Buy and Hold Investments for Gen X 401k Plans
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Verizon
| Part telecom utility and part gatekeeper for any digital gadget with an internet connection, Verizon (NYSE: VZ) has a lot going its way. Verizon yields a dividend of about 6% and has maintained a payout since 1984, meaning shares bought today will pay for themselves in about 16 years even without a single dividend increase in the years ahead. Also, Verizon seems fairly valued right now though not a screaming bargain. It’s in the middle of its 52 week range with a price/book of about 2.4 and a forward P/E of 14.2. Looking forward, the company has decent near-term and medium-term growth prospects via a possible iPhone partnership in 2011 and the growth potential of its popular though capital intensive FiOS network. With an a3 rating from Moody’s and a stable outlook, Verizon seems a safe long-term bet. | The Best-Kept Secrets at Vanguard Revealed |
Alcoa
| A bit riskier than Verizon, Alcoa (NYSE: AA) could be a highly profitable long-term trade for value investors. The stock has a price/book of 1.0 and a forward P/E of 12.3. Shares hit a 15-year low under $10 this summer, but have bounced back quickly in the last several weeks thanks to better than expected Q3 earnings. Unless you believe that weak consumer spending and worldwide manufacturing drought will linger for decades, Alcoa is a great way to play the prospects of a recovery sometime down the road. Aluminum is a cheap and durable metal used in all manner of products. Though AA stock may not hit previous levels of $40 a share in the next several years, it’s not outside the realm of possibility to expect half of those historic highs — and a nearly 100% upside above current valuations. | The Best-Kept Secrets at Vanguard Revealed |
United Technologies
| If you want a massive, stable company with few competitors, look no further than United Technologies (NYSE: UTX). The aerospace and defense giant is one of the lucky blue chips that enjoys a mainline to Uncle Sam’s coffers via DoD spending. But unlike some pricier rivals, UTX appears reasonably priced and has the reasonable expectation of growth. United Technologies enjoys a price/book of 3.5 and forward P/E of 13.9, and is expected to see annual sales growth of 10% across each of the next five years by most Wall Street estimates. To top it off, UTX enjoys a decent 2.3% dividend with a history of payouts since 1936. While there is concern over the federal budget, you can be sure defense spending will never be cut markedly — and that UTX will continue to cash in. | The Best-Kept Secrets at Vanguard Revealed |
Homebuilders ETF
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Exxon Mobil
| Remember $140 oil? Seems like a long time since we were all paying upwards of $4 a gallon for gas. Also seems like forever since Big Oil was getting grilled by Congress for its alleged shenanigans instead of Big Banks. But if you believe in massive U.S. debt driving a weaker dollar and strong inflation, and if you believe that eventually energy consumption will increase, then you’d be hard pressed to find a better long-term play than Exxon Mobil (NYSE: XOM). The stock was trading north of $90 as crude was making its making its run, and at a price/book of 2.4 and a forward P/E just south of 10.4, this could be a good long-term play — especially with the addition of XTO Energy’s natural gas operations last year. Additionally, any recovery, from an industrial resurgence to a tech rebound, is going to cause greater energy consumption. A lot could change in the energy sector in the next decade or so, but chances are Exxon will remain the 900 pound gorilla considering its current station as the largest U.S. company on Wall Street. |
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Wells Fargo
| While Citigroup (NYSE: C) nearly folded amid the financial crisis and while Bank of America (NYSE: BAC) struggled to digest the inauspicious balance sheet of Countrywide on top of its own bad debt, Wells Fargo (NYSE: WFC) showed it was one of the healthiest of the major commercial banks. Wells is actually up +15% in the last 10 years compared to a -91% loss for Citi, -53% slide for BAC. Yes, the financial sector has seen a rough go of it in 2010 — but WFC could be one of the healthiest picks out there. Consider that aside from a single Q4 2008 earnings report, Wells remained profitable throughout the financial crisis. Compare that to Citigroup, which posted only a single quarterly profit in all of 2008 and 2009, or BofA that posted a quarter loss for the fiscal year 2009. The financial crisis has taken its toll, but as the dust settles in the year ahead Wells Fargo is the likeliest commercial bank to bounce back quickly and return to success. | The Best-Kept Secrets at Vanguard Revealed |
Vanguard Small-Cap ETF
| You may be wondering by now if there are going to be any growth picks in this list. After all, small-caps that become large caps over the years — or get bought out by the big dogs — can deliver the most dramatic returns for many investors. Well rather than follow the drumbeat of earnings to find small and growthy plays, a good choice for Gen Xers is the Vanguard Small-Cap Growth ETF (NYSE: VBK). The ETF has almost doubled since the March 2009 lows and is up +14% year to date — almost triple the Dow Jones and S&P 500. The megacaps also mentioned in this list will do a good job of rooting the portfolio, while this growth ETF will tap into the aggressive growth potential of small cap stocks over the next decade or two. Also a plus is the fact that expenses are a reasonable 0.14% — while comparable SPDR or iShares ETFs with a small-cap growth focus have ratios as much as twice that. Over the decades, those savings will really add up.
Jeff Reeves is editor of InvestorPlace.com As of this writing, he did not own a position in any of the stocks or ETFs named here. Follow him on Twitter at http://twitter.com/JeffReevesIP. The Best-Kept Secrets at Vanguard Revealed If you’re ready for the inside help that gives you special advantages over other investors at Vanguard, sign up now for Dan Wiener’s free newsletter, Fund Focus Weekly. Each week you’ll get independent information on Vanguard’s best mutual funds to buy and sell, advance announcements of new funds, changes in management, plus much more! Sign up and get started today. |
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