Google the words “fractional shares” and you’ll find more than 770,000 results. In an age where the democratization of investing is discussed daily, finding 10 stocks to buy for $1,000 has never been easier.
In August 2017, I recommended seven stocks to buy for $2,000. Except for a couple of disappointments – Markel (NYSE:MKL) and Acuity Brands (NYSE:AYI) – the results were excellent. I especially like my Shopify (NYSE:SHOP) pick at $98.61. Even with this week’s correction, it’s up 1218% over the past 3.5 years through Feb. 23.
In my 2017 article, I picked stocks whose share prices added up $2,000. The downside was Markel took up half the portfolio at $1,048.71. It’s done diddly squat since.
This time around, rather than pick 10 stocks whose share prices add up to $1,000, which is what you’d do if you were building a fractional share portfolio, I’m going to recommend 10 stocks to buy that trade around $1,000.
This one won’t be nearly as easy because a quick screen shows me that there are only 17 stocks (market capitalization of $2 billion or higher) with a share price of $1,000 or more. I’ll have to look below $1,000, but reasonably close.
For those who don’t have a large portfolio, you can always buy 1/10th of each company’s stock I recommend through your fractional portfolio.
- Sherwin-Williams (NYSE:SHW)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- MercadoLibre (NASDAQ:MELI)
- AutoZone (NYSE:AZO)
- Boston Beer (NYSE:SAM)
- Texas Pacific Land (NYSE:TPL)
- BlackRock (NYSE:BLK)
- Mettler-Toledo (NYSE:MTD)
- CoStar Group (NASDAQ:CSGP)
- Shopify (NYSE:SHOP)
Let’s get going.
Wanting to spread the love, I’ve got 10 stocks representing nine sectors, with only industrials and utilities left out of the mix. Sherwin-Williams, for those who don’t know the giant paint company, represents basic materials.
As I said at the beginning, I wanted to get as many stocks as possible on this list trading around $1,000. However, I also have a responsibility to put you into stocks that make sense for the long haul.
Sherwin-Williams is one of two stocks from my 2017 article. It’s up 105%, not including dividends. Over the past 15 years, it has an annualized total return of 21.0%. It is a foundational stock for any long-term portfolio.
On Feb. 17, the company raised its quarterly dividend by 23.1% to $1.65 a share. It is the 43rd consecutive year increasing its dividend. It also announced a share repurchase program to buy back 15 million SHW shares. That’s in addition to the 4.55 million shares remaining on its previous buyback.
On Feb. 3, it announced a three-for-one stock split that will happen on April 1 for shareholders of record on March 23. You can buy now around $700 or wait until it’s one-third the price.
Either way, SHW is a long-term buy.
Alphabet (GOOG, GOOGL)
Representing the communications sector, Alphabet is the most expensive of the 10 stocks trading at $2,060 as I write this. While it trades significantly above $1,000, by the time you average in the stocks below $1,000 – there are three – they all ought to total close to $10,000.
But I digress.
Any time you’re looking at investing in one of the four companies that make up the trillion-dollar club – the others being Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) – you have to understand that each of these businesses will continue to face intense regulatory scrutiny.
InvestorPlace’s Tom Taulli recently recommended Alphabet’s stock despite the fact it’s expensive at 34 times forward earnings. When you control a massive amount of the digital ad market and your cloud business is gaining traction, any valuation concerns ought to be a secondary worry.
The biggest issue continues to be whether it will go under the breakup knife. But even if that were to happen, shareholders would likely still benefit from whatever separation efforts are implemented.
The pandemic reminded us that Google still packs a pretty punch.
The Latin American e-commerce and payments company is the first of two choices in the consumer cyclical sector. While I like Amazon as an investment, I remain convinced that its stock at some point will get hurt by its inability or lack of interest in meeting the needs of its frontline workers.
For this reason, I’ve chosen MercadoLibre, a stock that I’ve liked as far back as May 2013 when it was trading slightly above $100. Now almost $1,800, it’s come a long way as a company and a stock.
