I have a bit of time in my hands, and a few tips for someone trying to pick a few stocks that are almost guaranteed to be positive investments.
First some ground rules: have at least a 5 year investment window. This isn’t one for the pump and dump. Two, this isn’t a get rich quick, these stocks aren’t going to blow you out of the water, they’re going to give you a nice 10% annualized return on average over the next five years.
- Google and Facebook
With these guys. you’re buying the online ad industry. Between them, they have over 80% of a growing ad market, and they’re aggressively expanding into more properties. Facebook has a billion users on it’s main platform, Messenger, Whatsapp, Instagram and is aggressively monetizing. Google has over a billion users across it’s main search engine, Gmail, Youtube, Adsense and a bunch others. Both companies are growing rapidly.
One caveat, they’re valued highly at the moment (tho Google has pulled back some) so if I were you, I’d dollar cost average into them, i.e. I’d buy them a little at a time, maybe 3 stocks a month over the whole year to spread the volatility instead of buying it at one time.
2. Diageo, Pernod Ricard and Brown Forman
I feel like I’ve been recommending this combination for a long time. Both companies together represent more than 80% of the alcohol consumed globally with brands including Jack Daniels, Ciroc, Guinness, Finlandia, Canada Mist, Smirnoff, Bailey’s, Johnnie Walker, Absolut, Jameson, Malibu, Chivas Regal, Beefeater. Essentially, every drop of alcohol in almost any bar on earth flows to one of these three well run, incredibly diversified companies meaning you’ll be making money whatever the world decides to do.
3. Under Amour and Nike (and maybe Adidas)
The world is undergoing a fitness revolution, from USA’s increased focus on the obesity epidemic and workout culture, to Africa’s new emerging gym class. Owning these two puts you firmly in a position to both have the still very innovative incumbent and also the highly sophisticated and aggressive challenger working for you. I might include Adidas here too, but they’re a bit too richly valued and frankly, going too much for the sporty-fashion demographic to be full sportswear, fitness plays. But if you can snap up all three, good for you.
4. Netflix and Disney
Netflix is the entertainment platform of the future, and the way to play the cable cord cutting phenomenon. Having expanded globally with their original content, and getting more revenue fron their existing licensing deals due to increased viewership as well as the opportunity to partner with local content creators, expect their revenues to go up massively leading to improved stock returns. (and expenses too in the short term but it will more than pay off in profits). I worry a lot about some of the costs of penetrating some of the countries that have Internet issues but they’re working on repackaging their tech so even if they end up charging peanuts, across that many countries, it adds up.
Meanwhile Disney, while it has some cable dependence worries with popular ESPN, is still breaking records with new movie franchises, expanding resort and cruise revenues and massive moves into digital. So one of my favorite companies is definitely not going anywhere soon. Finally…
5. ExxonMobil, Valero and Phillips66 (and maybe Chevron)
The thing with a diversified oil major like Exxon is that it always has ways of making money no matter the direction of the market. And with it’s geo-diversification, powerful financial position and reserves, it will pay more than handsomely for the patience and volatility this period requires.
Then there are the downstream darlings like Valero (which I’ve been recommending for a year now) and Phillips66 who both have favorable economics and retail spread actually helping them under the circumstances. Because the entire energy space is depressed, these can be picked up at nice bargains and held until they pay off. I’d recommend Chevron too but frankly, it’s a bit overvalued and it’s financial position is not as sure as Exxons. However, as far as diversification goes, after Exxon and Shell, it’s the next best thing. And between those three and Chevron, you have ample coverage of both conventional and shale production, upstream and downstream, U.S. and international, and diversified versus pure plays.
So there you have it. If you have the money and the inclination, add these stocks to your portfolio, hold them for at least five years and come back to me when you have a lot more money than you went in with.
Unless of course a massive recession hits us tomorrow in which case, just hunker in and ride it out.