Let’s assume you’re a beginner investor with a reasonable chunk of capital to direct toward the market — in this case, a $5,000 chunk. Of course, I assume most new investors don’t jump into the market with that much money and look for stocks to buy. However, for the sake of argument, let’s just assume it’s true. And $5,000 is a strong position to start from.
Further, for the sake of this article, let’s also assume our hypothetical investor isn’t going to sink all $5,000 into a single stock. That’d be too risky and any beginning portfolio ought to be diversified. So, we’ll divide the capital evenly across 10 picks then, leaving $500 per stock.
Finally, since diversification is key, we should also allocate capital by sector as well. One way to do that is to follow the sector weighting of the S&P 500. However, that would lead to a more heavily tech-oriented portfolio, since tech comprises 28%. Because of that, I’ll instead opt to recommend a single stock from each of its top 10 sectors.
So, without further ado, here are 10 stocks to buy if you have $5,000 to spare.
- Taiwan Semiconductor Manufacturing (NYSE:TSM)
- Health Care Select Sector SPDR ETF (NYSEARCA:XLV)
- Nike (NYSE:NKE)
- Visa (NYSE:V)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Manpower Group (NYSE:MAN)
- Costco (NASDAQ:COST)
- NextEra Energy (NYSE:NEE)
- Crown Castle International (NYSE:CCI)
- Nutrien (NYSE:NTR)
Stocks to Buy: Taiwan Semiconductor Manufacturing (TSM)
In my opinion, when it comes to stocks to buy, any consideration of tech stocks should strongly favor semiconductors. The Semiconductor Industry Association, though clearly biased, hits the nail on the head in terms of the importance of semiconductors in our modern world. They refer to semiconductors as the “brains of modern electronics.” Beyond that, most everyone has now become aware of the importance of these chips during the pandemic.
Taiwan Semiconductor Manufacturing is the most important firm within this sector. It’s the world’s largest semiconductor foundry. That means it doesn’t design, manufacture, or market any products under its own name. Rather, it provides all of those services to the chip makers that keep the economy moving.
TSM stock is an easy pick from the tech sector. Following the rules I set out above, $500 would get an investor 4.29 shares of TSM, which traded at $116.42 on Dec. 13. There’s strong reason to believe those shares will appreciate in price. Consensus expectations are that revenue will increase by 30% in 2022, reaching about $74 billion. Hitting the average price target of roughly $144 per share seems entirely probable here.
Health Care Select Sector SPDR ETF (XLV)
Next up on this list of stocks to buy is XLV. One of the simplest and most effective methods of playing the stock market is to invest in ETFs, or exchange-traded funds. ETFs track a broad asset grouping like an index, a sector, or a commodity. They are a great vehicle for investors seeking overall growth from a niche of the market while avoiding the risk inherent to picking a single stock within a sector.
Because healthcare is such a broad sector, it’s probably most appropriate to go with an ETF. The benefit of the Health Care Select Sector SPDR ETF is that it exposes our hypothetical investor to names like Johnson & Johnson (NYSE:JNJ), UnitedHealth Group (NYSE:UNH) and some of the top pharmaceutical stocks. That’s true of any ETF, but given that healthcare stocks make up 13% of the S&P 500, an ETF is particularly good here.
With healthcare costs rising, XLV stock makes a lot of sense. An investment of $500 in XLV equates to 3.68 shares using the Dec. 13 close price. This pick has grown nearly 52% over the past three years.
Stocks to Buy: Nike (NKE)
The consumer discretionary sector is the next largest portion of the S&P 500, comprising 12.8%. Nike is a strong choice for stocks to buy within that sector. At nearly $167 per share as of the close of Dec. 13, the starter investor here is going to get three shares of NKE stock.
Nike stock is attractive because it simply continues to grow by most any measure. Over the past three years, shares more than doubled, rising over 127%. Over the last year, NKE has grown some 20%. In 2022, revenues should also rise to approximately $53.7 billion, from just over $47 billion in 2021. Long story short, more growth and increasing share prices are in store for this name.
Sometimes investing in the stock market is simply a matter of looking around your house, finding brands you believe in and directing capital toward them. Nike is one such case, among the strongest consumer discretionary picks out there. Will consumers continue to purchase this company’s goods when they have excess discretionary income? The answer is yes.
The next sector to tackle in our portfolio of stocks to buy is finance. Visa is a strong performer historically, but the stock has suffered recently. Since late October, share prices have been flagging. The news that took V stock lower? The earnings it released back in October.
One of the problems here is that 2022 revenue projections are being called conservative by some analysts. But the irony is that Visa topped revenue expectations of $6.5 billion in the third quarter, hitting $6.6 billion. Further, 2022 projections caused some folks to worry even more so.
In any case, though, V stock hit an inflection point to begin December and there’s a lot of upside baked into analyst expectations for Visa. The average target price sits at about $274 currently, implying strong returns given the Dec. 13 close price of $211. Personally, I’d expect V stock to end lower than that in 2022, given that revenue is anticipated to grow next year at roughly 14%.
A hypothetical $500 spent on V stock gives our starter portfolio approximately 2.37 shares.
