A few of Pittsburgh Steelers’ defensive players recently decided to make their pregame dinner while visiting the New York Giants a little more exciting by playing credit-card roulette, a game of chance that requires all the dinner guests to put a credit card into a hat. The waiter or waitress is then asked to pull out a credit card. The winner (or really the loser) foots the entire bill.
On this particular occasion, Steelers defensive end Stephon Tuitt was the recipient of bad luck, forced to fork over $2,000. The fourth-year player is a graduate of Notre Dame and was the 46th overall pick in the 2014 NFL draft.
Don’t feel sorry for Tuitt. He’ll be a free agent at the end of the 2017 season and he’s expected to get a big raise from his rookie contract.
NFL players can afford to play these kinds of games. The rest of us, however, have to make every penny count. So, rather than blow $2,000 on a dinner, I’m going to recommend seven stocks to buy for $2,000.
The only catch? One of them has to be for $1,000 or more.
Stocks to Buy With $2,000: Markel (MKL)
Stock Price: $1,049.71 (Aug. 22 closing price)
A month ago, I would have had several more choices over $1,000, including one of my favorites — Amazon.com, Inc. (NASDAQ:AMZN) — but the recent tech swoon has dragged their share prices below four digits. Therefore, to leave some dollars for the remaining six picks, I’m going to go with Markel Corporation (NYSE:MKL), an insurance company that’s often mentioned in the same conversation whenever investors talk about Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B).
Markel has three insurance segments: U.S., international, and reinsurance. Also, and this is the part that makes it similar to Berkshire Hathaway, is its non-insurance operations run by Markel Ventures, which includes manufacturing and non-manufacturing investments. In Q2 2017, its non-insurance operations generated $328.6 million, a 5.7% increase over the same quarter a year earlier (PDF).
It accounts for 21.9% of Markel’s total revenue in the quarter. Regarding operating profits, its non-insurance operations generated 16.3% of Markel’s $241.3 million in operating profits.
Add to that an underwriting profit of $110.6 million and net investment income of $99.3 million, and you’ve got yourself a pretty nice trifecta of profit generators.
Stocks to Buy With $2,000: Sherwin-Williams (SHW)
Stock Price: $339.03
With the big nut out of the way, we’ve got about $950 to spend on six different stocks, an average of $158. So, there is still plenty of leeway. Having already picked an insurance company, I won’t select Buffett’s company (although I want to). Instead, I’ll go for Sherwin-Williams Co (NYSE:SHW), a great company that’s sold off almost 8% in the past month as a result of second-quarter adjusted earnings of $4.52 a share, two cents less than the consensus estimate.
However, Sherwin Williams is still in the process of integrating its $11.3 billion Valspar acquisition which will help the company grow outside North America. When SHW announced the deal in March 2016, it said it expected to find $320 million in annual synergies from the combination along with immediately accretive earnings. Together, it would have $15.6 billion in annual revenue and $2.8 billion in adjusted EBITDA.
In March, I called SHW one of the best stocks to buy for the next decade. Nothing that’s happened since would make me change my mind.
Stocks to Buy With $2,000: Acuity Brands (AYI)
Stock Price: $181
It went onto deliver annual returns of 62.2% in 2013, 28.6% in 2014, and 67.3% in 2015. By the time it hit its five-year high of $280.89 around this time last year, I had begun to follow it once more. Since then it’s lost about $100 of its share price and is down 23%.
In June it reported third quarter earnings that were a little soft. Also, industry forecasts suggest that the North American lighting industry is going to continue to experience market softness through the remainder of the calendar year.
The company believes that it’s well positioned to benefit from an industry that will face environmental and energy concerns in the years ahead. A leader in the North American lighting market, I missed its big three-year run through August 2016. I’d rather be early to its stock going higher than missing its next big leg up.
Come 2018, expect AYI stock to start moving higher once more.
