Top 10 Best STOCKS to Buy Now For Long Term – Should you be afraid of volatility to prepare for your retirement in the stock market? No matter what the answer is, there will always be risks. Your main problem is that you are placing too much emphasis on volatility when it is the very nature of the stock market.
Volatility should not be an absolute concern for a long-term investor unless you are selling your stock for a good reason. Short-term variations caused by external events in the financial markets have little impact on the profitability of your portfolio.
If you are consumed by volatility, it is because you are in the bad habit of buying the most dangerous stocks in the market.
You buy value stocks on the grounds that they are undervalued or discounted relative to their real assets. Unfortunately, undervaluation can look like fake value.
You look forward to buying the stocks tomorrow. In reality, they are full of empty promises and don’t hold up financially.
You go hunting for high-yielding stocks while the dividend is not necessarily secure in the long run.
So which stocks should you buy to build a portfolio that will give you peace of mind for your retirement?
If I had to do it all over again for my first steps in the stock market, I would definitely opt for US stocks. As a native Frenchman, I realize that it’s unpatriotic, but on the other hand, they are the “best in the world”.
My list of the 10 best US Stocks to prepare for your retirement is focused on a business that is simple to understand and the dividend that acts as an income. Before I unpack everything, it’s good to know why to invest in US stocks and then where to find them.
Why invest in U.S Stocks?
Reason #1. They account for more than half of the world’s market capitalization at 53.3% at the end of 2018, or more than one out of every two trades, while France, the UK, and Germany together weigh in at 11.6%. There is no match.
Reason #2. The U.S. dollar remains the international reference currency, no matter what anyone says. Of course, the decline of its monetary hegemony is underway, but it is something that will happen gradually, barring exogenous events.
Reason #3. Most American companies that are listed on the stock market are brands that are exported all over the world. They are highly valued by consumers around the world.
Reason #4. Depth in terms of liquidity. You can find American small caps with the liquidity of a CAC 40 flagship.
Reason #5. U.S. stocks offer you a variety of choices across the 11 GICS (Global Industry Classification System) sectors, even though European stocks have nothing to envy.
Reason #6. They are good dividend payers. Period! Their dividend payout policy provides a guarantee of visibility for long-term shareholders. Most Uncle Sam companies pay a dividend on a quarterly basis to encourage recurring revenues. They are not afraid to balk at their cash flow every three months. Why? Because it’s a sign of confidence for the future.
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Where to find the best U.S. stocks?
There are two investment ideas for U.S. stocks that stand out and one that is optional. They have the distinction of having an exceptional dividend history over several decades. This shows that the dividend is an airbag for dealing with periods of market chaos.
What is interesting is that the dividend offers some truth about the evolution of the share price in question.
These are publicly traded U.S. companies that have increased their dividend every year for at least 25 consecutive years. They must be part of the S&P 500 Index and have a market capitalization of at least $8.2 billion. In addition, Dividend Aristocrats must meet a liquidity requirement with a three-month average trading volume of approximately $5 million.
The most represented sectors to date among the dividend aristocrats are industrials and consumer defensives, respectively. You will notice the low weighting of technology, which is touted in the stock market ecosystem.
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By its eligibility criteria, it remains a privileged and restricted club with 64 stocks. They have the particular advantage of outperforming their benchmark, the S&P 500, over the long term. Over at least 25 years, the dividend aristocrats have weathered the bear markets following the bursting of the dot-com bubble and the subprime crisis with the luxury of increasing their dividends.
Let’s just say they are the cream of the crop in the dividend universe. These are publicly traded American companies that have increased their dividends for at least 50 consecutive years. Unlike the Dividend Aristocrats, there are no eligibility criteria for the Dividend Kings.
Dividend kings include companies that have weathered the darker times of the second half of the 20th century such as:
- A period of high inflation in the 1970s was marked by a dollar crisis following the end of its convertibility to gold and oil shocks.
- A violent rise in interest rates in June 1981 to overcome inflation through a recession in 1982-1983.
- A stock market crashed in October 1987.
- To date, there are 30 stocks, 13 of which belong to the Dividend Aristocrats club.
REITs as an option
Listed real estate can be an option through REITs. They are known for their above-inflation yield. However, selectivity is required. They are capital intensive because it costs money to maintain a property. De facto, their debt level is high, and if it turns out to be unsustainable, a dividend cut is not far off.
TOP 10 BEST STOCKS TO BUY Now For LONG TERM:
1. Coca-Cola Company
Coca-Cola Company (NYSE: KO) is much more than a global leader in soft drinks. It is first and foremost a world-class brand. Its sustainable competitive advantage is based on consumer power. The company has built its reputation on its favorite drink, Coca-Cola, with the luxury of not filing a patent. This economy of scale allows it to invest in marketing campaigns to build a community of loyal customers.
