It’s hard to imagine that we’ll have another year like 2020 in our lifetimes and for the most part, that would be a positive outcome. However, the impact of the novel coronavirus over the past several months has created viable market opportunities. With so many stocks moving to the upside, many have chased hot sectors like technology. However, this is also an ideal time to consider retirement investments.
Yes, I realize that the topic isn’t exactly the sexiest that I can discuss. However, retirement investments are a concept that we must all think about – and the earlier the better. For one thing, this market segment focuses on reliable, blue-chip giants that have a long, proven track record. While it’s tempting to go for the get-rich-quick stocks, some of these hot names aren’t going to last.
How can I be so sure? Historically, a new industry or innovation immediately attracts a wide base of competitors. But over time, the best rise to the top. That’s why you don’t hear about old school web browsers like Netscape Navigator. Today, the world (wide web) runs on Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google. To avoid the all-or-nothing proposition, it’s better to have some exposure to reliable retirement investments.
Second, big blue chips tend to be resilient – usually far more resilient – compared to flavor-of-the-week growth stocks. No, there’s absolutely nothing wrong with adding growth names to your portfolio. Ironically, it’s harder to get to retirement if you load up exclusively on retirement investments. But with uncertainty over the horizon, the smart approach is to lever yourself to companies that can withstand shocks to the system.
Third, retirement investments generally pay dividends. Therefore, if the market has a down year, you can expect to have something from the mess. With high-growth ideas, you’re largely dependent on a bull market. In a bearish phase, they can become a liability. Again, with uncertainty in the air, these retirement stocks feel very appropriate at this hour.
Finally, don’t get the impression that retirement investments are tied to boring industries. As you’ll see, some of the most seemingly staid companies are levered to the 21st century economy, making them surprisingly relevant. Therefore, don’t judge these retirement stocks to buy on their cover alone.
Johnson & Johnson (JNJ)
Due to the novel coronavirus, pharmaceutical companies have suddenly become the hottest sector on Wall Street. Shocking and embarrassing scandals aside, Johnson & Johnson has also enjoyed a boost as one of the many competitors in the Covid-19 vaccine race. Of course, JNJ stock lost its headline appeal when Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) jumped to the lead with their messenger-RNA-based solutions.
Still, Johnson & Johnson could be a Covid dark horse, as a recent Forbes article argued. Most of the leading vaccine candidates will most likely require two doses, which poses logistical challenges. In addition, mRNA vaccines tend to have more stringent storage requirements. Unfortunately, this might not suit less-than-adequate healthcare facilities. On other hand, Johnson & Johnson’s candidate is a one-dose affair and doesn’t require freezing.
That of course would be a major plus for JNJ stock. However, even if the underlying company doesn’t get the green light, it’s still one of the better retirement investments available. No matter what, people are rethinking healthcare, which should benefit JNJ for years to come.
Personally, I’ve had a love-hate relationship with McDonald’s. While I understand its appeal in a non-pandemic situation, the resilience of MCD stock throughout this crisis has surprised me. On an anecdotal level, I’m always surprised to see huge lines at the McDonald’s drive thru. Sure, people want their fast-food fix, but isn’t this a time to support small businesses?
Nevertheless, this robust demand in the face of a health apocalypse should be encouraging to those seeking retirement investments. Further, the bullish narrative for MCD stock during this time has fundamental justification. According to Harvard Health Publishing, people tend to eat when stressed. And the effects associated with comfort or junk food exacerbates this dynamic.
Basically, McDonald’s is a cynical play on retirement investments. But when we get out of this craziness – and you’d figure there will be light at the end of the tunnel – the company would have established itself in the consumer consciousness, which was gravitating toward healthier fare.
Now that I think about it, that is a cynical argument too!
How do you know an American is lying? His lips are moving.
That might be the joke that everyone in the non-American world is telling each other. In recent press statements, President Trump asserted that he won the 2020 election despite corroborating evidence. Recently, CNBC published a story indicating that Trump filed a motion to join a Texas Supreme Court bid in an attempt to reverse Joe Biden’s electoral victory.
I’m an open-minded person, but if there’s no evidence, this could be the biggest ignominy in modern U.S. history. But what does this have to do with Coca-Cola and KO stock? When all is said and done, Americans love their junk food and sugary beverages. Sure, many pay lip service to healthy eating and all that jazz. But if you want to know what’s up, don’t listen to the words. Instead, watch what they put in their mouth.
To that end, the American consumer is addicted. Likely, they will be even more addicted post-pandemic. Why? With restaurants shut down, the grocery aisle became the exclusive battlefront. I’m sorry but that greatly favors blue chips like Coca-Cola. Hence, KO stock may have a longer upside pathway than we previously imagined.
Practically every major company that previously corresponded to their customers/clients by snail mail has at least offered the digital alternative. Of course, some folks will always prefer to have a paper record. But increasingly, especially with the emerging generation, digital is the way to go. It’s lightning quick and in the case of tax refunds, it eliminates physical theft. What’s not to like?
