Special Report

The “Perfect 10” Portfolio

The naysayers would have you believe the market has shifted dramatically, and that profits are increasingly hard to come by on Wall Street.

Don’t believe it!

The market continues to hit new highs like clockwork. And while some stocks are suffering, such as zombie retailers like Sears (NASDAQ:SHLD) and JC Penney (NYSE:JCP), there are a ton of opportunities out there in technology stocks, healthcare stocks, European stocks and other areas of the market.

You just have to know where to look, and when to buy.

There are admittedly reasons to be cautious. Donald Trump continues to be a very unconventional leader, and the media can’t seem to talk about anything else other than the possibility of a meltdown in the White House.

At the same time, growth in the U.S. economy remains sluggish and our eight-year bull market definitely is getting long in the tooth.

But some investors seem to forget that the S&P 500 is up by double-digits and continues to set new all-time highs like clockwork.

And while sitting things out may feel smart or safe, you simply cannot afford to leave that kind of money on the table right now.

But if you want to play this rally … what’s the best strategy?

To help you answer that question, I’ve created a “Perfect 10” portfolio of 10 powerful stocks — including three low-risk bedrock stocks, three high-yield dividend machines and four “profit rockets” for impressive capital gains. Together, these stocks balance out to the perfect combination of growth and stability.

After reading this report, if you have any questions or concerns about these stocks, please contact me via email any time at editor@investorplace.com.

Thanks for your interest in InvestorPlace, and best of luck in 2017!

Signed Jeffrey P. Reeves

Jeffery P. Reeves
Executive Editor, InvestorPlace.com

3 Low-Risk Bedrock Stocks

Every portfolio needs a firm foundation of investments that will weather anything the market throws your way. But while investments like cash or U.S. Treasuries seem to be safe on the surface, it’s important to remember that these instruments offer next to nothing in actual growth of your investment.

The solution, then, is to rely on solid companies that will not only preserve your savings in tough times but deliver significant growth during the good times.

Here are three great options for those investors looking for stability without sacrificing growth.

Bedrock Stock #1 – Duke Energy

  • Sector: Utilities
  • Buy Below: $89

Utilities have long been considered among the most stable stocks an investor can buy. That’s because utilities are highly regulated, and effective monopolies in many regions provide reliable cash flows to these corporations that are unmatched in other industries.

Duke Energy Corp (NYSE:DUK) offers a very solid investment for these reasons, but also offers much more. For instance, while some utilities are struggling with no-growth operations, DUK stock will see revenue grow more than 7% this year according to analyst estimates, and initial forecasts for 2018 show modest sales growth next year, too. The company also has met or exceeded profit expectations for four consecutive quarters, and is set to see EPS move higher both this year and next, too. That’s a big reason for Duke’s outperformance year-to-date in 2017.

Furthermore, many utilities are now trading for a higher price-to-earnings ratio than the broader S&P 500 thanks to their popularity. However, Duke still trades for a more modest valuation even amid this outperformance.

Throw in a 4% dividend, and there’s a lot to like about this bedrock stock.

Bedrock Stock #2 – Johnson & Johnson

  • jnj stock Johnson & JohnsonSector: Healthcare
  • Buy Below: $140

Johnson & Johnson (NYSE:JNJ) is a dominant brand with a place in all family budgets. While it does have a wide footprint in the healthcare industry, its products include Listerine mouthwash, Neutrogena skin care products and Tylenol medications that make JNJ as much of a staples stock as anything else.

If you’re looking of a measure of stability, too, consider that Johnson & Johnson is one of just two corporations with a AAA credit rating — Microsoft Corporation (NASDAQ:MSFT) being the other one.

While some investors may have lost faith in Johnson & Johnson in the years after the Great Recession where growth was hard to come by and the company seemed stuck in a rut, the past few years have proved those days are behind J&J. The $350 billion behemoth is tracking roughly 5% revenue and EPS growth this year, and could top those metrics in 2018 if forecasts hold. Those are impressive numbers for a company this size.

