Retirement investors have been done a terrible disservice over the years. They’ve been told that they should move into dividend stocks and bonds in order to generate income for their retirement years, and stay away from growth stocks.
The problem with this approach is that inflation is not 3%. It is actually closer to a range of 8% to 10%. As a result, your retirement portfolio is improperly skewed towards investments that are not going to give you the return you need.
My investment advisory newsletter, The Liberty Portfolio, is designed to meet or beat the actual rate of inflation. One of the ways it does this is by zeroing in on some very carefully selected growth stocks for your portfolio.
Growth stocks are a critical part of any portfolio, including retirement portfolios. Here are suggestions for three stocks you may want to look at, and that The LibertyPortfolio either owns or is considering.
Growth Stocks for Retirement: Enova International (ENVA)
Enova International Inc (NASDAQ:ENVA) is an online consumer lender and a great addition to your list of growth stocks. It is growing its slate of products both domestically and in the United Kingdom, as well as starting to build a portfolio in Brazil. Its underwriting continues to be exceptional, and loan losses have been stable at their historical levels. Enova remains, in my eyes, the premier online consumer lending operation, growing earnings at an exceptional rate.
There is some additional good news. The new head of the Consumer Financial Protection Bureau has indicated that he may curtail the onerous rules that were issued by his predecessor regarding payday lending.
In addition, the payday loan trade association has filed a lawsuit against the Bureau, in which it alleges that the Bureau’s rule have no evidentiary support, that research there fails to show any consumer harm, and that the rules put in place are a de facto control of interest rates, which is beyond the Bureau’s power.
If this payday loan rule goes away, Enova will expand back into this extremely lucrative business. It was making money hand over fist and growing at an astonishing clip until the CFPB got involved. If this payday loan rule is completely overturned, I believe Enova could become even more profitable.
Growth Stocks for Retirement: Apple (AAPL)
Apple Inc. (NASDAQ:AAPL) just crushed it again in the last quarter, and along with all the cash it is repatriating, it is what is known as a “GARP” stock. That’s an abbreviation for “Growth at a Reasonable Price.” We don’t want to overpay for growth stocks. It’s easy to do.
AAPL stock has $266 billion of cash and investments, offset by $101 billion in debt on its balance sheet. AAPL will pay up about $40 billion in taxes on that money, meaning AAPL stock has a net cash position of about $25 per share.
With today’s market cap of $949 billion, the market places a value on Apple’s business at $771 billion. With $58 billion in TTM net income, AAPL stock only trades at 13.3x net earnings. Analysts estimate 13% annualized growth going forward.
However, I add a 10% premium for each of these: robust free cash flow, strong cash position and irrefutable worldwide brand name. AAPL stock is a cheap growth stock for retirement.
Growth Stocks for Retirement: AT&T (T)
AT&T Inc. (NYSE:T) delivered decent, if not outstanding, earnings the other day. Investors sold the stock off. AT&T stock is trading at $31.54. Along with a yield that now exceeds 6%, I think we are going to see income investors and bottom fishers step in here.
More to the point, the antitrust trial regarding AT&T’s merger with Time Warner Inc (NYSE:TWX) is over. By all accounts, including my own, AT&T probably crushed the DOJ in the trial. The judge will rule on the case by June 12, and I believe the merger will go through. With that, AT&T will transform into a completely different company and become a great member of the growth stocks community. As a result, this combined entity will be a media and advertising powerhouse.
Even if the merger is not approved, not only T but also TWX remain excellent media companies. You can buy either entity here for growth for your portfolio.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns calls on TWX stock. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at [email protected].