Investors looking for the best stocks to buy now often have tunnel vision, focusing on short-term trends for immediate profits.
But picking instant winners is no easy task, and frequently involves risky bets on volatile players that could offer big losses instead of big gains.
So when looking for the best stocks to buy, why not focus on long-term investments that are sure things instead of chasing today’s fads?
You might think there’s no such thing as a sure thing on Wall Street, but so-called “megatrend stocks” offer a way to play almost-certain shifts in demographic, economic and social trends. These investments are not designed to pay off in the next three months, but if you have the patience to buy and hold until these durable macro trends play out, you can be assured of both stability and growth — not just in 2014 or 2015, but into 2025 and beyond.
Here are the seven sure-thing megatrend stocks I’m watching right now, and believe are the best stocks to buy for impressive growth and rock-solid stability over the long-term:
Sure-Thing Stocks to Buy: China Mobile Ltd. (ADR) (CHL)
Market Cap: $254 billion
Dividend Yield: 3.3%
YTD Returns: 17%
There’s a lot of doubt about China’s economy right now, and with good reason. The stocks in this region have outperformed the rest of the world for a few years now, and every week seems to bring more data that proves the “growth miracle” of China is slowing down.
But when you look at China Mobile Ltd. (ADR) (CHL), with its amazing growth and S&P-beating performance in 2014, it’s hard to lump the telecom company into the same group of ugly investments as the rest of Chinese equities.
Sure, China Mobile has some problems — notably a rare decline in profits across the first nine months of this year vs. 2013. However, the telecom reported 41 million 4G customers at the end of September vs. just 14 million at the end of June.
You read that right — it roughly tripled the size of its 4G business in just three months, to now serve a number of customers that’s greater than the population of California.
And that’s just its 4G business. Total customers across all of CHL total 799.1 million — well more than twice the entire population of the U.S.!
Whatever the future holds for China, you can be sure that telecommunications play a large role. And CHL is undeniably the best way to play this trend, and cash in on an increasingly wired region.
Long-term investors will be thrilled to know that China Mobile has been increasing its payouts steadily over the last 10 years, with a roughly 500% increase in dividends since 2003.
The CHL dividend payout ratio is less than half of projected profits, and more importantly, China Mobile has significant growth prospects as China gets increasingly wired.
Sure-Thing Stocks to Buy: PowerShares Water Resource Portfolio (PHO)
Market Cap: $960 million
Dividend Yield: 0.5%
YTD Returns: Flat
Sector: Infrastructure ETF
Unless you were living under a rock, a few months ago you heard plenty of reports about the impact of drought in California and the importance of water rights in the American West. Water conservation is a serious issue in many communities as water becomes scarce amid growing populations, and as disintegrating municipal infrastructures make investment in clean and safe water a priority.
That’s where the PowerShares Water Resources Portfolio (PHO) comes in. This diversified ETF holds water infrastructure plays like Mueller Water Products, Inc. (MWA), which specializes in smart water meters and leak detection systems, as well as water utilities like American Water Works Company Inc (AWK). Given the breadth and unique focus of this fund, the expenses are pretty reasonable at 0.61% or $61 annually per every $10,000 invested per the fund’s official website.
There is some cyclical exposure here, since some of these water companies have a footprint in the residential market, or operate in diversified businesses with other industrial applications. However, the diversification you’ll win across the water sector is worth some of these hangups to play this growing water megatrend.
PHO admittedly has underperformed in 2014, but keep in mind it is up more than 50% since January 2013 … and that the megatrend of high demand for water will continue for years to come.
Sure-Thing Stocks to Buy: Stericycle Inc (SRCL)
Market Cap: $10.8 billion
Dividend Yield: None
YTD Returns: 9%
Sector: Commercial services
Over the last few decades, regulations and safety guidelines for medical waste have become much more stringent — and that has effectively pushed a lot of smaller players out of the space. At the same time, the need to control infectious diseases and protect public health via sterile medical environments is assuredly never going away.
That leaves Stericycle Inc (SRCL) in a great spot for long-term investors who want to cash in on the dirty business of medical waste.
SRCL has gobbled up smaller peers and pushed out competitors to become the largest regulated medical waste company in North America — and is growing fast into regions like Ireland, Spain, Romania, Brazil and Japan.
Medical waste safeguards aren’t going anywhere in developed markets, and neither is Stericycle. But as emerging markets increase healthcare spending and as regulations in Latin America and Eastern Europe evolve, Stericycle is in great position for growth.
Stericycle should finish the year with almost $2.6 billion in revenue — up about from fiscal 2013, and nearly double revenue of about $1.4 billion in 2010. That shows the growth path this company is already on.
