Have you ever heard the advice to “invest in what you know?” Some folks have been recommending this style of investing for years. However, when selecting stocks to buy, I think it’s fair to say that being familiar with the companies you own is a wise strategy.
That said, you can’t just pick the companies whose products that you use. I mean, if you owned Ford (NYSE:F) at around the time the company brought out the Pinto, you probably wouldn’t have fared very well.
So, you don’t want to be investing in products whose companies don’t make money. I mean, who among us hasn’t taken an Uber (NYSE:UBER) recently? But Uber isn’t sure to make annual profits in the next few years. On the other hand, though, if you shop on Amazon often (and don’t mind how they treat their frontline delivery people), buying shares of AMZN stock makes tremendous sense.
I call this strategy “everyday investing.” For this article, I’ve selected 10 companies whose products get me through my day. Additionally, each of them is growing sales and either generates significant cash flow or will do so soon.
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Morningstar (NASDAQ:MORN)
- Amazon (NASDAQ:AMZN)
- Apple (NASDAQ:AAPL)
- L Brands (NYSE:LB)
- Church & Dwight (NYSE:CHD)
- Henkel (OTCMKTS:HENKY)
- McCormick & Company (NYSE:MKC)
- Costco (NASDAQ:COST)
- Beyond Meat (NASDAQ:BYND)
Stocks to Buy: Alphabet (GOOG)
It would be easy to say that Alphabet made this list of stocks to buy because of its search engine — something that almost every person on the planet uses frequently. However, it’s actually Google Drive that is the heart and soul of my Alphabet usage. For me, it’s virtually indispensable.
Plus, even though founders Larry Page and Sergey Brin are selling some of their massive stake in the company, it’s hard to imagine the duo ever abandoning their ownership of GOOG stock completely. According to Forbes, Page and Brin have sold more than $440 million in stock over the past month, their first sales since 2017.
If you’re a long-time shareholder in GOOG, don’t freak out. These stock sales represent 0.2% of their combined net worth of over $200 billion. You might laugh, but to those two, $448 million is merely walking-around money. Nothing more.
I can remember when Joe Mansueto — founder of Morningstar and current Executive Chairman — acquired two of my favorite magazines, Inc. and Fast Company, in 2005. I thought that would be the beginning of a media empire.
For the most part, though, Mansueto has kept those two magazines separate from Morningstar, the financial information business he founded in 1984. Today, he still owns 45.1% (Page 14).
I recently tried a free trial of Morningstar’s premium subscription. For someone who spends a lot of time coming up with investment ideas, Morningstar’s been invaluable to my work. And, even though I ultimately felt there was too much information to digest to make the annual cost worth my while, I believe that MORN is one of the best and most reliable sources available for the retail investor.
So, if you’ve got more time to poke around its site, I think you can’t go wrong buying a subscription.
As for the company, Morningstar has grown sales and net income by an average of 15.1% and 17.8% annually over the past three years. In that time, MORN stock has also delivered an annualized total return of 22.6%.
Stocks to Buy: Amazon (AMZN)
Of all the names on my list of stocks to buy for “everyday investing,” AMZN stock gives me the biggest difficulty in recommending. However, it makes gobs of money. So, what’s the problem?
For me, the hang-up is that this company seems to want to sweep its labor issues under the rug, despite the fact that things have gotten so bad for frontline delivery drivers that they were considering unionizing.
Soon-to-be-ex CEO Jeff Bezos says he wants to do better — and I hope he means that. After all, as a CEO, I don’t think there’s any question he was a brilliant strategist and implementer of ideas. No doubt, a lot of people got rich because of his talent.
Generating almost $26 billion in free cash flow (FCF) in fiscal 2020 — 50% higher than in 2018 — Amazon took advantage of the tailwinds it experienced due to Covid-19. But has Bezos and AMZN made the world a better place? That’s debatable.
Still, the stock itself is hard to beat.
Recently, my wife suggested that I take a break from my iPhone. According to her, I was glued to the thing 24/7. But it turns out I’m not the only one.
In June 2018, Apple introduced “Screen Time” as part of its iOS 12 operating system. Essentially, the feature helps users control how they interact with their devices. Craig Federighi, Apple’s senior vice president of Software Engineering, said the following about the update:
“In iOS 12, we’re offering our users detailed information and tools to help them better understand and control the time they spend with apps and websites, how often they pick up their iPhone or iPad during the day and how they receive notifications.”
Since then, I haven’t paid close attention to the updates to Screen Time over the past few years. However, what I can say is that, after I set up some downtime with the feature, my usage has slowed. And that’s great.
Why should you care? It’s things like this — as well as privacy features — which users appreciate. And, while I’m sure plenty of the other phones can do the same things, Apple products overall offer superior quality and are often more user-friendly.
Basically, until Warren Buffett backs away from AAPL stock, I think it’s one of the top stocks to buy.
Stocks to Buy: L Brands (LB)
I don’t know about your household, but mine goes through hand soap like nobody’s business. Our brand of choice? Bath & Body Works.
Of course, the bad news for L Brands’ Bath & Body Works is that it’s still tethered to Victoria’s Secret, a brand that’s increasingly become something out of bad ’80s film. But the good news is that L Brands’ breadwinner for the past few years will soon be its own independent company.
In its first-quarter 2021 report in May, the company said that splitting the two businesses into separate public companies would happen in August. Now that can’t come soon enough.
