Stocks to Invest in for the Next Decade

published 6 January 2020

Ryan Ermey: Sandy and I are back and ready to begin a new decade's worth of timely, money-smart advice for our listeners, and what better way to start things off than with my stock picks for the next 10 years, the subject of our main segment. On today's show, we tell you why you should return that ugly sweater sooner, rather than later, and a new edition of Deal Or No Deal delves into 529 plans and prescription assistance programs. That's all ahead on this episode of Your Money's Worth. Stick around.

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Ryan Ermey: Yes, we've both come back with a little bit of a bug here, but we won't let something like that keep us from bringing you timely personal finance advice. We're talking, in this first episode of the new year, about returns because a lot of people received all kinds of well-intentioned gifts for the holidays, but maybe not something that they like or they wanted, or if it's clothes, that fits. So what should people be keeping an eye on here?

Sandy Block: I've been working on this for an upcoming issue, Ryan, and the most important thing I want to say is if you want to exchange something, do it now. We've kind of gotten lulled into complacency because a lot of big retailers in the past have loosened their policies. Some of them will let you return things forever. But in recent months, according to Consumer World, which is a consumer advocacy website, a lot of big names have actually tightened their policies. In some cases, you may, if you wait until March, that may be too late to get your money back.

Ryan Ermey: Right. So we're telling you to act soon here. Like you said, a number of major retailers have reduced the period over which they'll accept returns. Sometimes they went from unlimited, they cut it to a year. Some have cut it to 180 days, some have cut it to 90 days or less. So wherever you have a gift receipt from, make sure you go check before you stick it in the back of your cause it and save it for later. There are a few prominent ones that we wanted to highlight.

Ryan Ermey: ... with your aunt, bring her with you to the store. I haven't been an extra large in years. Sorry about that. So yeah, the real upshot here is act now. Read the policy because maybe you've been shopping at the Target for years and years, and you think you know what the return policy is. But according to our friends at Consumer World, a number of major retailers are, as you said, tightening their policies. So they may not be as lenient as they used to be. So go, read the policy, and act as quickly as you can. Coming up, I'll look at a few of my favorite stocks to buy now and hold for the next decade. Don't go anywhere.

Ryan Ermey: We're back and in lieu of an interview today, since we are headed into the next decade or we're here right at the beginning of the twenties, that I would do a main segment interview on some of my stock picks for the next decade. So in the January issue of Kiplinger's, our colleague Nellie Huang detailed the best 10 stocks of the last 10 years. Be sure to check out that story. I wrote about the best 10 stocks for the next decade.

Ryan Ermey: A wide variety of mutual fund managers who invest in companies with a mix of styles. So we wanted some growth stocks, stocks that we expect to grow faster than the broad market, and value stocks, undervalued companies. Then we also wanted a mix of sizes. We wanted some bigger companies, some smaller ones, some in the middle. I put a special emphasis on talking with people who tend to hold stocks over long periods of time, which we believe investors should do it well. I wanted a mix of companies from different industries, as well as a mix of well known firms and some that you've likely never heard of.

Ryan Ermey: So I encourage anyone listening to go read the whole story. I have 10. We're going to talk only about a few here. In this case, I'm going to stick to some that are a little bit easier to explain over the air, rather than ones that have kind of tricky business models that were easier to tackle in writing. Just a few quick caveats, and we've said over and over, and this is really the most important thing, that most investors should have a diversified core portfolio of low cost mutual funds.

Ryan Ermey: Most people don't have the time and wherewithal to spend researching stocks to the level of depth that they would need to build a portfolio solely of individual stock. So that's one thing. Another is that as you know, I don't think that the 10 stocks I mentioned in this story or the three that I'm going to talk about here, are the best of the next decade. That would be really going out a limb.

Ryan Ermey: ... I'd be rich. But I do think that they are all, and all 10 of them are poised to outperform the broad stock market over the next decade. Finally, and this is true for all of my stock picks, that I'm not a financial advisor. I'm not a stock broker. You should never buy a stock just because I say so. You should always do thorough research on your own, but I'm giving you stocks to consider, a starting point. Places that you should... companies that I think are interesting that you should be looking into.

Ryan Ermey: Yeah, another huge agricultural tech company. In doing so, it opened itself up to what turned out to be quite a lot of legal risk because Monsanto manufactured Roundup, the weed killer, which people have been alleging in court have caused harmful health side effects. That caused a lot of people to dump Bayer stock, which is now, in my humble estimation, dirt, dirt cheap. So the shares trade in the US is an American depositary receipt. It just means that you can buy...

Ryan Ermey: It's a German company. That just means that you can buy it on an American exchange this way. In terms of price to earnings ratio, which is a measure that a lot of people use to determine the valuation of a stock, it's trading at only 10 times estimated earnings for 2020, which is a significant discount to the share's five year average annual price to earnings ratio. So these lawsuits are hanging over the company's head, but they're likely to settle them for a lot less than investors first anticipated, according to the sources that I talked to. In fact, the EPA and the justice department recently said that a federal appeals court, and this is an... friend of the court brief, said that the U.S. appeals court should reverse a lower court verdict finding Bayer liable in the California case in which they accused Roundup of causing cancer.

Ryan Ermey: So essentially, investors have beaten down the stock more than we think they should have. In the meantime, this company has the best agricultural technology on the market. They are the market leader in producing seeds, pesticides, monitoring systems that enable farmers to yield more from their harvests. The point that my source made to me, and this was David Herro, who runs a fantastic international fund, Oakmark International, essentially made the argument that we have a global growing population, and we're going to need agricultural technology in order to feed a hungry world.

