We all love lists that highlight the best investments of the past five, 10, even 25 years. It’s especially rewarding when you own one of these stocks that beat the odds and climbed the stock charts with reckless abandon — and you owned it all along the way.
It’s exhilarating, but it’s also rarely felt by most mere mortals — a big reason why we make the lists in the first place. It’s like a big lottery win where we marvel at the odds of winning so much money simply by buying a ticket.
There is a serious side to highlighting the best investments, though. It allows us in hindsight to look back at the trends from past years that drove stocks higher. And all the winners have one thing in common: They all had a catalyst generating those super-sized returns.
What catalysts will generate outsize returns in the future? That’s anybody’s guess. However, if you take a look at our list of the 10 best investments of the next 10 years, I think you’ll see where some of those trends should develop.
The Best Investments for the Next Decade: Alibaba (BABA)
Let’s start with a relative softball.
In May, I called Alibaba Group Holdings Ltd (NYSE:BABA) once of the 10 best growth stocks to buy now. Whether you’re looking for a sound investment for the short-term or over the next 10 years, Jack Ma’s company is definitely a large-cap stock you want to get behind.
Simply put, Ma is one of China’s shining stars, and although there are lots of people warning against the company’s complex accounting — including Herb Greenberg, who has been railing against BABA since it went public in 2014 — I believe Ma and Alibaba will prove the detractors wrong.
The thing I most appreciate about Ma is that he understands, much like Jeff Bezos, that brick-and-mortar retail isn’t dead. In fact, it’s essential to the future of retail — online and off.
I love the contrarian in him. I’m tired of reading about the death of retail. It’s just not accurate, and he knows it.
Much like the famous story about how Joseph Kennedy sold all his stocks before the market crash of 1929 because a shoeshine boy gave him a stock tip, the fact that ETFs are showing up enabling investors to benefit from the demise of brick-and-mortar retail tells me it’s time to go the other way.
Alibaba gives you a safer way to do that while betting on its very hopeful future.
The 10 Best Investments: Nuveen Real Estate Income Fund (JRS)
I’m a big believer that if you own your own home, you already have a big exposure to real estate and don’t need anymore.
However, if we’re talking about the 10 best investments of the next 10 years, I think it’s important that real estate is a part of the list; it’s just too big a part of the U.S. economy.
The Nuveen Real Estate Income Fund (NYSE:JRS), a closed-end fund, has roughly 470 million in total assets, $145 million of which is leveraged; 63% is invested in equity REITs, and 34% is invested in REIT preferred stocks. All told, the fund holds 82 stocks, and the wide majority of those belong to large-cap companies. Perhaps most impressive is the fund’s roughly 9% distribution rate — which is the kind of high-caliber income you can expect from mixing REITs and their preferreds.
The three portfolio managers who manage JRS have been with the fund since April 2006. Over the past 10 years, the fund’s market price has averaged a 3.3% annual return while its assets have appreciated by 2.9%, which suggests the fund over the past decade has traded at a premium to its net asset value.
Currently, however, JRS trades at 1.3% discount to NAV, making now a reasonably good time to buying this closed-end fund.
JRS charges 1.33% in expenses, or $133 annually on every $10,000 invested.
The Best Investments for the Next Decade: Lululemon (LULU)
I’m probably the only person who thinks Lululemon Athletica Inc. (NASDAQ:LULU) is the best mid-cap stock to hold for the next 10 years, and that’s OK.
I still believe Lululemon’s CEO, Laurent Potdevin, continues to make the right moves to position the company for future growth.
In April, I suggested that LULU should merge with Under Armour Inc (NYSE:UAA) to bring together two companies that could benefit from each of their strengths while filling some obvious shortcomings. Lululemon shares have gotten a boost in recent weeks over rumors on the flip side of the coin — that the company will be taken private by either a private equity firm or a strategic buyer.
I don’t believe either will happen, but you never know when it comes to M&A.