In mid-February, ScotiaBank’s investment research team initiated MELI coverage with a “sector-perform” rating and a target price of $2,050. Based on its current price, the target provides a potential upside of 15%.
Given how far it’s come over the past eight years combined with a valuation that’s much higher than its historical norm, you might want to hold back for a correction in the overall markets before jumping on the bandwagon.
Then again, I could have said the same thing eight years ago. Good companies get higher multiples. It’s that simple.
My second consumer cyclical pick is AutoZone. I chose it primarily because Eddie Lampert once owned a big chunk of the auto retailer. In his old gig as an activist investor – and not a destroyer of one of America’s most iconic retailers – he acquired 12% of its stock in 1999.
Looking at AutoZone’s proxy statements from 1999 through 2012, Lampert’s investment fund, ESL Investments, owned 30.69 million shares as of Oct. 15, 2001. That was good for 29.4% of the company. As far as I can tell, that was the period in which ESL Investments held the most number of AutoZone shares.
Now, Lampert’s fund did just fine by selling out in 2012. At the time, shares were trading as high as $380, more than 13 times the share price in mid-1999 when the activist investor first bought into the company.
Care to guess how much that stake would be worth today?
At its current price of $1,181, ESL Investments’ shares would be worth $36.2 billion. Based on a share price of $58 on Oct. 15, 2001, that’s a compound annual growth rate of 16.8%. By comparison, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has a compound annual growth rate of 6.9%.
More importantly, Lampert’s investment firm would have $36 billion in assets under management, a number considerably higher than what he has today.
For investors, it’s a lesson that time in the markets matters. And it doesn’t hurt that AZO is still reasonably priced at 9.6 times cash flow, well below its five-year average of 12.6x.
Boston Beer (SAM)
I happened to be watching the NHL’s outdoor games at Lake Tahoe recently. The lead sponsor was Truly, Boston Beer’s version of spiked sparkling water. You’d have to be living in a cave somewhere for the past two to three years not to be familiar with the White Claw phenomenon.
Personally, I’m not too fond of the taste of the stuff, but I don’t think a 56-year-old bourbon drinker is its target audience. Anyway, if not for the advent of Boston Beer’s version of hard seltzer, the SAM share price would be a whole lot lower.
The question for future growth? What does it do for an encore?
As the company said in its Q4 2020 conference call on Feb. 17, Truly grew its volumes in 2020 by more than 100%, with its off-premise market share increasing 400 basis points to 26%. However, it expects all of the company’s brands to grow in 2021, including its core Samual Adams beers.
At first glance, you might think SAM is expensive at 7.4 times sales, double its five-year average. However, when you consider its PEG ratio (P/E divided by five-year earnings growth rate) is far less than its five-year average, you can take comfort that its second-place position in hard seltzers is filling the coffers faster than it can spend the largesse.
That’s an excellent thing.
I don’t know what its next big thing will be. What I do know is it’s building a solid group of alcoholic beverage brands. That’s good for long-term share price appreciation.
Texas Pacific Land (TPL)
I was hesitant to put an energy-related stock on the list of 10 companies. However, with oil prices coming on, it might make for perfect timing. Trading at $1,141 as I write this, Texas Pacific is one of Texas’s largest landowners.
How much land does it own? Approximately 880,000 acres in West Texas. It generates revenue by leasing those acres to oil and gas producers in the Permian Basin.
In fact, it’s got four major ways it generates revenue: surface access rights, oil royalty rights on more than 20,000 acres, they sell water to the oil companies who use it for hydraulic fracking, and they buy and sell land on a speculative basis.
In operation since 1888 and a public company since 1927, on Jan. 11, 2021, Texas Pacific Land completed its conversion from a trust to a C-corporation, allowing it to attract lots of institutional investors that it couldn’t under the trust structure.
Up 53% year-to-date through Feb. 23, TPL stock continues to be an intriguing way to play the resurgence in oil and gas.
BlackRock is a bet you can make for the long haul knowing that whatever happens in the financial and investment markets, the company will be there to manage your funds in the most professional manner possible.