The company faces major challenges such as anti-obesity campaigns and the decline in soda consumption in the United States. Gradually, Americans are taking their health very seriously and preferring water-based drinks.
2. Procter & Gamble
Procter & Gamble (NYSE: PG) is one of the world’s giants in consumer staples. Operating in more than 180 countries, its sales contracted over the 2013-2017 period globally. In a world trending toward less multilateralism, it restructured its portfolio around 65 brands instead of 170 by splitting its business into 5 product categories:
- Home Care and Linen (33% of sales in 2019): Ariel, Dash, Tide, Bounce, Swiffer, etc.
- Infant, feminine, and family hygiene (27%): Pampers, Always, Tampax, Bounty, Charmin, Puffs, etc.
- Beauty (19%): Pantene, Head & Shoulders, Olay, Max Factor, Old Spice, etc.
- Shaving (9%): Gillette, Braun, Prestobarba, etc.
- Health (12%): Oral-B, Crest, Vicks, Prisolec, Clearblue, etc.
On the other side of the mirror, it had to part with 105 brands. In sports jargon, this sounds like a major workforce review.
The interest in this restructuring is multiple. Firstly, Procter & Gamble is getting rid of products with low margins. Secondly, its portfolio is focused on products that meet everyday needs that households can’t live without. In retrospect, you can see why the company has permanently exited the food segment. Third, the restructuring allows it to gain authenticity and visibility with investors.
3. Stanley Black & Decker
When you’re tinkering or gardening around the house, Stanley Black & Decker (NYSE: SWK) is never far away. Growing up, I remembered steam strippers for removing wallpaper more than I did big impact drills.
Back to the point, this global leader in DIY and gardening products is the result of a merger between Stanley Works and Black & Decker in 2009. Its business revolves around 70% of its sales on tools and accessories, of which it is the world leader.
The remaining 30% is split evenly between safety and industrial. These two segments, with a profile oriented towards BtoB, enable it to reduce its dependence on consumers.
Present in 120 countries with approximately 38,000 restaurants, McDonald’s (NYSE: MCD) is the world’s number one fast food company. Criticized for its responsibility for the obesity scourge, it is nevertheless a company that brings people together. On the one hand, families come to spend a moment of pleasure. On the other hand, it is intergenerational, because the customers are of all ages.
Its business model is based on franchising. More than 90% of its restaurants are franchises. McDonald’s owns the building and the land while the franchisee will be in charge of the decoration, the material, and the equipment for the operation of the restaurant and will receive royalties calculated on the basis of its turnover.
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In the early 2010s, McDonald’s was in trouble with competitors such as Starbucks, Chipotle Mexican Grill, or Yum Brands, but it was able to turn things around by diversifying its menu offerings around the world.
Its investments in the renovation of its restaurants and digital technology have enabled it to gain efficiency, such as reducing the waiting time of its customers by installing ordering terminals, establishing partnerships on online delivery with Uber Eats and Deliveroo, and above all bringing back a previously lost clientele.
5. Johnson & Johnson
With Johnson & Johnson (NYSE: JNJ), you’re dealing with a global healthcare behemoth founded in 1886. Unlike its competitors who are focused on a specific segment, its strength comes from a well-thought-out diversification of its business model.
The company is well positioned in drugs, medical equipment, and self-service medicine. It is not dependent on any one product that accounts for a third or half of its sales. Its flagship brands are Band-Aid for adhesive bandages, Johnson’s for baby creams and shampoos, Neutrogena for skin care products, and Listerine for oral solutions.
Defensive by nature, the world of healthcare will be at the heart of attention in the decades to come with four major challenges: the aging of the population, the impact of global warming, environmental health, and changes in the workplace. Johnson & Johnson has a sustainable competitive advantage through innovation. It has enabled it to sustain its business model and generate wartime cash flow. The company has room to invest in R&D.
Pepsico (Nasdaq: PEP) is the result of the merger between soft drink manufacturer and distributor Pepsi-Cola and snack food company Frito-Lay in 1965. The merger created a global food giant with a portfolio of value-added brands. The geographical distribution of its sales is relatively balanced between the United States and international markets, with a few percent lead for Uncle Sam.
Many French-speaking individuals will refer to its competitor beverage of Coca-Cola Company, Pepsi. However, Pepsico is not Pepsi-dependent. The company owns many brands in several segments of the food industry such as:
- Gatorade, Tropicana, Lipton (alliance with Unilever as a distributor), 7Up (only internationally) Mountain Dew, and Pure Leaf for soft drinks.
- Lay’s, Doritos, Cheetos, Fritos for snacks,
- Quaker, Life Cereal, Cap’n Crunch for cereals.
