Every so often, InvestorPlace likes to have a little fun while providing readers with investment ideas and potential stocks to buy.
In May 2018, I wrote “10 Top Stocks Every Retirement Portfolio Should Have,” an article that recommended 10 stocks that ought to be in your retirement portfolio. The only catch: The first letters of the 10 stocks corresponded with each of the letters that spell out the word “retirement.”
So, for example, the “R” in retirement was represented by Rollins (NYSE:ROL), the owner of the Orkin brand, the champion of the North American pest control industry. The first “E” was represented by Electronic Arts (NASDAQ:EA), and so on.
Recently, I went back and looked at the performance of the portfolio over the past 41 months.
What I found was that the portfolio averaged a cumulative return of 48.7% through Oct. 25 compared to 57.6% for the SPDR S&P 500 ETF (NYSEARCA:SPY).
Undaunted, I’m going to give it another go.
Here is my revised version of the retirement portfolio. None of the stocks from this version are the same as the last one. To make it even more interesting, all 10 of the stocks are constituents of the S&P 500.
R: Royal Caribbean Cruises (RCL)
I must admit I’ve got a soft spot for Royal Caribbean Cruises (NYSE:RCL) stock. My wife and I were married on the Majesty of the Seas way back in 2005. Ever since then, I’ve tried to recommend RCL stock for long-term investors whenever it made sense, because the cruise industry has a high barrier to entry given the cost of new ships. Plus, the company itself is well run.
In mid-October, Macquarie analyst Paul Golding raised his rating on RCL stock from “neutral” to “outperform” while also upping its price target by $6 to $132, suggesting that it’s making big inroads in the Asian market.
Even better, CEO Richard Fain was named one of Barron’s top 30 CEOs for 2019. Oh, by the way, Fain was CEO when we were married and has been since 1988, making him one of the longest-running chief executives in the S&P 500.
E: Equinix (EQIX)
The Wall Street Journal recently suggested that because data center stocks such as Equinix (NASDAQ:EQIX) have more than doubled since the beginning of 2015, while the S&P 500 is up 50% over the same period, the headwinds they face make their stocks riskier to buy in the future.
While it’s hard to argue with regression to the mean, I think it’s fair to say that companies like Equinix continue to fill a need. Until that itch is fully scratched, I think there’s more than enough future performance available for owners of EQIX stock.
In the third quarter, Equinix’s revenue increased 9% to $1.4 billion while its adjusted funds from operations increased 17.5% to $472.7 million.
In 2019, the company expects revenues of at least $5.6 billion and adjusted funds from operations of $1.9 billion, a margin of 34%.
Slow and steady wins the race. I don’t see Equinix losing its focus over the next 3-5 years.
T: Tyson Foods (TSN)
The beef and poultry producer reported fourth-quarter earnings Nov. 12 that missed on both the top and bottom line. However, Tyson Foods (NYSE:TSN) stock rose by more than 7% on the company’s optimism for 2020.
“We’re very optimistic about fiscal 2020, and we currently expect to meet or exceed our long-term earnings algorithm of high single-digit adjusted earnings per share growth as we’re well positioned to take advantage of opportunities in the global marketplace,” CEO Noel White stated in the Q4 press release.
In 2019, Tyson’s overall revenues grew by 5.9% to $42.4 billion while its adjusted net income fell 11.4% to $5.46 a share.
As Tyson continues to invest in the plant-based foods craze, I would expect that its revenue and earnings projections will move higher over the next 3-5 years thanks to its Raised and Rooted brand. Recently, Tyson invested in New Wave Foods, a company that makes plant-based shrimp from seaweed and natural flavors.
Tyson Foods is saving the environment one investment at a time.
I: Intuitive Surgical (ISRG)
I think the only thing stopping Intuitive Surgical (NASDAQ:ISRG) from continuing to grow is the ongoing debate about the rising cost of healthcare. As Medicare for All continues to make the rounds leading up to the 2020 election, all healthcare companies have got to be concerned over what the discussions could mean for their little slice of the U.S. healthcare pie.
However, if the changes aren’t too jarring, owners of ISRG stock should expect revenues and earnings to continue to rise at a decent pace.
In the third quarter, the maker of the da Vinci robotic surgical system reported revenues of $1.1 billion, 23% higher than a year earlier, and higher than the consensus estimate of $1.06 billion. On an adjusted basis, Intuitive earned $3.43 a share, 21% higher year-over-year, and 47 cents better than analyst expectations.
“Intuitive Surgical reported a fantastic procedure quarter, which grew 20% driven by sequential acceleration in both U.S. and outside U.S. procedures,” Evercore ISI analyst Vijay Kumar said in a report to clients. “While there could have been some modest benefit from (number of business) days, it still was an impressive number.”
Generating an annualized total return of 26% over the past five years, the sky’s the limit for ISRG stock.
R: Roper Technologies (ROP)
I have to be honest. I’m not especially familiar with Roper Technologies (NYSE:ROP).
However, the company that calls itself “a diversified technology company” has certainly done well for its shareholders. Between 2003 and 2018, Roper’s total shareholder return was 1,084%, five times the return of the S&P 500.