And it doesn’t hurt that it has a reasonable 2.3% dividend yield for times like right now when it’s not keeping up with the performance of the markets as a whole. BlackRock has a YTD total return of 2.6% compared to 4.3% for the entire U.S. market.
However, over the past 10 years, it’s managed to outperform the markets by 119 basis points on an annualized basis or 15.1%. You might not get rich with BlackRock like you might with Tesla (NASDAQ:TSLA) or one of the other electric vehicle (EV) companies, but you’ll likely save more than enough over 20 or 30 years.
But there’s a big reason that you ought to consider BlackRock. It’s the fact that the company actually cares about the planet.
“Underlying our desire for greater disclosure on emissions baselines, GHG reduction targets, and transition plans is our conviction that climate risk is investment risk,” BlackRock stated in its February 2021 commentary on investment stewardship.
The world’s largest investment manager will continue to pressure companies in its portfolio to put in place plans to achieve net-zero emissions. That’s good news for owners of its mutual funds or ETFs. Those focused on sustainability outperform those that aren’t.
Mettler-Toledo International (MTD)
While I wanted to go with Intuitive Surgical (NASDAQ:ISRG) for the healthcare sector – it makes the da Vinci robotic surgical system – I did say I’d try to include as many stocks at or near $1,000 as possible.
As a result, my next best choice is the Ohio-based manufacturer of weighing and precision instruments for several industries, including life sciences, industrial and food retail.
The company recently introduced an x-ray inspection system that helps manufacturers identify glass, metal and other unwanted items found in the production of wet pet food, yogurt, soups, and other liquid-based products. As a pet owner, I’m glad to see it’s contributing to keeping our pets safe.
The business is doing well despite the pandemic.
In 2020’s fourth quarter, Mettler-Toledo reported sales that were 7% higher, excluding currency, at $938 million. On the bottom line, adjusted earnings were $9.26 a share, 6.2% higher than analyst expectations and 19.0% higher year-over-year.
Off to a slow start in 2021, history suggests it will get going soon enough. It’s got a 10-year annualized total return of 20.8%, significantly higher than its peers.
CoStar Group (CSGP)
In June 2020, I included the provider of real estate information in a list of 10 stocks with little or no debt to own for the 50 years. Eight months later, up more than 26%, nothing has changed to reconsider my pick.
At the time of my pick, I felt like the company’s acquisition of STR Global, a hotel real estate information provider, would be an excellent driver of growth. It turns out that wouldn’t be its last move to dial-up growth.
Under CoStar Group’s all-stock offer – 0.1019 shares of CSGP for each share of CLGX – CoreLogic shareholders would own 16.2% of the combined entity. Given it’s up 30.9% on an annualized basis over the past 10 years compared to 15.7% for CoreLogic’s stock over the same period, CoreLogic shareholders would be wise to take the company’s offer.
Regardless of what happens, CGSP stock will be at $1,000 in no time.
The last of 10 stocks, Shopify, represents the technology sector. While it recently had a rough week, down 11.8% over five days of trading through Feb. 23, it’s hard to feel sorry for long-time shareholders like Chief Executive Officer Tobi Lutke, whose net worth is $11.3 billion, according to Forbes.
As I said in the intro, Shopify’s been a big winner over the past 3.5 years, and I don’t see that changing despite the drumbeat of war at Amazon HQ. On Jan. 15, the Seattle company headed by the world’s second or first wealthiest person, Jeff Bezos, made a highly unpublicized purchase of Selz, an Australian competitor to Shopify.
InvestorPlace’s Louis Navellier discussed Amazon’s purchase of Selz, suggesting that whether or not it was part of the e-commerce behemoth’s internal project focusing on Shopify, Jeff Bezos is coming for the Canadian e-commerce platform.
Shopify’s U.S. market share for e-commerce sales is 5.9%. That puts it in second-spot, well behind Amazon at almost 37%. While it’s not going to be easy for Shopify to keep Seattle’s second-biggest company at bay, I think it can hold its own.
I’d look to buy SHOP whenever it corrects by more than 10% in a given week as it has in recent days. Long term, I think it will be a winning strategy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.