Ryan Ermey: Exactly, and it used to be called Burlington Coat Factory. They changed their name in 2015 because they wanted to really broaden the business model. So they sell brand name, clothing, home goods, gifts, beauty products, toys. They have about 700 stores. It's a model that you probably, listening to it probably sounds familiar, because it is. It's the same idea that Ross stores have and that...

Ryan Ermey: TJX, as well. TJ Maxx. Exactly right. You know, there are certain pockets within retail that have still done really well and that are more or less immune. I won't say immune, but kind of maybe inoculated against intrusion from the big eCommerce players because they sell these... in this case, they're selling discounted goods and operate in a niche that way. For one thing, the model is such that people like to hunt.

Ryan Ermey: It's something that a business model like Amazon's doesn't do a very good job replicating. So why Burlington stores? Well, the reason is because they're very similar to Ross and TJ Maxx, but earlier in that process, earlier in this kind of transformation into the business models that Ross and TJ Maxx have been so successful with. Just to give a little context, over the last 10 years, Ross stores stock returned an annualized 28.6%.

Ryan Ermey: You have it on your watch list. This is a recommendation for the next decade, and we're only a couple of days into the decade. So I think that this has a lot of room to grow. It's growing. New stores and same store sales and earnings faster than the competition. Analysts at William Blair expect the retailer to boost earnings by 13% in 2020, more than its competition. So this is still, I think, a good time to look at the stock, but maybe consider adding to your watch list and buying on a tip.

Ryan Ermey: I do have one more I wanted to talk about. This one is one that people are probably a little bit less familiar with. It's called Medallia. Now I recommended it at about $29. It's now sitting at about $31 and it's one of the, call it a longer shot or a more speculative bet among the stocks that I picked in this story. It had an IPO, an initial public offering, in July 2019, and it really doesn't have any earnings to speak of and probably won't for another two years. It's one of these smaller tech firms that is investing heavily in itself and in its growth.

Ryan Ermey: So the new way is having this cloud-based software that Medallia provides, which uses artificial intelligence to help these companies. We're talking insurance companies, hotels, auto firms, media firms, assess customer and employee satisfaction by culling data and language from social media, from travel blogs, from interactions with the internet of things. So this is still really, to use a little bit of jargon an under-penetrated market. What I mean by that is industry experts expect this business, not Medallia, but the entire experience management business to represent something like $68 billion in potential annual revenues, but only about 1% of the market is currently being served.

Ryan Ermey: Yeah, exactly. So that's just three of them. We're going to put all 10 up in the show notes. Be sure to go check those out. Once again, my stock picks, it's in my Twitter profile actually. My stock picks aren't gospel, only my bar pics are. If you're in D.C., my bar picks are bulletproof. My stock picks aren't. So do your own research. But those are three companies that I'm particularly excited about, heading into the next decade.

Sandy Block: So that's serious money. You always want to look at your own state's plan any way because most states, if they have an income tax, do give you a tax deduction. So that's fairly well-known. But I don't know that a lot of people know that they can actually just get money for investing in a state 529 plan. So certainly if one of your resolutions was to save for college, I think this is an additional little giddy-up to do it. So it's definitely deal.

Ryan Ermey: What's your deal? My deal is a deal, and it's a deal that I think is worth the headache of jumping through a lot of hoops for. That is pharmaceutical patient assistance programs. This is something that I talked about. I had a column in the February issue of Kiplinger's (see How to Pay for Pricey Prescriptions). But this really goes for a lot of people because it goes for anyone who might be in a high deductible health plan.

Ryan Ermey: It's really crazy. So we've talked a little bit about some of the preliminary solutions when you get prescribed an expensive drug. The first one... so I talked to a bunch of people about this. I talked to doctors, I talked to health insurers, I talked to people at the advocacy group, lots of people. The first thing to do, and this was something that I guess I thought I knew, but it hadn't really even been a fully formed thought in my head, was that you really need to get all of your doctors on the same page.

Ryan Ermey: Right. So these are all... that's really your first line of defense. After that, look for coupons. This is something you can talk to your pharmacist about. You can log on to GoodRx.com, which has these coupon programs. WellRx, as well, they have these copay assistance programs. So when I was prescribed, I have a treatment for "chronic dry eye" eye drops. I was prescribed in the sticker price. Well, I'm looking at the coupon first. It says up to $250 off.

Ryan Ermey: Right. So the next thing that people should consider is log on to NeedyMeds.org, and you can type in the name of your treatment. It'll bring up whether there are patient assistance programs. Now for some drugs, especially for treatments for rare or life-threatening diseases, there are foundations that help out with things. But for something like I had, the manufacturer will help you out. So that's what I did. I applied to the drug manufacturer's patient assistance program.

Ryan Ermey: Yes. So they make the calculation based on, okay, what would you pay after... up to when you hit your deductible and then after it for the year. Then they take that yearly number and divide it into your take home salary. If it's a certain percentage of it, you qualify. So it's worth looking into for anyone, I would say, who is prescribed something that they don't think they can afford. It's worth doing the research, and it's worth jumping through hoops. It was a huge pain to get in my doctor's office to fill this out. There was a lot of miscommunication, but ultimately it's been super worth it for me, and my eyes are doing a whole lot better.

Ryan Ermey: Oh, thank you. That's it for this episode of Your Money's Worth. For show notes and more great Kiplinger content on the topics we discussed on today's show, visit Kiplinger.com/links/podcasts. You can stay connected with us on Twitter, Facebook or by emailing us at podcast@kiplinger.com. If you like the show, please remember to rate, review, and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.

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Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.