Millennials often find themselves as the butt of the joke, but in today’s stock market, they’re the group that will have the last laugh. Since Boomers have a much shorter investment timeline, they have to make stressful buying and selling decisions. Meanwhile millennial stocks are far easier to come by.
As Michael Clark, Ph.D., Associate Director at the Center for Business and Economic Research at the University of Kentucky pointed out — millennials are seeing a truly massive dip first the time, but it can be a good thing if they’re looking for stocks to buy in their retirement accounts. Most have 20-30 years before reaching retirement age, leaving plenty of time for the stock market to recover before they need those funds.
Specifically, Clark states the following when addressing the subject of millennial stocks:
“Equity investments generally perform well in the long run, but they can experience significant losses at times. It took five years for the stock market to fully recover from the losses during the 2008 recession, but the market did come back and provided strong returns for many more years. Millennials should consider the amount of risk they can tolerate at different points in their life. As they get closer to retirement, they might not have time to wait for the market to recover and should then look for more conservative investments.”
With that in mind, here are three of the best stocks for millennials with varying degrees of risk.
While buying shares now amid economic uncertainty is inherently risky, finding investments that haven’t risen as far as the broader market during the recent jump can be even trickier. However, by looking at industries facing more pain ahead, millennials can find worthwhile investments that, given some time, can produce results. Let’s dive a bit deeper into what makes each of these promising stocks for millennials to buy.
Millennial Stocks to Consider Now: Chevron (CVX)
It would be impossible to talk about risky stock picks without including an oil play. The price of oil has been on a wild ride over the past few weeks as oversupply and a price war between producers flooded the market. Now, as the world runs out of places to store it, oil prices continue to suffer.
But that doesn’t mean oil stocks will never recover — in fact, a longer timeline makes the energy sector a good place to look for risky stocks for millennials. CVX stock is down nearly 30% so far this year and investors are likely to continue seeing turbulence ahead.
In the long term, Chevron looks well-positioned to come out ahead. For one thing, the firm is part of the oil industry’s “big five.” That means CVX has size and diversification on its side, so it can continue to make money from other parts of its business. Smead Capital Management’s Cole Smead pointed to Chevron’s relatively strong balance sheet and conservative spending as a big reason it stands out from the rest of the oil majors in times of crisis. In fact, the analyst stated that CVX is “the biggest one we think will benefit on a balance sheet basis.”
Assuming that analysis is accurate, CVX stock should be an ideal long-term pick for millennial investors.
Ralph Lauren (RL)
When it comes to consumer products, everyone is looking at companies selling personal care items, food and other necessities. That’s because the inevitable recession in 2020 is likely to expedite the failure of several retailers that haven’t quite caught up to the shift in consumer behavior. But not all retailers are created equally, and clothing brand Ralph Lauren looks well-positioned to ride a recovery wave once people start shopping again.
RL stock is down 40% from its February highs. Some of that is deserved; with unemployment at all-time highs, the last thing on consumers’ minds is their wardrobe. So, as the U.S. reopens its economy, it will take time for the stock to make its comeback. But unlike many of its peers, RL stock is backed by a strong balance sheet and the company has very little debt. That’s essential when it comes to riding out turbulence.
RL has a debt-to-equity ratio of 18.8. To put that into perspective, competitor Levi Strauss & Co (NYSE:LEVI) sports a debt-to-equity ratio of 62.3. Without a ton of debt to service, Ralph Lauren will have more room to maneuver through the novel coronavirus crisis and come out the other side stronger. Plus, with nearly $2 billion in cash on the balance sheet, the firm looks like a solid pick for those with an appetite for risk.
Of course, not everyone wants to load up on risk-heavy stocks heading into a recession. But that doesn’t mean millennials should avoid investing altogether. Now is a great time to upgrade your portfolio by picking quality stocks that will deliver for years to come at a discount.
Right now, five big tech firms are driving the market — Alphabet, Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL). All five have seen their share prices recover substantially in the wake of the pandemic as people continue to rely on technology amid shutdowns.
While all five have recovered since the new virus sent markets into a tailspin, Alphabet has seen the least love among investors. Amazon is actually trading 12% higher than it was in mid-February, while Apple, Facebook and Microsoft are down between 6% and 12%.
GOOGL stock, on the other hand, has lost 16% since mid-February. A big reason for that is investors’ worries regarding advertising spend — especially among travel companies. Google is undoubtedly exposed when it comes to a pullback in ad spending, but the tech giant is more than prepared to get through it.
Google is sitting on $90 billion worth of cash with only a minimal debt obligation. That puts the firm at a huge advantage moving into a recession. It will allow Google to invest in its own growth, perhaps through strategic acquisitions, and come out the other side of this crisis a winner.
Laura Hoy has a Finance degree from Duquesne University and has been writing about financial markets for the past 8 years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.