For Q1, Bath & Body Works’ net sales increased some 93% year-over-year (YOY) to $1.47 billion. And compared to Q1 2019, sales still rose by nearly 60%. Over the same two years, Victoria’s Secret’s sales fell 7.0% to $1.55 billion. On top of this, Bath & Body Works made operating income of $380 million in Q1 for a 25.9% margin. Meanwhile, Victoria’s Secret made $245 million, a 15.7% margin.
The reality is that the days of multi-brand conglomerates are coming to an end. Instead, these two companies are better off as two separate businesses. But that also makes LB stock one of the better everyday stocks to buy.
Church & Dwight (CHD)
I’ve been a fan of Church & Dwight for many years. Back in April 2016, I recommended CHD stock, suggesting that it remained one of the better stocks to buy despite its perfect record — 10 consecutive years of positive annual returns. Since 2017, CHD stock is up some 70%.
So, how does this company gets me through the day? Most notably, I use its Arm & Hammer toothpaste regularly. However, if I looked real close, I’m sure I could find plenty more of its products in my daily and weekly habits. For instance, I also use Oxiclean as well as Arm & Hammer baking soda — and probably other CHD brands as well. The point is, this is a company that I can count on when it comes to consumer products.
Over the past three years, Church & Dwight has grown its annual sales and operating income by 9% and 12%, respectively. So, you’re not going to get rich owning CHD, but you will get double-digit returns over the long haul.
Now trading at 4.o1 times forward price-sales (P/S), it’s a little more expensive than it has been in the past. But, as I said, you will definitely do just fine with this name if you’re looking for a pick that’s long-term.
Stocks to Buy: Henkel (HENKY)
The only over-the-counter name on this list of stocks to buy, Henkel is basically a larger German version of Church & Dwight. The company has three operating segments: Adhesive Technologies (45% of overall sales), Beauty Care (19%) and Laundry and Home Care (35%). Some of Henkel’s top brands include Loctite, Dial, Persil, Snuggle, All and many more.
For Q1 2021, Henkel’s overall sales increased by 7.7% to 5 billion euros ($6.1 billion). The adhesives unit drove most those sales, with 13% organic growth. That said, all three of this company’s business units experienced organic growth in the quarter. Now, it expects organic sales of 4% to 6% for all of 2021.
In 2020, Henkel had sales of 19.3 billion euros ($23.5 billion) and an adjusted net income of 2.6 billion euros ($3.2 billion). Currently, HENKY stock is also trading at 1.83 times price-sales, well below CHD stock.
All told, consider this the value play of the bunch.
McCormick & Company (MKC)
The next entry on my list of stocks to buy — MKC stock — is near and dear to me for two reasons.
First, McCormick has owned Billy Bee Honey since it acquired the Canadian company back in 2008 for $75 million. At the time of purchase, Billy Bee had annual sales of $37 million and “60% share of branded honey sales to retailers in Canada.”
Second, I remember going to Billy Bee’s factory as a child. It was one of my earliest lessons about business.
Alas, I don’t use Billy Bee honey anymore. However, my wife could tell you that I put one of McCormick’s other brands — Frank’s RedHot — on virtually everything I eat.
McCormick paid $4.2 billion to acquire Reckitt Benckiser’s (OTCMKTS:RBGLY) condiments group back in July 2017. It was the biggest deal in the company’s history; MKC acquired Frank’s as well as French’s mustard and ketchup. I use all three.
As for financials, the company’s trailing 12-month free cash flow is $730 million, or 96% of its net income. In addition, its net debt is $5.34 billion (total debt of $5.6 billion – $260 million in cash and equivalents). That’s a manageable 23% of MKC stock’s market capitalization.
Stocks to Buy: Costco (COST)
Costco has continued to be the target of my household’s go-to weekly shopping trip over the course of the pandemic. From cases of ginger beer to large quantities of allergy pills, we always have things to pick up at this wholesale retailer.
If you’re a long-time shareholder in COST stock, you probably also appreciated the $10 per share special dividend it paid at the end of 2020. That dividend cost the company $4.4 billion. It has made three other special dividends since 2012.
Special dividends are my preferred method of dividend payment because it provides the company with flexibility while also enticing shareholders to remain on board for the long haul.
On top of a great dividend system, though, Costco’s membership fee provides its bottom-line profit, preferring to pass its savings on bulk supplier deals to its customers. And, in the case of the special dividend, to its shareholders.
Altogether, as business models go, you can’t beat this pick of the stocks to buy.
Beyond Meat (BYND)
Last up on my list of stocks to buy for “everyday investing” is BYND stock. How does this name play into my daily life? Well, I’m pescatarian and my wife is vegetarian. As such, we’ve tried many different brands of meatless burgers, hot dogs and sausages. But there’s no question in my mind that Beyond Meat is the best company in the business.
Of course, it’s safe to say that anyone who bought BYND stock at its initial public offering (IPO) price of $25 has had their fair share of ups and downs since its May 2019 debut. While up about 500% since the IPO, the stock has traded at or near $200 on two separate occasions over the past few years — back in both July 2019 and October 2020.
Moving forward, though, Beyond is installing new leadership as well. On June 4, the company announced that it had hired veteran Amazon finance executive Phil Hardin as its CFO to strengthen the management team. At the same time, it also announced hiring both a Chief Growth Officer and a Chief People Officer.
These moves indicate the business is getting prepared for lots of future growth.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.