Best Stock Picks and Fund Picks

Best Pure-Play Domestic Stocks

An appreciating dollar hurts multinational companies because it makes U.S. goods more expensive to buy in foreign lands. It also erodes the value of sales and profits generated overseas when they are converted from local currencies to greenbacks. If the dollar continues to strengthen, you may be better off investing at home—or, rather, in the stocks of homebuilders. For instance, both DR Horton (symbol DHI (opens in new tab), $29) and Lennar Corp. (LEN (opens in new tab), $48) generate 100% of their revenues in the U.S. Sales of new homes are gathering steam, so analysts expect both companies to generate double-digit-percentage profit growth this year and next.

Best Takeover Candidates

With buyout activity on track to set a record in 2015, it's a good time to try your hand at divining the next big deal. If you're right, you could make a quick killing. Goldman Sachs has a list of 197 possible takeover candidates. But because the odds of a takeover actually occurring are low, we searched for stocks that could perform well even if a deal doesn't materialize. So we culled Goldman's list for companies that most Wall Street analysts rate as "buys" and that trade for at least 40% less than analysts' average 12-month price targets.

A lot of deals are occurring in biotech, where big outfits often find it easier to buy a company and its products than to develop their own. Our top candidates are Anacor Pharmaceuticals (ANAC (opens in new tab), $118) and Atara Biotherapeutics (ATRA (opens in new tab), $31). Outside of biotech, we suggest Freshpet (FRPT (opens in new tab), $11), a maker of pet food that could be a tempting target for a large consumer-products company.

• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Best Buffett Alternative

Like Warren Buffett's Berkshire Hathaway, Markel Corp. (MKL (opens in new tab), $802) is in the insurance business, specializing in niche areas such as summer camps and racehorses. Markel also makes strategic, long-term investments in companies ranging from bakeries to homebuilders to makers of dredging equipment. Over the past year, Markel's stock soared 26%, while shares of Berkshire (BRK.B (opens in new tab), $130) sank 6%.

Best Funds for Low Fees

With 0.09% in annual fees, Fidelity Spartan 500 Index (FUSEX (opens in new tab)), which tracks the S&P 500, is among the cheapest mutual funds around. Among ETFs, we favor Vanguard Total Stock Market (VTI (opens in new tab)), a member of the Kip ETF 20. It tracks the entire U.S. stock market, charging only 0.05% in annual fees.

• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Best One-and-Done Mutual Fund

• T. Rowe Price Global Allocation (RPGAX (opens in new tab)) offers all the asset classes you need in one fund. Launched in May 2013, the fund at last report held 24% of its assets in domestic stocks, 32% in foreign stocks, 29% in bonds, 9% in alternative investments and 6% in cash.

Best Stock Fund for Nervous Investors

• Parnassus Core Equity (PRBLX (opens in new tab)) held up better than the overall stock market during the 2007–09 bear market (when the S&P 500 plunged 55%) and during the 2015 correction (a 12% decline). The fund uses screens to filter out companies involved in tobacco, liquor, weapons and nuclear power, among other things.
• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Best Bond Fund for Nervous Investors

• Vanguard Short-Term Investment Grade Fund (VFSTX (opens in new tab)), a member of the Kiplinger 25, should weather an interest-rate rise well. And as its name suggests, you won’t have to worry about credit woes should the economy weaken. Yield: 1.9%.

Best Stock Picks for Nervous Investors

If you worry that the market's recent swoon isn’t over but want to keep some skin in the game, then buy stocks that have a record of holding up better than most in down markets. Three companies to consider: tobacco giant Altria Group (MO (opens in new tab), $54); Edison International (EIX (opens in new tab), $63), parent of electric utility Southern California Edison; and aerospace and technology giant Lockheed Martin (LMT (opens in new tab), $207). Each of the stocks showed its mettle during the May–August correction by faring better than the overall market. All three boast above-average dividend yields and get high marks from Wall Street analysts.

• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Best Dividend Growth ETF

• WisdomTree U.S. Quality Dividend Growth Fund (DGRW (opens in new tab)) holds shares of 293 dividend-paying firms with solid profit growth. Though the exchange-traded fund yields only 2.3%, slightly above the S&P 500’s 2.2% yield, it’s packed with technology- and consumer-related firms that are likely to hike their dividends as earnings climb.

Best High-Yield ETF

Many dividend ETFs load up on utilities. The iShares Core High Dividend ETF (HDV (opens in new tab)) spreads its bets, squeezing out a 3.5% yield by focusing on health care, energy and retail com­panies. Although its 20% weighting in energy stocks has hurt returns lately, that stake will help once oil prices recover.

• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Best Dividend Growth Mutual Fund

Over the past decade, Vanguard Dividend Growth (VDIGX (opens in new tab)), a Kip 25 member, returned 8.4% annualized. That beat 97% of its peers—funds that invest in large-company stocks with growth and value characteristics.

Best Dividend Stocks

• Microsoft (MSFT (opens in new tab), $44) yields 3.2% and has a whopping $96.5 billion of cash on its balance sheet—plenty of money with which to keep hiking the dividend. CEO Satya Nadella is slashing costs to help boost profits and is steering the software giant toward hot tech areas, such as cloud computing and mobile products. Payroll processor Paychex (PAYX (opens in new tab), $48), which handles payrolls for 590,000 small and midsize businesses, yields 3.5% and should fare well as long as the economy keeps expanding.
• SEE ALSO: Kiplinger's Picks for the Best Personal-Finance and Investing Products and Services of 2015

Higher short-term interest rates would boost the money Paychex makes on cash held for customer payrolls, potentially lifting profits higher. Plunging oil prices didn't stop ExxonMobil (XOM (opens in new tab), $74) from raising its dividend this year—its 33rd consecutive annual boost. Even if oil prices don’t recover much, Exxon should make more than enough money to keep the dividend streak going next year. The stock yields 3.9%.