The icing on the cake is a dividend around 2.5% — not as nice as the high-yield plays we will get to later, but still a decent sweetener for a bedrock stock you’ll likely hold for many years without trouble.

Shares are up by double-digits so far in 2017, so pay close attention to the “buy below” price on this pick to ensure you’re not chasing it. Buying on dips will ensure you enter at a much better price — and trust me, any drop in this rock-solid pick is sure to reverse in short order, so see dips as the opportunities they are.

Bedrock Stock #3 – Deutsche Bank (DB)

  • Deutsche Bank (DB) LogoSector: Financials
  • Buy Below: $18

Many investors no longer thing of financial stocks as safe in the wake of Lehman Brothers and Bear Stearns. However, it’s important to remember that financial services companies are very integrated into the global economy — like it or not.

In the case of Deutsche Bank AG (NYSE:DB), you’re getting a European powerhouse that isn’t going anywhere — and even better, a stock that’s trading at less than half its tangible book value of around $40 a share!

There’s a price when even financials, which are admittedly more cyclical investments, become pretty darn low-risk. And DB stock is at that level.

Yes, earnings are set to decline this year and revenue should be flat. But the rock-bottom valuation of this stock makes that performance very much priced into the stock. So if things remain challenging, Deutsche Bank simply remains constant. But if metrics improve — a real possibility after German GDP accelerated to start the year — a bargain buy of DB stock could prove quite profitable.

Lastly, it’s important to acknowledge the importance geographic diversification in your portfolio. If you really want a stable foundation for your investments, then you need to consider looking overseas as well as at U.S. equity. Deutsche Bank offers that diversification in an NYSE-listed company, making the process very accessible for any investor.

3 High-Yield Dividend Machines 

After you have a firm foundation to your portfolio, it’s important to put that money to work for you in a reliable way. And the most reliable investments on Wall Street are dividend stocks that deliver big yield as well as increasing share prices.

Not all dividend stocks are created equal, of course. Many troubled retailers pay huge dividends right now … but could very well see those payouts slashed as operations struggle.

If you can find stocks that combine a big payout with big upside potential, however, your portfolio will be well-positioned for anything the market throws your way.

Here are three such picks:

Dividend Machine #1 – Ford 

  • Ford logo ford stock gm f stockSector: Consumer Discretionary (Automaking)
  • Buy Below: $13
  • Dividend Yield: 4.9%

Ford Motor Company (NYSE:F) has admittedly not been doing well lately, with shares losing about 30% from their summer 2016 highs through their August lows. The reasons have been pretty simple — flat revenue, earnings that have been mixed and an overall expectation of weaker vehicle sales in the industry across the next few years.

But come on. This is a stock with a huge 5%-plus dividend yield that is a mere third of next year’s projected earnings! That large, easily funded payout alone makes Ford worth a look.

Also, recent headlines show that Ford isn’t just standing still. The company is willing to make hard choices to appease shareholders, including significant layoffs. There are also signs of life in its European operations even as the U.S. arm of Ford slows. If Europe really is breaking out of a funk in 2017, then this is a very encouraging sign for this automaker.

And perhaps the biggest sign of all? Ford recently let go of its CEO, a longtime industry veteran, and promoted the head of its autonomous car unit as a nod to the importance of emerging technologies in the automotive market.

The big drag here is, of course, the decline of high-margin trucks in North America. But the huge dividend and a rock-bottom valuation right now makes me inclined to give Ford stock a chance at the right price.

That price is under $12 a share, providing a 5%-plus yield on your cost if you stay under that mark.

Dividend Machine #2 – Omega Healthcare

  • Sector: Real Estate (REITs)
  • Buy Below: $33
  • Dividend Yield: 8.1%

Healthcare real estate and senior living properties are as close to a sure-thing as you can get right now. Thanks to the unending march of demographics, more older Americans are creating big demand for senior living space. And when you find the right company, structured as a tax-sheltered real estate investment trust (REIT), it’s all the better.