Well, I could counter with the threat of cyberattacks, but that’s not the point. When you look at a company like Verso, you can’t help but wonder if it’s too boring even for retirement investments. Levered to the paper business, VRS stock appears agonizingly anachronistic. Sure enough, with shares down nearly 34% year-to-date at time of writing, the critics have been proven correct.
Nevertheless, I believe VRS stock has long-term potential because of the e-commerce revolution. That’s right, I said e-commerce. How else would the products you buy on Amazon (NASDAQ:AMZN) get to you? Certainly, they don’t arrive at your doorstep in their native form (you’d be ticked off if they did!).
The information age economy still requires paper, lots of it. Plus, Amazon doesn’t pay a dividend.
Public Storage (PSA)
In a way, Public Storage got an invite to the cool table thanks to the A&E Network show, Storage Wars. Prior to the program, I just viewed the industry for its face-value premise: a place to store your crap. I didn’t realize that you can potentially make a killing bidding on abandoned storage units. But was the organic marketing enough to boost PSA stock?
When you’re looking at it from a strictly YTD performance perspective, it doesn’t seem like it. However, Public Storage is one of the surprisingly relevant retirement investments. For starters, the Wall Street Journal noted earlier this year that self-storage companies represent a safe haven against uncertainty. Obviously, the Covid-19 pandemic counts as a major source of fear and trepidation.
But another, more important catalyst for PSA stock is tied to demographic realities. As you know, with baby boomers retiring and incurring empty-nest syndrome, the incentive to own and maintain a big house declines significantly. Self-storage units offer a cheap platform to store items like large heirlooms, while the individuals can downsize to less-costly abodes.
If you’re looking for a tech play, arguably most folks would rather chase names like Advanced Micro Devices (NASDAQ:AMD) or Nvidia (NASDAQ:NVDA). I get it. They’re tied to relevant markets and burgeoning innovations. Best of all, they’re raking in huge profits for stakeholders, despite putting out year after year of ridiculous gains. Maybe the party can go on forever!
But if you’re focused on retirement investments, you may want to consider IBM. True, IBM stock has been in the doldrums for a long time. As well, the organization struggled to de-lever itself from its legacy businesses, which is still a challenge. But increasingly, “Big Blue” has forged pathways across multiple exciting sectors, including artificial intelligence, machine learning and cybersecurity. These areas will become more critical in the post-pandemic era.
Additionally, IBM has been acquisitive recently, securing deals that will bolster the company’s AI and cloud computing initiatives. Even better, many top level companies have been attracted to Big Blue’s hybrid cloud capabilities, which serve to automate IT, processes, and customer service, among other things. Thus, don’t overlook IBM stock – it just might surprise you.
With the incoming Biden administration bolstering an already-hot electric vehicle market, it’s no wonder why people continue to pile into names like Tesla (NASDAQ:TSLA). However, I think it’s fair to question how long this EV rally can last. While the platform is enjoying monstrous growth, we must also realize that we’re dealing with the law of small numbers. In the broader context, EVs represent a small fraction of total vehicle sales.
Still, if you’re into both EVs and retirement investments, you may want to check underneath Ford’s hood. As you know, the iconic automaker generated headlines when it placed the Mustang badge on its electric Mach-E SUV. Naturally, automotive enthusiasts cried foul, claiming that only two-door pony cars should be branded as Mustangs. But my argument is that this is a new world. And that means F stock wouldn’t survive if it listened to this declining consumer base.
But that doesn’t mean Ford is losing its gearhead street cred. For instance, the 2021 Ford Bronco will get an optional 7-speed manual transmission, which is quite remarkable. Since EVs will take time to displace combustion cars, F stock is an intriguing retirement play.
Magellan Midstream Partners (MMP)
Throughout this Covid-19 crisis, I’ve been bearish on pretty much anything oil related. However, if we’re talking about retirement investments, then this beleaguered sector deserves another look. While the present situation does not look good at all, we must also remember that we humans are a resilient bunch. Take away the immediacy bias and you’ll recognize that we are bound to recover, someday.
In this context, I’m going to finish this list of retirement stocks with Magellan Midstream Partners. On a YTD basis, MMP stock looks like it just got done with an MMA match, down 29%. However, shares have been moving higher shortly after election day.
While that may sound counterintuitive – Biden and the Democrats are big on renewable energy – the reality is that fossil fuels feature high-energy density. Basically, for a small cost in terms of space requirements, fossil fuels can generate much usable power. Sure, alternative technologies are closing the gap but they’re still some ways off.
Until green solutions take over, MMP stock will be relevant. Therefore, if you can handle some volatility risk, Magellan will probably surprise many contrarians.
On the date of publication, Josh Enomoto held a long position in F stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.