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All Contents © 2019The Kiplinger Washington Editors
By Lawrence Meyers
| July 27, 2017
Unless you are truly investing for the long-term — and by that, I mean 10 years at a minimum — you expose yourself to a much higher degree of risk. That’s why the best stocks to buy if you’re a conservative investor are those that are durable, so you can hold them for years and expect them to easily bounce back anytime the market throws a tantrum.
Swing trading and using options are perfectly acceptable ways for more aggressive investors to achieve returns, but you have to know that when you do that, you’re introducing a number of risks that, if not handled properly, could end up setting you back.
But the longer the time frame you have for investing, the better off you are positioning a large part of your portfolio with a buy-and-hold mantra in mind. After all, there has been no 30-year rolling period in which the market did not provide a positive return.
So if you are investing for the long-term and seeking market-beating returns without taking on too much risk, let me show you the way. Please read on as I explore seven all-weather stocks to buy that should serve conservative investors well for the next 30 years.
Prices and data are from the original InvestorPlace story published on July 25, 2017. Click on ticker-symbol links in each slide for current prices and more.
AbbVie Inc. (ABBV) was once a piece of Abbott Laboratories (ABT), which completed the spinoff of the research-based pharma outlet that’s home to well-known drugs such as Humira and Tricor.
I’m not keen on pharma and biotech these days, since most stocks in the healthcare sector are highly overvalued. However, you must have exposure to this sector. It has too appealing a combination of growth and income to ignore.
ABBV (including its performance as part of Abbott) has been one of the most consistent stocks you can buy for the long-term. It’s developing new products in the arenas of virology, neuroscience, immunology and oncology.
Financially, it’s hard to argue with 13% anticipated growth in earnings per share this year. We also enjoyed a 12% dividend increase in 2016, maintaining AbbVie’s status as a Dividend Aristocrat, and another one should hit later this year.
Sector: Financials (Insurance/Conglomerate)
Berkshire Hathaway Inc. (BRK.B) is, in a way, more than one stock.
For one, Berkshire Hathaway is an insurance company that operates among several brands, including Geico, United States Liability and the namesake Berkshire Hathaway. Insurance is a fantastic, and very reliable, business if underwriting is done with care. Collect premiums, make sure you don’t pay out more than you take in, invest the rest, watch it all grow.
Then there’s Berkshire’s other subsidiary companies, which include the likes of See’s Candies, Fruit of the Loom Companies and Lubrizol.
The cherry on top is Warren Buffett himself, who is one of the greatest investors of all time, and whose stakes in companies like Bank of America Corp (BAC) more often than not work out wonderfully for both the Oracle of Omaha and shareholders alike.
Cintas Corporation (CTAS) is another Dividend Aristocrat that belongs on this list.
It’s funny that I would choose Cintas considering I hate clothing retailers, but then, CTAS isn’t exactly your typical retailer. Instead, CTAS designs and makes uniforms for all sorts of industries, including specialized equipment for dangerous work such as firefighting.
CTAS is a cash flow business, throwing off modest but consistent earnings growth of about 7% annually, and analysts think that could grow to as much as 12% expansion going forward.
There’s not much in the way of yield here, as Cintas pays out roughly 1% based on its annually paid dividend, but investors sitting on 265% gains in five years don’t seem to mind. Besides, the income has more than doubled over the same time period.
CTAS has a defensible position. And nobody else is really assaulting Cintas’ market.
Sector: Consumer Discretionary
Ever wanted to buy into an empire? Then buy Walt Disney Co. (DIS).
Sure, I think ESPN has huge problems, but I think it’ll either be spun off or sold outright. Yet, DIS owns the world right now, with all of its Marvel films, its occasional Pixar film and the constantly expanding universe of Star Wars. Better still, Disney’s resorts division is wholly immersing itself in … well, the immersive experience trend, where it’s able to use its story-telling prowess to make guests feel like they’re playing a part in fictional universes.
Disney is synonymous with family entertainment, with a global brand name, enough content to power it for the next 30 years and one of the best stock out there.
Among these seven stocks, I think Disney and one still to come are tied for the best chance of providing the highest returns over time.
The energy sector has been bludgeoned over the past few years, but you still can’t go without any exposure to this space. It will recover. At some point, producers will buckle — whether it’s OPEC or some of the smaller U.S. firms that for now insist on drilling, drilling, drilling.
That’s why I think you can’t go wrong with any of the big names, though among those, my favorite stock to buy is Exxon Mobil Corporation (XOM).
Exxon has assets all across the world, and has its hands in every part of the E&P cycle, or that it has great financials … all of which are strong enough to cement the bull case. But XOM also has a wild card in the form of Secretary of State Rex Tillerson, Exxon’s former CEO who obviously was chosen to enhance U.S. oil production around the globe via Exxon’s deal with Russian state-owned Rosneft (OJSCY).
Even if rumors about Tillerson quitting the administration end up coming to fruition (though I don’t think they will), Exxon Mobil is the biggest, most powerful oil and gas play on the planet. If it goes, everything else probably went first.
National Grid (NGG) represents utilities in this portfolio of all-weather stocks to buy.
National Grid is a primary provider of electricity and gas infrastructure in the U.S. and the U.K. As a utility, it is able to count on a certain amount of revenue because it is a monopoly, and has regulated rates. It has fantastic net margins and ROE, and offers a dividend of nearly 5%.
Shares have cooled off thanks in large part to movements in the British pound this year, though the chart looks a bit worse than reality thanks to a big special dividend a couple months back. This is a great opportunity to get into the stock for the long-term. NGG boasts solid financials, a never-ending need for its product and additional upside when the British pound recovers.
While the auto parts sector has been hit by a big selloff lately, that’s good news for those looking at stocks to buy for the next 30 years.
AutoZone, Inc. (AZO) is a phenomenal choice right now, and might be one of the most misunderstood bargains on the market.
AZO has plunged nearly 35% this year, in part on the heels of a disappointing fiscal third-quarter earnings report that saw comps decline. That has analysts panicking and lumping it in with the rest of the retail space, but AutoZone is suffering from other macro issues, as well as a hit thanks to the timing of tax refunds this year.
However, new and used cars will need parts for a long, long time. Even though car sales have been on the decline of late, they’ll rise again in the next cycle. Every car ages, and every car needs parts. With more than 5,000 locations, AZO has plenty of footprint — not to mention diagnostic and repair programs you can’t get via Amazon.com, Inc. (AMZN). How convenient.
Despite the worries, AZO still is expected to grow earnings 8% this year and next on low-single-digit revenue expansion. That’s not great, but that also doesn’t look like a dying retailer to me. Expect AutoZone to bounce back once the market gets over its hysteria.
This article is from Lawrence Meyers of InvestorPlace. As of this writing, he was long DIS.
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