Stocks to Buy With $2,000: Apple (AAPL)
Stock Price: $159.78
I have a love-hate relationship with Apple Inc. (NASDAQ:AAPL). While I abhor its stance on its foreign cash and the taxes it currently would have to pay to repatriate it, I can’t help but love its current products and those in development. It might not be as adventurous as some of its peers when it comes to driving innovation, but it does enough to keep shareholders happy. Before splitting seven for one in 2014, it would have been a toss-up between AAPL stock and AMZN for my $1,000 pick.
Apple is investing $1 billion in developing its own TV shows for Apple TV. As many as ten programs are expected to be produced by two former Sony Pictures executives. Analysts see the content as another way for the company to boost its services revenues — a growing part of the Apple empire, something I wrote about in February.
Ultimately, the $1 billion investment by the company will appear to be a small one if it’s able to double its services revenue by 2020 as a result.
I think it can and will.
Stocks to Buy With $2,000: Estee Lauder (EL)
Stock Price: $105.21
I recently read an article that suggested the beauty and cosmetics business is about to go into the tank, but for the life of me I can’t remember where. Most of the negativity in the article seemed to focus on Ulta Beauty Inc (NASDAQ:ULTA) falling from grace as people decide to spend less on cosmetics and beauty care. Down 16% over the past year, a bad earnings report or two will slow a stock that’s been on fire the last three years.
What does this have to do with Estee Lauder Companies Inc (NYSE:EL)? Well, as ULTA goes, to some degree as a supplier, so goes EL. Estee Lauder’s fourth-quarter earnings results released Aug. 18 suggest its business is very healthy. Q4 2017 revenues increased 11% excluding currency to $2.9 billion while operating income in the quarter increased 60.8% to $230 million.
Last November, I recommended that investors buy Estee Lauder, a stock that was down, but in my opinion, not out. Since then it’s up 36.3% through Aug. 21. Long term, Estee Lauder is a stock that’s not going to disappoint. Rarely in recent years has it traded below $80. Its stock is one to buy on weakness.
Stocks to Buy With $2,000: Shopify (SHOP)
Stock Price: $98.61
I couldn’t ignore one of the hottest stocks trading in both the U.S. and Canada. Shopify Inc (NYSE:SHOP) is up 138% year to date on top of 66.2% in 2016.
If you’re a small- or medium-sized business, you’ve likely heard of the Canadian tech company that’s been compared to lofty stocks such as Amazon as it continues to scale its e-commerce platforms.
My InvestorPlace colleague Laura Hoy recently discussed the reasons to buy SHOP stock. While she does caution investors that it’s not a cheap stock, she also reminds readers that it’s changing e-commerce for the better. When you help businesses make money while also saving them time, you’re onto something big.
“Shopify is still just a fraction of the size it could become — I wouldn’t be surprised to see SHOP stock grow to 10 times its current size over the next few years,” wrote Hoy. “E-commerce only accounts for about 8.4% of the total retail sales in the U.S. I think that figure will grow exponentially over the next decade and Shopify will expand right alongside it.”
Need I say more.
Stocks to Buy With $2,000: TJX Companies (TJX)
Stock Price: $71.60
If you haven’t heard of TJX Companies Inc’s (NYSE:TJX) various retail brands including TJ Maxx, Marshalls, Home Goods and many others, you’ve been living under a rock somewhere.
Known for selling discounted merchandise that others couldn’t at full price, TJX was thought to be one of the few retailers immune from the downturn in brick-and-mortar retail. But then it delivered weak first-quarter results May 18, and its shares hit the skids falling a few dollars on the news. However, its Q2 2018 earnings released Aug. 15 seems to have put a floor under its stock price.
I believe it’s now ready to begin climbing higher once more. Same-store sales growth was 3% in the quarter, higher than the company plan, and earnings per share excluding currency increased by 9.9%, a sign that business is still good — especially in Canada where same-store sales grew 7% in the quarter on top of 9% in 2016.
The Sierra Trading Post concept continues to grow brick-and-mortar locations to go along with its online business. It opened four new locations in Q2 2018. It now has 16 open, which is up from the four outlet stores it had when it acquired the internet retailer back in 2012.
I see this being a major growth driver in the years ahead despite retail’s overall lethargy.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.