That’s what Omega Healthcare Investors Inc (NYSE:OHI) offers investors. That, and a tremendous 7%-plus dividend for investors who buy under $35 a share.

There are risks here, of course, what with the current fight over healthcare reforms and the chance of Medicare and Medicaid payments being reduced — a big weight for Omega and similar senior housing plays.

But the difference is that Omega Healthcare is not a provider itself. It is just a landlord, and any changes in healthcare regulations are the tenants’ problem to work out. Furthermore, Omega operates “triple-net lease” properties, which means OHI is not liable for the three big add-ons that handcuff other REITs — taxes, maintenance and insurance. Omega quite literally just collects the rent!

Of course, some of the tenants’ pain can trickle down. Late payments would be a big problem, as would weak pricing on rent because tenants aren’t as plentiful or as competitive as they used to be. But OHI is seeing sustained growth in both the top and bottom lines, and with a juicy dividend north of 7%, that seems a risk worth taking.

Dividend Machine #3 – Enterprise Products Partners

  • Sector: Energy (MLPs)
  • Buy Below: $28
  • Dividend Yield: 6.5%

MLPs offer big dividend payouts (or “distributions” if you want to be a smarty pants). But lately there has been a lot of carnage in the industry. After all, with China’s slowdown in growth and persistent oversupply in crude oil, it hasn’t exactly been great times for energy companies.

But much like Omega is a landlord and not a healthcare provider, pipeline operator Enterprise Products Partners L.P. (NYSE:EPD) is not an energy company in the traditional sense. While exploration and production companies have to take on big debts on the hopes that they will strike enough oil (and sell it at a high enough price) to make it rich, EPD is the middleman between those producers and the marketplace.

Well, it’s not quite as boring as that. EPD operates more than 49,000 miles of pipeline, 260 million barrels of crude oil storage and another 14 billion cubic feet of natural gas storage.

Oh yeah, and a 6%-plus dividend yield.

Also like Omega, what you’re getting here is a high-yield stock that is ostensibly in an industry that may face pressures. But in reality, the operations of EPD are insulated from any volatility in energy prices because it is simply a toll-taker charging companies that use its infrastructure. Sure, when oil and gas prices are weak, there is less incentive to bring the products to market … but many smaller companies cannot afford to curtail production too much or they won’t be able to make their payrolls and pay back lenders.

Enterprise Products has a strong track record of raising dividends, and EPD should be a great income play for those patient enough to withstand the short-term volatility that may be brought on by energy prices.

4 High-Growth Profit Rockets 

After you have a solid base for your investments and a reliable stream of income, the next task is to unlock significant outperformance via fast-growing stocks that can deliver big-time profits.

There are many different companies that fit this description, but the best share a common theme of rapidly growing sales and profits that back up their share price. After all, a company that surges based on sentiment alone doesn’t have anything to fall back on if things go south.

If you’re looking for outsized profits, then, you have to look at companies growing their business faster than their peers.

Here are four such examples … but keep in mind the “buy below” prices for these fast-growing stocks, and don’t chase them.

Profit Rocket #1 – Salesforce.com

  • Sector: Technology (cloud-based business services)
  • Buy Below: $98

Salesforce.com, Inc. (NASDAQ:CRM) stalled after its mid-year earnings report, but that’s only because the stock had soared about 30% since Jan. 1 on strong metrics, and investors simply decided it was time to take a breather.

Salesforce is a powerhouse, make no mistake. And as the charts show since that mid-year lull, CRM stock has made up its lost ground and then some as investors have returned in earnest.

Just look at its better-than-expected earnings growth of about 17% and revenue growth of 25% year-over-year. Or look at its raised full-year guidance a few months ago.

Or look at its new Einstein cloud-based e-commerce platform that will tighten its grip on the space, providing merchants with predictive technologies to maximize sales. These tools are in very high demand, particularly as many traditional retailers are desperately trying to figure out how to maximize e-commerce sales to offset brick-and-mortar’s decline.