As for merging with Under Armour, that just got a little harder now that LULU is suing Kevin Plank’s company for allegedly infringing on the design of Lululemon’s Energy Bra, which retails for about $52 — almost double Under Armour’s sports bras.
I say “bravo” to Lululemon. It’s time that companies making quality products stand up to lazy, cheap imitations. Long-term, protecting its brand will pay dividends for its shareholders.
The Best Investments for the Next Decade: Paradigm Micro-Cap Fund (PVIVX)
If you’re going to invest in actively managed mutual funds, it’s my opinion that you’re best off seeking out funds whose holdings are in smaller companies where hands-on management might be able to make a difference, unlike large-cap stocks that are covered by the entire universe of stock analysts.
A small fund in a sea of large ones is the Paradigm Micro-Cap Fund (MUTF:PVIVX), operated by a mother-and-daughter investment team from Albany, New York, who opened the fund back in January 2008. Today, it has $41 million in assets under management and is routinely at the top of the Morningstar performance charts.
Top holdings include the likes of Extreme Networks, Inc (NASDAQ:EXTR) and Oclaro, Inc. (NASDAQ:OCLR). Honestly, unless you follow small- and micro-cap stocks carefully, you probably won’t be familiar with many of the stocks in this fund.
Candace King Weir (mother) and Amanda Weir (daughter) — thought to be the only mother-and-daughter team in the mutual fund business — get paid handsomely (MER of 1.25%) to follow micro-caps for you. And delivered nicely for their clients. Since inception, Paradigm Micro-Cap has delivered an annualized total return of 8.2% (as of March 31, 2017) — 124 basis points greater than the Russell Microcap Index.
Who said women don’t know how to invest? Not me, that’s far darn sure.
The Best Investments for the Next Decade: Stock Split Index Fund (TOFR)
The USCF ETF Trust (NYSEARCA:TOFR) is one of the better ETFs out there that uses both passive and active management to manage the fund’s assets.
Its premise is simple.
TOFR tracks the 2 for 1 Index — a group of 30 stocks that have all announced a 2-for-1 split or higher within six months of being included in the index. Once included in the index, a stock remains for approximately 30 months when it’s sold, and a new one is added to replace it. That’s the passive part.
The active role comes with the stock selection. Each month, one stock is sold from the portfolio, and another is added by Neil Macneale, the creator of both the “2 for 1 Newsletter,” which he started in 1996, and the index that followed in September 2014.
Although TOFR is expensive for an ETF at 0.55%, I believe that this is one of the best ways to invest in the U.S. markets while getting a little extra performance than investors are used to from the S&P 500.
The Best Investments for the Next Decade: CyberArk Software (CYBR)
This pick suddenly got a lot cheaper.
There’s no bigger problem for multinational companies than cyber threats that compromise their highest-value information assets held in the cloud.
Estimates put the annual cost of cyber attacks to the U.S. economy at $100 billion, or 0.64% of America’s GDP. That might not seem like a lot … until you consider that it costs the country 500,000 jobs annually. That’s a lot of people removed from the economy simply because of insufficient cybersecurity. And it’s only going to get worse.
That’s where CyberArk Software Ltd (NASDAQ:CYBR) comes into play.
CyberArk partners with more than 3,200 global businesses, including 45% of the Fortune 100 to protect their valuable information. In five years, its revenue and non-GAAP operating profits have grown by 503% and 729% on a cumulative basis. It continues to grow the top and bottom lines by more than 20% a quarter, and that growth is expected to continue for at least the next five years.
CYBR is just coming off a 17% haircut following an earnings warning, providing hints to the rest of the industry that the cybersecurity scares of the past few months (namely WannaCry and NotPetya) didn’t actually drive a sudden spike in business.
Stifel analysts seem to think differently, believing it’s possible that these ransomware attacks actually “disrupted sales cycles,” which means those purchases could have been pushed a couple months back.
CyberArk still has a sound balance sheet and lots of room for growth, plus it’s small enough that an acquisition is a very real possibility.