Pepsico is at the top of the global food industry thanks to its sustainable competitive advantages. Its brands are recognized worldwide. The group owns 22 brands that generate more than one billion dollars each year. This makes it indispensable to its suppliers, with economies of scale at stake.
This financial security margin allows the company to invest in marketing as well as in research and development.
7. Hormel Foods
Hormel Foods (NYSE: HRL) is a typical example of a boring company that doesn’t draw a crowd. While it won’t make you rich overnight, it has been able to create value for its shareholders over time. You are dealing with a company that has been around for over 125 years.
Hormel Foods is an American company specializing in meat and spice products. Its business model revolves around four segments: Chilled Foods, Grocery Products, Jenni-O Turkey Store, and International & Miscellaneous. This has enabled Hormel Foods to develop a strong brand portfolio and establish itself in its core market.
The Chilled Foods and Grocery segments contribute nearly 80% of its sales. Its flagship brands are SPAM for meat, Jennie-O for turkey, Skippy for peanut butter, and Dinty Moore for stew. For anédocte, SPAM was the first no-fee meat product to be launched worldwide.
Colgate-Palmolive (NYSE: CL) is one of the oldest companies in the U.S. and in the S&P 500 Index, founded in 1806 by William Colgate in New York. Originally, it specialized in candles, starch, and soap.
More than 200 years later, Colgate-Palmolive makes products that are in your shopping cart: toothbrushes, toothpaste, dishwashing liquid, soap, home care products, and shampoo. For some of you, pet food.
The company has a portfolio of world-renowned brands. Some of them look familiar like Ajax, Colgate, Elmex, Palmolive, or Sanex. Its business model is based on four product categories:
- Oral care products: Colgate, Elmex, Sorisso, Meridol, Tom’s of Maine.
- Personal care products: Protex, Sanex, Palmolive, Tahiti, Tom’s of Maine.
- Household and laundry products: Ajax, Axion, Soupline, Palmolive.
- Pet food: Hill’s
Oral hygiene products represent half of its sales. This is quite logical. Why? Because it has been its core segment since its birth.
Starbucks (Nasdaq: SBUX) is the largest coffee chain in the world. Although coffee is its trademark, the company also sells tea, juice, sandwiches, desserts, and bottled water in nearly 81 countries. In addition, it licenses products to supermarkets and stores such as Teavana, Seattle’s Best Coffee, Evolution Fresh, and Ethos.
Starbucks’ appeal to consumers around the world is primarily due to its stores. Indeed, individuals consider them the third place in their lives, behind home and work. Personally, I would even say that it can take on the appearance of coworking in some aspects. In each store, regardless of the location, Starbucks strives to offer the best services to improve the customer experience: mobile payment, personalized drinks according to your desires, decoration of the walls with its history, loyalty card, etc.
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Approximately 81% of its revenue is generated largely by its own-brand stores in 2019. Licensed stores and consumer packaged goods account for 11% and 8% of its revenue, respectively. Geographically, the Americas (U.S., Canada, Mexico, and Latin America) make up the largest share of the pie at 69%. The international market accounts for 23%, including China-Asia Pacific at 19% and Europe at only 4%.
10. Realty Income
Among the real estate REITs to put in your portfolio, I definitely put Realty Income (NYSE: O). This is a REIT that specializes in retail and has been able to circumvent the Amazon threat.
It owns 6,400 properties spread across 49 U.S. states, Puerto Rico, and the United Kingdom. Its business model of freestanding in well-located locations allows it to escape the disruption of the retail apocalypse. The diversification of its tenants by business segment ensures revenue stability.
Realty Income takes care to select tenants with superior financial ratings. The company is not just exposed to commerce. Some of its tenants are in the healthcare, industrial, financial services, and agricultural sectors. Its occupancy rate for its properties has rarely fallen below 96%.
Its leases are based on triple-net leases, meaning that the tenant pays monthly rent and charges such as insurance, taxes, and maintenance.
Build an Investment Portfolio for Retirement with Peace of Mind
The first thing that would come to my mind to prepare for my retirement in the stock market is to be exposed to the cream of the crop of the stock market, i.e. the financial center of New York, Wall Street. For a long-term investment horizon, it would be a mistake not to hold US stocks in a portfolio.
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If you buy the best stocks on Wall Street, you are more likely to be familiar with them than with stocks on the Old Continent. As I said, U.S. stocks are known for their frequent dividend payouts. Most of them do so on a quarterly basis, but you can have others like Realty Income that pay a dividend every month. This ensures a recurring stream of income into your account.
With the flood of choices in Uncle Sam’s market, you’d better not be on the wrong track. Get on the right track with U.S. companies that have an easy-to-understand business, an international reputation, and proximity to consumers. My list of the 10 best US Stocks is proof of this and will surely give you some good benchmarks to start your stock market career.