beginner stocks
TRANSCRIPT
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By Matt Frankel, Motley Fool Investment Planning
4 Great Stocks For Beginners
May 2, 2023
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What makes a good “beginner” stock?
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• The best stocks for beginners won’t make you rich overnight but won’t make you go broke either.
• Look for companies with a steady track record of growing revenue and low debt levels.
Low risk
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• Look for businesses that will be around forever.
• For example, people will always need groceries, ways to communicate with each other, and safe places to keep their money.
• However, will people always buy a specific high-end brand of clothing? Or, will people always need to buy desktop computers? Maybe, but maybe not.
“100-year” businesses
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• Ideally, stocks for beginners will make their money from a variety of products and services.
• Geographical diversity is important too.• For example, companies that do a lot of
business overseas are better-positioned to withstand a U.S. recession.
A diverse revenue stream
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• Stocks with a history of dividend increases tend to make solid long-term investments.
• Also, only invest in businesses that are easily understood, at least while you’re just getting started.
• Basically, beginners should focus on building a good foundation. There may come a time when it’s okay to take some higher risks, but it isn’t a good idea while you’re new.
Other things to look for…
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4 “beginner” stocks to get you started…
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May 2, 2023
1. Berkshire Hathaway (NYSE: BRK.B)• Berkshire Hathaway
one of the best all-around stocks in the market.
• The company’s primary business is insurance, but investors get so much more than that…
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• Berkshire Hathaway has more than 50 subsidiary companies, as well as a diverse portfolio of the best stocks in the market.
• Essentially, by investing in Berkshire Hathaway, you are buying an all-in-one diversified investment portfolio.
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May 2, 2023
Just a few of Berkshire’s subsidiaries…• GEICO• The Pampered Chef• Fruit of the Loom• Clayton Homes• See’s Candies• Helzberg Diamonds
• NetJets• Burlington Northern
Santa Fe• Lubrizol• Duracell• Dairy Queen
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May 2, 2023
Some of Berkshire’s major stock holdings…
• American Express• Deere & Company• General Motors• Goldman Sachs• International Business
Machines (IBM)• Coca-Cola• Moody’s • Procter & Gamble
• US Bancorp• Wells Fargo• Wal-Mart• Verizon • Phillips 66• Visa• MasterCard• Costco
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2. Colgate-Palmolive (NYSE: CL)• Colgate-Palmolive
produces many name-brand products including– Ajax– Colgate toothpaste– Irish Spring– Murphy Oil Soap– Science Diet– Softsoap– Speed Stick
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• Colgate-Palmolive is a “dividend aristocrat”, which means that it raises its dividend year after year like clockwork.
• In fact, Colgate-Palmolive has increased its dividend for 52 consecutive years, and has paid a dividend every year since 1895.
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• Colgate-Palmolive’s sales come from all over the globe.
Geographic diversity
Source % of sales
Latin America 27%
North America 20%
Europe/South Pacific 18%
Asia 16%
Africa/Eurasia 6%
Hill’s Pet Nutrition 13%
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• Colgate has steadily grown its sales over the years, and it is well-positioned to capitalize on the world’s growing middle class.
• This steady growth has produced a 1070% total return over the past 20 years, and there is no reason to think the strong performance won’t continue.
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3. ExxonMobil (NYSE: XOM)• The largest publicly-
traded integrated oil company.
• ExxonMobil could be an excellent way to take advantage of depressed oil prices.
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• ExxonMobil has exposure to all aspects of the oil business.
• So, even though its exploration and production business suffers when oil prices are down, others – such as the refining and chemicals business – actually do better.
• Plus, its size gives it a competitive advantage, allowing the company to run more efficiently than rivals.
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• ExxonMobil’s size and diverse revenue streams allow it to perform well during tough times and even pursue acquisitions or other strategic investments
• As one of only three U.S. companies with a AAA credit rating, ExxonMobil has access to virtually unlimited cheap capital for acquisitions or other opportunities.
• In fact, ExxonMobil has an even better credit rating than the U.S. government!
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May 2, 2023• In terms of valuation, not only has ExxonMobil’s share
price dropped by about 20% in the past year or so, but its price-to-book value is at its lowest level since the mid-1990’s thanks to sector weakness, even though the company remains strong.
• Now may be a great time to get into ExxonMobil cheaply.
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4. Johnson & Johnson (NYSE: JNJ)In addition to its portfolio of well-known brands such as
– Band-Aid– Johnson’s Baby Products– Tylenol– Neutrogena
Johnson & Johnson’s largest business is pharmaceuticals.
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• J&J’s size and brand power are tremendous competitive advantages.– Its size allows it to produce goods more efficiently.– Its well-known brands give it more pricing power than
lesser-known competitors.• The massive pharmaceutical business is the real
money maker, and the company invests aggressively in research and development, which has resulted in some innovative (read: profitable) drugs.
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• Johnson & Johnson has an outstanding 53-year history of dividend increases.
• The company pays out less than 50% of its earnings as dividends, leaving plenty of room for this to continue.
• Even though many investors consider J&J to be a “boring” stock, it has handily beat the S&P 500’s returns over the past several decades.
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