The Best Investments for the Next Decade: Vanguard Mid-Cap ETF (VO)
The Vanguard Mid-Cap ETF (NYSEARCA:VO) covers mid-cap stocks while avoiding dipping down into the small-cap arena, and it does so for just 0.06% — lower than 95% of its peers.
In other words, most of your money is going to the actual investments themselves and not the fund company.
With VO, you get 348 stocks invested across $86.1 billion in total net assets with a median market cap of $13.1 billion. These are decent-sized companies, many of which are still in the growth mode. This includes the likes of Equinix, Inc. (NASDAQ:EQIX) and Fiserv Inc (NASDAQ:FISV).
As I said before, I like this ETF because only 1% of the portfolio is invested in small-cap stocks; 64% goes to mid-caps and the remaining 35% to large caps.
The Best Investments for the Next Decade: Fuller & Thaler Behavioral Small Cap Equity Fund (FTHNX)
Behavioral finance has become a big deal in recent years, and that has led to the creation of funds such as the Fuller & Thaler Behavioral Small Cap Equity Fund (MUTF:FTHNX), which got its inception in September 2011.
Back in March, I suggested FTHNX is one of 10 mutual funds you could buy and hold forever. As far as I’m concerned, the next 10-year period qualifies.
This fund looks to buy a combination of small-, mid- and micro-cap stocks, and it earns five stars from Morningstar, which means it has outperformed most of its competition over the past three, five and 10 years. The fund charges 1.07% annually and tries to keep turnover to less than 100% to keep down costs. A $10,000 investment at inception is today worth approximately $24,000, well ahead of its benchmark and the S&P 500.
Investing in companies where investors have overreacted to bad news or under-reacted to the good news has led to superior performance. Given that investors consistently overreact to news of any kind, FTHNX should continue to do well in the coming years.
The Best Investments for the Next Decade: Cymbria (CYB)
Cymbria Corporation (TSX:CYB) is a stock that’s traded on the Toronto Stock Exchange, so that might present a problem readers. However, if your brokerage firm has access to the TSX — and many do — you should consider it.
It’s that good.
The guys and gals behind EdgePoint Wealth Management created Cymbria in 2008 after leaving Trimark, a well-known Canadian investment manager. The plan was to create a go-anywhere portfolio of high-quality stocks and provide investors with a significant ownership position in EdgePoint Wealth Management’s investment management business.
Having written about the financial advisor community here in Canada, I can tell you that EdgePoint is held in the highest regard by investment professionals; they flat-out earn their investment management fees.
Cymbria’s current portfolio consists of 39 publicly traded stocks along with a 20.7% ownership interest in EdgePoint’s business, the company’s biggest holding. For that privilege, shareholders pay an annual investment fee of 1.2%.
Since its inception in November 2008, shareholders have achieved a 17.8% annual return. If you’re thinking it benefited from perfect timing; think again. Since 2009, it has had positive calendar-year returns in seven out of eight years.
You want to own this.
The Best Investments for the Next Decade: Vanguard FTSE All-World ex-US ETF (VEU)
The beauty of ETFs is it lets you spread a wide net to capture as much of the world’s stock-market capitalization without paying a lot in fees.
The Vanguard FTSE All-World ex-US ETF (NYSEARCA:VEU) gets you 2,592 stocks in every part of the world except the U.S. including 19% of its $31 billion in total assets in emerging markets.
Investing primarily in large-cap stocks with an 88% weighting, investors get the world’s best companies at an annual fee of 0.11%, cheaper than 90% of VEU’s peers.
The top five countries regarding weighting are Japan (17%), U.K. (11%), France (7%), Germany (7%), and Switzerland at 7%. Year-to-date through July 12, the ETF is up 16.3%. Over the past five years, it has delivered a reasonable 8.4% total return.
There’s a reason that investors have poured more than $31 billion into VEU. It has Vanguard’s name on it, so you know it’s cheap and good giving you peace of mind with your global investing.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.