there is therefore no green light, as the stock is trading below the 200-day moving average and the short-term moving averages.

However, these short-term movements should not deter long-term investors. Linde's moat is likely to continue to be a source of great satisfaction in the coming years, especially given the strength of its order backlog. For one thing, customers have few alternatives. For another, the company typically delivers directly from its industrial parks, in some cases via pipeline, to its customers. Last but not least, Linde likes to point to its long-term supply contracts. Cautious investors are still waiting for a technical breakout. Those with very long investment horizons can already start gradually buying more shares now, provided they are willing to take on short-term risks.

Zefiro Methane: Doing Good and Making Money

Zefiro Methane also operates in a market with little competition. The Canadian company specializes in plugging abandoned and orphaned oil and gas wells from which climate-damaging gases like methane are still escaping. That sounds like a niche business, but the numbers tell a different story. Estimates suggest there are at least two million wells in the US alone. CEO Catherine Flax even estimates that up to three million undocumented wells are in question. The Wall Street veteran is not afraid of the competition. While units of major oil companies like Chevron are active in this business, they focus on wells located on their own drilling properties. According to Flax, the open market is often served by smaller teams that may have limited expertise. Zefiro Methane has also developed proprietary technology. The company deploys its own crews and drilling rigs to permanently plug these wells using cement and specialized sealing materials.

Investors looking to gain a better understanding of Zefiro Methane's work should watch the short documentary "The Hazard Below".

https://www.youtube.com/watch?v=3MrjCUk5_QU

The funding for this work typically comes from the affected states. These states, along with the federal government in Washington, have recognized the problem and allocated more than USD 4.5 billion to commission companies to expertly plug the holes. Most recently, Zefiro announced an USD 11.5 million contract for a state-funded project in the Great Lakes region in the northeastern United States. Last year, the company received a USD 19.6 million contract from the Ohio Department of Natural Resources.

The potential is therefore enormous. Zefiro Methane is also gaining a foothold in the AI data centre market. If leaks are discovered at these multibillion-dollar project sites, rapid action is essential. After all, in this environment, time is money. Last but not least, Zefiro is also contributing to environmental protection while monetizing the carbon credits it generates.

Zefiro Methane's half-year results are expected to be released in the coming weeks. The company currently has a market capitalization of around CAD 70 million. With strong results, the share price should once again eye its annual high. Analysts at GBC Research are optimistic. Their price target is CAD 2.12, which is about three times the current price.

SAP: A Deeper Moat Than One Might Think

For some, SAP is under pressure due to the AI revolution. But this year, the company seems to be demonstrating that it intends to be among the winners of this trend. And the market is changing its mind, too. The stock's downward trend ended in early summer. Since then, it has been on the rise.

Over the years, the Walldorf-based company has built a substantial moat. Many Fortune 500 companies are among its clients. The switching costs for these billion-dollar companies would be enormous. Moreover, switching out entire ERP systems takes many years and also carries significant operational risks. No management team wants to deal with that. In addition, SAP now supports its customers with AI solutions, further deepening its moat. This could boost margins in the long term.

The DAX heavyweight laid the groundwork for this position years ago. It shifted its business model from one-time software licenses to recurring cloud subscriptions. As a result, cash flows have become more predictable and stable. As a German provider, SAP is also likely to have an advantage in Europe over its strong US competition, as data security plays an increasingly important role in times of growing geopolitical uncertainty.

The stock is still trading more than a quarter below its multi-year high from 2025. Interested investors should currently wait for pullbacks if they want to add SAP to their portfolio.

Linde's stock has taken a hit, presenting an opportunity for long-term investors. Zefiro Methane is performing well and generating profits. The company will soon report its earnings, and new orders will certainly help boost the share price. With SAP, investors are betting on the German software company as it works to capitalize on the AI revolution.