Stocks to Buy: Alphabet (GOOG)
Next up on this list of stocks to buy is Alphabet. Communications services stocks are the next biggest component of the S&P 500, making up 10.8%. Of course, you’ve probably already concluded that our imaginary investor can’t buy an entire share of GOOG stock with just $500. That’s true — but it’s also no problem. Fractional share ownership is common. In this case, $500 buys you approximately one-sixth of a share for this starter portfolio.
Remember, though, Google shares have nearly tripled over the past three years. Just about no one expects it to reverse course. So, that $500 will grow.
There are thousands of narratives and directions one could discuss related to this company, but risks are quite relevant. Tech giants like this one are drawing more and more attention for the consolidation of power they exercise.
The risk of material regulations affecting this company looks to be increasingly likely, according to certain sources. That would suggest perhaps shying away from GOOG stock. However, Morgan Stanley strategist Michael Zezas believes the base case will likely result in only a modest increase in oversight for the company.
Manpower Group (MAN)
Unlike with GOOG, $500 can purchase multiple shares of MAN stock. In fact, at just under $94 as of the close of Dec. 13, that money buys over five shares for our starter portfolio.
There are a few reasons to assume those hypothetical shares should increase moving forward. For one, target prices sit at around $127 according to Tipranks, significantly higher than MAN’s current price. Secondly, Manpower should see revenues increase by approximately $1 billion in 2022 to more than $19.5 billion.
Manpower is a staffing management firm with operations across the Americas, Europe, the Middle East and Asia. In Q3, revenues grew by 12% across all of its geographies. Gross margins hit 16.6% as well, 80 basis points higher within the quarter.
Finally, MAN stock is also attractive in that it carries a dividend yielding 2.7%, or about $1.26 per quarter. Assuming that dividend payment doesn’t change, that equates to an extra $25-plus in returns over one year with a $500 purchase of shares.
Stocks to Buy: Costco (COST)
Next down on the list of S&P 500 industry weightings is consumer staples at 5.6%. Briefly, consumer staples are goods and services which have low cyclicality. These are the things that we spend money on regardless of the economic environment.
Costco is a premier player in this space. What’s more, the wholesale retailer recently proved how strong its operations are despite the pandemic.
Specifically, this company’s total revenue hit $50.36 billion for its most recent quarter. Wall Street had been expecting $50.15 billion. The strong results sent COST stock surging above $550 from the $525 level. The results were particularly strong given how tough ongoing supply-chain issues continue to be.
For the purposes of our stocks to buy starter portfolio, it’s best to wait a bit for prices to move lower. A $500 investment could perhaps buy a single share of COST sometime soon.
NextEra Energy (NEE)
The energy sector comprises roughly 3% of the S&P 500 and is the next sector up on this list of stocks to buy. Generally, investors associate the energy sector with oil. That’s changing, however. These days, that means investors are looking toward more diversified energy sources and energy stocks.
NextEra Energy operates Florida Power & Light, a utility in its namesake state. It also generates energy from a diverse set of sources including nuclear power, wind, natural gas and solar.
This company has become somewhat synonymous with green energy. That’s one reason to consider it — the attention will help drive more capital toward the firm. But more important is the fact that NEE stock is underpinned by strong operational performance. For Q3, net income reached $836 million.
For $500, our hypothetical starter investor gets 5.45 shares using the Dec. 13 close price. Revenues are expected to increase by 15.8% in 2022.
Stocks to Buy: Crown Castle International (CCI)
Next up on this list of stocks to buy is Crown Castle International, a REIT or real estate investment trust. REITs own and operate income generating properties. For investors who want exposure to rising real estate prices through dividends — and without the requisite capital requirements or management issues — REITs are a good deal.
The thing to understand about REITs is that investors should anticipate modest price appreciation. In the case of CCI stock, that will likely result in a $200 share price moving forward. This is modest, given the current price of around $193. But when you also consider the dividend, REITs like CCI begin to make a lot of sense.
The potential return for this name? If the total of 2.6 shares grow to $200 in price by 2022, that $500 is poised to become around $520.
That isn’t exactly attractive. However, we have to consider dividends as well. The 2.6 shares of CCI stock entitles us to 10.4 dividend payments (2.6 times four quarterly payments), totaling $15.28. That brings the total of $500 invested to a value of around $535, or a 7% return.
Last up on this list of stocks to buy is Nutrien, a Canadian chemicals firm. Materials is the 10th most heavily represented sector within the S&P 500, accounting for 2.5%. As a crop product company focused on potash, nitrogen and phosphate, Nutrien certainly fits the bill for the sector.
This company makes sense because there are multiple reasons to believe it will appreciate in price. For example, 2022 revenues are expected to reach $29.05 billion on average, up 10.7% over 2021 figures.
Further, analyst expectations are that NTR stock could move to $80.40, about 16% higher than the Dec. 13 close price. Nutrien’s dividend yield of 2.65% also bumps up that return even higher. The firm is coming off a record Q3 and with further growth anticipated, now’s the time to jump in.
On the date of publication, Alex Sirois did not hold (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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.