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All Contents © 2019The Kiplinger Washington Editors
By James Brumley
| October 19, 2018
The last few days have been tough ones for too many investors in S&P 500 stocks. Though far from devastating, the existing backdrop of anxiety exacerbated the fear incited by the modest selloff. And traders still aren’t sure what the foreseeable future holds. In simplest terms, it’s just plain stressful.
It’s times like these when the “old school” approach of buy and hold — meaning buy it and forget about it — starts to sound compelling again. In other words, forget the day-to-day battles. Sit back and trust that time will do the heavy lifting for you.
To that end, here’s a rundown of 10 large-cap names that are well-suited for that precise approach. They’re all S&P 500 stocks, and more than that, they’re all names that don’t require constant babysitting. You can count on them more or less being the same company a year from now, and even five years from now.
In no particular order…
Prices and data are from the original InvestorPlace story published on Oct. 9. Click on ticker-symbol links in each slide for current prices and more.
There aren’t too many biotech stocks one could step into and then forget about. Amgen (AMGN) is an exception to that norm, though.
It’s mostly a matter of size and scale. Amgen’s portfolio of marketed drugs is diverse, allowing for reliable cash flow that funds the development of new additions to that portfolio as needed. No single drug makes up more than one-fourth of Amgen’s revenue, and only two drugs drive more than one-tenth of its sales.
The pipeline is plenty promising too. The company has got nine phase-3 trials underway right now, and is developing five different biosimilars. Never even mind all the phase-2 and phase-1 tests going on.
It’s just more diversity than one would expect from a biopharma name.
Microsoft (MSFT) isn’t a name that needs an introduction. It’s the name behind the world’s most common computer operating system, and offers a huge array of business-minded products and services, like LinkedIn and office-productivity software.
The advent of mobile devices and cloud computing was admittedly disruptive to Microsoft. But, in some ways it inspired changes that may not have otherwise come to fruition. As of the quarter ending in June, $6.9 billion of the company’s $30.1 billion in revenue was cloud-based, and though its Windows for mobile devices was a flop, it’s played a strong hand in the cloud computing market by developing infrastructure tools companies need to make their use of the cloud work.
The kicker: A great deal of Microsoft’s revenue is reliable recurring revenue, meaning customers are paying a monthly fee for access rather than making a one-time purchase. That makes this a solid S&P 500 stock to buy.
Many investors may not be familiar with Red Hat (RHT), and many of the ones that do know it are a little surprised to learn it’s big enough to rank among the S&P 500 stocks.
Don’t let the obscurity fool you though. Red Hat is not only plenty big, it’s plenty potent.
Red Hat, in simplest terms, offers a variety of enterprise-level software. It has got a particularly impressive app-development set of tools, but can answer almost any call with open-source solutions that are becoming more and more important as organizations seek to get more out of their technology.
More important, it’s working. Not once in the past ten years has Red Hat failed to produce quarterly revenue growth, and net income growth has been reasonably reliable too.
Apple (AAPL) is another one of those S&P 500 stocks that doesn’t really need an introduction.
Its popularity is palpable, but at a price. Some onlookers sense a saturated smartphone market has already stifled sales of its flagship product, the iPhone. And, whatever headwind saturation didn’t create, the phone’s four-figure price tag may well have.
Apple has been preparing for this paradigm shift for a while now, however, cultivating a “Services” business that’s starting to make a dent. Last quarter, its services arm — which sells digital content and other non-hardware goods — grew 31% year-over-year to revenue of $9.5 billion.
That’s still only about 18% of the company’s total business, but points to the idea that Apple is developing a bigger, self-serving, self-sustaining ecosystem of software and hardware.
Johnson & Johnson (JNJ) isn’t exactly a barnburner. Indeed, even compared to most other stodgy, aging S&P 500 stocks, JNJ stock is something of a snooze.
In many regards though, it’s the boring, unassuming nature of J&J that makes it such a compelling prospect.
There’s a Johnson & Johnson you know. That’s the one that makes (among other things) baby shampoo, Band-Aids and Tylenol. Then there’s the J&J you don’t know … the one that sold $2.46 billion worth of cancer drugs during the second quarter of this year, and the one that sold $1.34 billion worth of psoriasis drug Stelara in the same quarter.
There’s a lot more diversity and firepower to Johnson & Johnson than most investors realize.
Banking is a cyclical business, to be clear, and Bank of America (BAC) is no exception to that reality. So, even long-term investors will want to think about something before taking on a long-term position in B of A — that is, are you truly committed enough to BAC to hold it through a recession, or is it strictly a name to stick with as long as a bull market is underway?
Either way, Bank of America is arguably one of the best of its breed. It has got a healthy balance of lending, trading and capital markets, as well as a healthy balance of consumer and corporate customers.
It’s just not a name that requires constant monitoring.
On the surface, it would seem like credit card middleman Visa (V) would be too cyclical in an increasingly competitive environment to make it a name you can just buy and forget about. Don’t be fooled though. V stock is better defended and less vulnerable to economic cycles than many S&P 500 stocks.
That defense comes in the form of deliberate innovation. Visa is a leader on that front, setting the tone and pace for the inevitable advent of a cashless society. It’s tinkering with technologies like blockchain and the Internet of Things, and has done enough developmental work to earn a spot on Fast Company’s list of top 10 innovators in the finance arena.
As for consistency, interestingly, Visa mostly shrugged off the impact of the subprime mortgage meltdown that up-ended most other companies in 2008. Sales and profits were both up in 2007 and then again in 2008, as the need for credit cards never really went away.
Cardinal Health (CAH) does a little of everything in support of the healthcare industry, ranging from supplying bulk-rate medicines to distribution logistics to more efficient coordination with health insurers.
It’s a complicated undertaking, and is made even more challenging by political uncertainty. The advent of the Affordable Care Act proved more problematic than not for Cardinal Health, and though the ACA has since gone away, the future of the healthcare industry is just one pen stroke or one congressional vote away from being disrupted again.
Cardinal Health is a company, however, that given enough time will find a way to make the business of healthcare logistics work. Efficiency and cost-effectiveness never really go out of style, and Cardinal Health has a healthy long-term track record.
Nielsen Holdings (NLSN) isn’t just about TV ratings anymore. The company can measure everything from the effectiveness to online ads to the public’s opinion of a political candidate to the impact of a presence within the eSports industry.
Investors who’ve been paying close attention to Nielsen of late will know all too well that it’s being targeted by multiple class action lawsuits, which argue the company didn’t fully disclose its vulnerability to new online privacy rules that ultimately stem from Facebook’s Cambridge Analytica debacle.
A closer look at Nielsen’s revenue trend, however, suggests sales haven’t been crimped. Profits are a slightly different story, but as was the case with Cardinal Health, Nielsen Holdings can find ways to turn sales into net income when given adequate time.
Last but not least, add Boeing (BA) to your list of S&P 500 stocks to hang onto for the long haul. Just be sure to buckle up for the bumpy ride that BA stock is sure to dish out in the meantime.
The long-term bullish case for Boeing is two-fold. First though not foremost, it’s a defense contractor. And, as partisan as Washington D.C. has become, both major political parties agree that military power is one thing the country can’t afford to skimp on.
The other bullish argument is the long-term outlook for air travel. Boeing’s market update suggests that demand for air travel will grow at an annualized clip of 4.7% through 2036, necessitating the delivery of 41,000 new passenger jets in the meantime. Boeing remains the preferred provider among airlines shopping for new aircraft.
This article is from James Brumley of InvestorPlace. As of this writing, Brumley did not personally hold a position in any of the aforementioned securities.
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