Sure-Thing Stocks to Buy: HCP, Inc. (HCP)
Market Cap: $19.8 billion
Dividend Yield: 5%
YTD Returns: 20%
Another twist on healthcare investment for the long-term is the the graying of America as baby boomers age. This is a megatrend that I talk about frequently, and one that I highlighted in early 2014 as a sure-thing megatrend for long-term investors.
HCP, Inc. (HCP) is a powerful way to play this trend, because it’s a REIT with a big mandate for dividends as well as a big player in healthcare-related real estate that makes it particularly crash-proof going forward.
Broadly, U.S. healthcare stocks are one of the best long-term plays you can make for both growth and stability. Between the demographic tailwind of the aging baby boomer population and the rise of insurance coverage under Obamacare, there is a strong “customer base” for many health-related businesses. HCP gives you access to this investment trend via its healthcare real estate portfolio that includes senior housing and medical offices.
HCP stock has a beta of 0.6, meaning it won’t give you a big upside move overnight. However, the power of this demographic shift will certainly deliver outperformance for those patient enough to wait on HCP.
To top it off, HCP, Inc. just reported strong earnings that beat expectations on both sales, profits and guidance — showing that there is momentum in the short-term as well as the long-term for this senior housing player.
Sure-Thing Stocks to Buy: Prudential Financial Inc (PRU)
Market Cap: $38.5 billion
Dividend Yield: 2.8%
YTD Returns: -9%
Beyond healthcare, there’s another important play on the graying of the developed world: financial and insurance stocks focused on providing older folks with wealth as they age, not health.
According to the U.S. Census Bureau, “In 2050, the population aged 65 and over (in America) is projected to be 83.7 million, almost double its estimated population of 43.1 million in 2012.”
That growth in older Americans should bode well for financial companies like Prudential Financial Inc (PRU) that focus on insurance as well as turning savings into lifetime income strategies — most notably, via annuities.
Prudential is the largest variable rate annuity provider in the U.S., selling a whopping $12.7 billion in the investment vehicles through the first six months of the year.
As annuities say in focus amid an aging population thirsty for income-oriented investments, Prudential will continue to do well. And on top of that, throw in the very high likelihood of a rising interest rate environment and PRU stock starts to look even better; insurance companies like Prudential often invest the “float” between monthly premiums and payouts for claims via short-term, low-risk investments that are sensitive to interest rates.
When rates rise, so do returns on this float. And an increase in annuity business coupled with this investment income makes PRU very hard to pass up given its decent dividend yield and a bargain forward price-to-earnings ratio of less than 9 right now.
Sure-Thing Stocks to Buy: First Solar, Inc. (FSLR)
President Obama just made a big splash recently with a climate change deal forged with China, with Beijing pledging to reduce carbon emissions just before the G-20 summit in Australia.
The deal is a big one, and the surest sign yet that even dirty coal-burning emerging markets have reached a point where they understand the importance of reducing pollution both for global environmental health as well as their own economic success.
First Solar, Inc. (FSLR) is poised to benefit big-time from this movement away from fossil fuels and carbon emissions. As one of the world’s leading alternative energy companies, FSLR produces thin film solar modules that are used by all manner of businesses and electric utilities to convert sunlight into electrical energy.
FSLR stock recently took a dive after earnings on weaker revenue and news that it wouldn’t be creating a “yield co” by spinning off solar power plant operations, but this provides a good buying opportunity for new investors. The bottom line is that even if First Solar isn’t ready to give income investors an income-oriented spinoff with more reliable revenue, the company still is riding a big megatrend as coal falls out of favor.
Weak natural gas and oil prices right now are making alternative energy less attractive, but that can’t last forever. And the will to go green around the world will ensure a strong baseline business for FSLR.
Sure-Thing Stocks to Buy: Monsanto Company (MON)
Market Cap: $57.4 billion
Dividend Yield: 1.65%
YTD Returns: +2%
Food is one of life’s necessities, and the growing global population makes Monsanto (MON) a must-buy for the megatrend of increased demand for food — and particularly “upper-class” food like chicken and beef that is increasingly in demand among emerging-market consumers.
Monsanto is one of the biggest agribusiness players in the world, and its seeds and herbicides help farmers plant in conditions that aren’t ideal and yield bigger harvests on their crops. This is important not just for the production of grains that are directly consumed by people, but also grains like corn that go into animal feed and help support the growing demand for beef and poultry in emerging markets.
Monsanto sometimes gets some bad press for its genetically modified and bio-engineered products, which don’t sit well with some consumer groups and environmental activists. That, coupled with the overall negativity for all commodity stocks in 2014, has held this stock back lately.
But the bottom line is that many modern agricultural practices are downright necessities — particularly in emerging markets. As long as there are many hungry mouths to feed, Monsanto will keep powering higher.
And considering its recently announced $10 billion stock buyback and eight consecutive quarters of revenue growth, investors should have confidence that short-term concerns about bio-engineered seeds can’t keep this stock down.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.