After having learned from both good and bad experiences, veteran investors usually are pretty good at picking stocks. In most cases, they’re just maintaining an existing portfolio, picking one stock at a time to replace another that’s no longer a worthy holding. It’s a slow-moving journey.
Brand new investors, however, face a tougher task. Building a portfolio from scratch is not only daunting but also plain difficult. Between finding enough good names to fill out a fully diversified collection of stocks, determining the best time to step in and then learning to sleep when taking on a new kind of risk, it can be an overwhelming task.
But it doesn’t have to be.
Here’s a list of ten stocks to buy, hand-picked for their simplicity, but without sacrificing real opportunity. These stocks combine palatable risk and respectable reward, and each name ‘s outlook is easy to predict. In no particular order …
Walmart (NYSE:WMT) may not be the world’s very best-run retailer. But its status as the biggest retailer certainly helps offset some of the disadvantages of size. It can negotiate the best prices for inventory it sells, and its size allows it to offer the best prices to its customers. That sheer scale gives it a serious edge on any of its brick-and-mortar competitors.
It’s even made a dent in the unchecked dominance Amazon.com (NASDAQ:AMZN) has historically enjoyed on the e-commerce front. Last quarter’s online sales for U.S. Walmart were up 23% year-over-year, sustaining a long streak of strong double-digit-percentage growth.
Unlike high-tech companies, WMT has no wait-time for product development, and no intellectual property or patent nuances.
Bank of America (BAC)
Big banks like Bank of America (NYSE:BAC) are generally more subject to economic cycles than smaller banks are. And, they’re also more sensitive to interest rate changes than smaller rivals… for better or worse.
The advantages of size are still better than the downside though. For the same reason Walmart is one of the best stocks to buy for a new portfolio, BAC stock provides ideal exposure to the banking sector because it’s arguably the best-run of the largest banks.
Better yet, it’s generously sharing the wealth created by that work. After passing this year’s so-called “stress test” with flying colors, the bank won approval for its request to give $37 billion back to shareholders within the next year through dividends and stock buybacks. For perspective, Bank of America sports a market cap of $275 billion.
Unilever (NYSE:UN) isn’t exactly a household name for most U.S. investors… for a couple of reasons. One of them is the fact that it promotes its products’ brand names rather than the corporate moniker. The other is that it’s not based in the United States, nor is North America its primary target market.
U.K.-based Unilever is the parent of products like Breyers ice cream, Lipton tea, Noxzema facial products and dozens more you’ve never heard of because they’re only offered overseas.
Not only is Unilever a highly diversified play just because of the sheer number of products; it’s geographically diversified, too. Every day, 2.5 billion people use a Unilever product.
As far as industrial names go, Danaher (NYSE:DHR) doesn’t spend much time in the spotlight. This is a case, however, where boring can be beautiful. What the company lacks in pizzazz it more than makes up for in consistency.
Danaher is the parent company of roughly a couple dozen businesses. Some of them you’ve heard of, like Pantone, Backman Coulter and Alltech. Most of them are likely unfamiliar though… names like Ormco, Leica Biosystems and Phenomenex.
It seems like a lot to manage, and it is. Danaher manages it all quite well though, turning that extreme diversity into the foundation for a respectably consistent revenue and earnings growth machine.
Following the 2014-2015 debacle the energy sector went through, it would be easy to be soured on all oil and gas stocks forever. But here’s a little secret: though that meltdown was extreme, it actually wasn’t unusual or surprising. Energy stocks fell into the same downturn in 2008, in the late 90s and in the late 80s. Cyclical overproduction is, sadly, the norm.
But the biggest and best names in the business tend to survive.
Chevron (NYSE:CVX) is one of the biggest and best names in the business, and arguably the one to own if there’s only room for one in a portfolio.
Indeed, its relatively new CEO, Mike Wirth, has already made it clear he’s keeping the bigger picture in mind. In a recent interview he explained “Good times won’t last forever, so you can’t change your cost structure, or make unwise investment choices.”
If he can make that kind of sound thinking the new norm for everyone at the company, Chevron will be more than built to last.
Duke Energy (DUK)
No list of good stocks to buy is complete without a utility name. Duke Energy (NYSE:DUK) is the one that made the cut.
Duke Energy delivers electricity to 7.7 million customers spread across six different states, mostly in the south. It also services 1.6 million natural gas customers. And, with a market cap of $68 billion, it’s one of the biggest players in the utility business.
Translation: It’s not going anywhere. While its revenue may ebb and flow from time to time, its future is secure.
Sure, it’s not a high-growth business, but with such a strong dividend profile, it doesn’t have to be. The current yield of 4% makes for a nice bit of cash flow that most other investments can’t quite rival.
There was a point in time not too long ago with Microsoft (NASDAQ:MSFT) was on the verge of becoming a has-been. Although its operating system and productivity software made it an icon, cheaper and even free alternatives have since become readily available.
CEO Satya Nadella saw the writing on the wall, though, and adjusted accordingly. Not only did he shift the business model to one that monetizes customers ‘on the back end’ rather than collect money up-front from one-time sales of software, he made a point of making the company a monolith of the cloud-computing market.
Perhaps even better, the recurring revenue nature of the business model has made sales and earnings growth surprisingly consistent for the behemoth.
For years McDonald’s (NYSE:MCD) has supposedly been on its last leg, with observers claiming an aging shtick, an unhealthy menu and growing competition would derail the world’s largest restaurant chain.
McDonald’s keeps on chugging though, finding not just a way to survive, but thrive. As it turns out, low-cost food sold in a familiar environment is perpetually marketable.
And the company has become almost entirely focused on franchising restaurants rather than owning them outright because franchising produces higher-margin revenue. Running and owning stores is a big challenge. More and more franchisees are pushing back, complaining of costs they have no choice but to incur.
It’s not an existential problem yet, and likely won’t become one. But it’s the one thing new investors in MCD stock may want to keep an eye on.
Paypal Holdings (PYPL)
On a fintech landscape that includes Square (NYSE:SQ) and Bitcoin, it would be easy to view Paypal Holdings (NASDAQ:PYPL) as a relic that has no place in the future of money. Don’t let its age fool you, though. The oldest player in the digital payments space is not only the biggest but also remains one of the best because of its reach.
That said, also know that Paypal has its finger on the pulse of all the changes. The fact that it’s developed its own credit-card readers and cash register systems that manage inventory and customer relationships make it clear that simply being a middleman isn’t enough.
In other words, Paypal is more than ready for the cashless and payments revolution that’s quickly becoming inevitable.
Johnson & Johnson (JNJ)
Finally, add Johnson & Johnson (NYSE:JNJ) to your list of stocks to buy for first-timers just starting to fill up a portfolio.
It’s admittedly not an earth-shattering growth opportunity. Though it offers prescription pharmaceuticals like blockbuster drugs Stelara and Remicade, pharma accounts for only about half of J&J’s business, and it’s not exactly a groundbreaking drug developer. Moreover, there almost certainly is more fallout from the opioid crisis waiting to drag the stock but nothing that would threaten the dividend.
The other half of the company’s business is basics like band-aids and baby shampoo, and surgical devices. It’s solid, but not the stuff of double-digit top-line progress.
The tradeoff is worth it, though. Johnson & Johnson offers safety in numbers. The current dividend yield of 2.7% isn’t too shabby either, especially considering the company hasn’t failed to raise it in any years since 2000.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.