Roper’s generated free cash flow, one of my favorite financial metrics, by the boatload over the past six years. In 2012, it had free cash flow of $639 million. In 2018, it was $1.4 billion, a compound annual growth rate of 13.6%.
More importantly, as its slogan suggests, it has a diversified group of businesses that generate between 12%-31% of Roper’s revenue. Plus it has EBITDA margins of 34% or higher for all of its operating segments.
I’m going to make sure I learn all I can about Roper over the next three years because I’m confident it will be one of the best stocks in my retirement portfolio.
E: Estee Lauder (EL)
On Oct. 31, Estee Lauder (NYSE:EL) cut its profit forecast for 2020 to $5.89 a share at the midpoint of earlier guidance. The cosmetic company’s stock fell on the news but it recovered some of those losses in the month of November.
With Brexit, Hong Kong and the U.S.-China trade war, it seems there’s no end to the problems facing Estee Lauder.
Not to worry. You won’t have to hold a charity event to raise money for the Lauder family, the company’s controlling shareholders. They’ve got plenty. And even though Piper Jaffray analysts downgraded EL stock to “neutral” from “overweight” on concerns younger shoppers aren’t buying makeup, it could still make more than $800 million in profits in 2020.
Trading off its all-time high of $207.50, a level it reached in September, Estee Lauder remains one of the best-run cosmetics and skincare companies anywhere in the world.
M: MSCI (MSCI)
Care to guess which investment has done better over the past five years?
Over the past five years through Nov. 11, EUSA’s total annual return was 9%. Meanwhile, MSCI, the company, had a total annual return of 39.2%, more than four times the return of the exchange-traded fund.
There used to be a saying that you were better off investing in the mutual fund provider rather than the provider’s mutual funds. Well, now the same thing applies to ETFs. At least, that’s the case for MSCI.
Of course, MSCI is so much more than an index company.
It’s also into analytics, ESG research and real estate analysis. Although these last two aren’t big enough to be included as a separate segment in its financial reporting, together, their revenues grew 17% in the first nine months of 2019, to $104.7 million. That makes the duo the fastest-growing part of MSCI’s business.
Ignore MSCI’s possibilities at your own peril. It’s a winner.
E: Expedia (EXPE)
Travel stock Expedia (NASDAQ:EXPE) was having a decent, if not a spectacular year on the markets until it dropped by 27% in a single day of trading.
“In our view, the most concerning trend is the reduced efficiency of SEO (search engine optimization) marketing as Google pushes ‘free’ links further down the page,” wrote Piper Jaffray analyst Michael Olson. “In particular, Google is favoring its own ‘Hotel Finder’ platform, along with other paid links, all of which are capturing more real estate on page one of the search results. Expedia is, therefore, having to resort to the use of higher-cost marketing channels, which is negatively impacting marketing ROI and Ebitda.”
I’ve worked for media businesses in the past that were caught in Google’s crosshairs. It can be difficult to right the ship once Google’s gone in another direction. Perhaps, in this instance, the government might want to revisit the company’s influence when it comes to search.
Expedia will figure it out.
In the meantime, it’s now trading at a forward price-to-earnings ratio under 14. Can you say, value?
N: Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is preparing to release its Q3 earnings report after the markets close Nov. 14. While I can’t speak to what the report will hold, I do know that a few analysts increased NVDA stock’s target price earlier in the week.
UBS upped its 12-month target on the chipmaker to $240, an increase of $45. It continues to rate NVDA a “buy.” Meanwhile, Deutsche Bank, who has a “hold” rating on the company, raised its target from $160 to $190, almost a 20% increase.
“All told, NVDA remains one of our top ideas as we have been focused on product cycle stories rather than ‘playing the semis cycle,'” UBS analyst Timothy Arcuri said in a note to clients.
Of the 38 analysts providing coverage on NVDA, only three have an “underweight” or “sell” rating on its stock with 26 giving it an “overweight” or “buy” rating. The average target is $203.53, below its current share price.
Perhaps this is why InvestorPlace’s Brad Moon is in no rush to recommend investors buy Nvidia stock before earnings.
However, long term, Moon believes Nvidia’s a winner. So do I.
T: Target (TGT)
Target (NYSE:TGT) CEO Brian Cornell took the top job at one of Minneapolis’ most successful companies. He’s since taken positive steps to return the discounter to its former glory.
What has that meant for shareholders?
As we get closer to the holiday shopping season, analysts have started to come up with their picks for the most successful stores. Target and Walmart are leading the pack.
“We believe Target is currently better positioned from a valuation perspective as shares are trading at a significant multiple discount versus Walmart,” Cowen analyst Oliver Chen wrote in a Nov. 7 note to clients. “Nevertheless, we expect shares of both companies to continue to work as respective management teams continue to successfully execute on internal initiatives and take additional physical and digital market share.”
In the past two second quarters, Target’s same-store sales have totaled 9.9%, the company’s best two-year showing in over a decade. Here, its digital sales actually outperformed its in-store numbers.
All signs point to a good holiday and beyond.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.