A strong track record of growth is nice, but being in a high-demand industry is the icing on the cake. No wonder Piper Jaffray called Salesforce “the most attractive stock” it is covering right now.

If you want outperformance in the months ahead, make sure you get into CRM stock before it breaks higher. Just make sure not to chase it above $98 a share because occasional rollbacks like the one we saw this summer are likely provide the best chance to get a good buy-in price.

Profit Rocket #2 – Regeneron

  • Sector: Pharmaceuticals
  • Buy Below: $485

Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) may give some investors sticker shock based on its triple-digit share price. But as we’ve seen in plenty of high-priced stocks from Apple Inc. (NASDAQ:AAPL) before its split to Amazon.com (NASDAQ:AMZN) presently, sometimes you can get an incredible deal when you buy a three-figure stock before the breakout.

And REGN may very well be near a big move higher.

For starters, Regeneron is not a sleepy Big Pharma name that is facing patent expirations and decaying revenue. In its most recent quarter, REGN saw double-digit sales growth and over 30% earnings growth.

Furthermore, Regeneron is a biotechnology company with a robust product pipeline. For instance, at the end of March, the company saw its Dupixent treatment for dermatitis finally win approval — and many analysts expect this drug to reach $3 billion in annual sales going forward.

While there is a small risk that healthcare reforms could derail REGN, that seems highly unlikely as Republicans in Congress focus on deregulation and lower tax rates — not draconian approval processes for new drugs, or price controls that could eat into margins.

This growing healthcare play is a great way to tap into big profits as its current drugs deliver and its forthcoming drugs fuel future growth.

Profit Rocket #3 – Facebook

  • fb facebook stockSector: Technology
  • Buy Below: $180

Facebook Inc (NASDAQ:FB) is a fashionable name that’s in many growth portfolios, but that’s for a very good reason. Simply put, FB is a reliable growth company that has a proven track record of success and consistently beats the broader market’s performance.

Facebook’s stock jumped roughly 50% from January to September, driven by a massive operation that somehow keeps growing and delivering impressive earnings beats like clockwork.

Yes, that growth rate is slowing, but what do you expect from a company that already boasts about 1.3 billion users EACH DAY? I mean, unless we discover life on Mars, Mark Zuckerberg & Co. have to run out of potential users eventually. And yes, there is always a chance that users will get fatigued and leave for a competitor like Snapchat, operated by recent IPO Snap Inc (NYSE:SNAP).

But the power of FB doesn’t come solely from its users. It comes from its dominance among marketers and advertisers. And given the sophisticated targeting and massive scale of this platform, you can be sure the ad dollars will keep flowing — and Facebook stock will keep rising rapidly.

Profit Rocket #4 – Nvidia

  • Sector: Technology
  • Buy Below: $190

After tripling across the 12 months before its most recent earnings report, Nvidia Corporation (NASDAQ:NVDA) had a heavy burden of investor expectations going into its May report. But when the final numbers were tallied, the momentum darling held its own — and then some.

The numbers are simply amazing — 126% growth in operating income, EPS figures that blew away expectations, 48% revenue growth and a one-day pop of about 20% for shares!

While shares surged after the report, they’ve since settled into a groove. This pause is exactly what investors should take advantage of before this high-growth tech company sees another leg up in the months ahead and builds on its success.

In addition to these tangible results, don’t forget that virtual-reality capabilities at NVDA hold big promise in the long-term, and could continue to fuel a premium in shares based on the hopes of future successes in this emerging field.

Yes, Nvidia’s gaming division is showing signs of a slowdown. But good tech stocks don’t just cling to fading revenue streams; they create new ones. That’s what Nvidia has done with its surging datacenter business that delivered in the short term, and its heavy investments in VR.

High expectations didn’t undo Nvidia after its Q1 report, and shouldn’t pose a problem going forward. Take advantage of this brief lull in shares to stake out a position if you don’t have one … but be careful not to chase NVDA beyond our buy-below price. Volatility cuts both ways in a hot stock, so it pays to be patient and disciplined with your entry price.

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