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The past 12 months haven't exactly been the most profitable for investors. Since last July 1, the S&P 500 has returned 3.8%, including dividends.
But that doesn't mean you need to resign yourself to piddling returns. By buying high-quality companies for reasonable prices and holding them for the long run, you can get superior results. That's what I set out to do last summer, when I put together "The World's Greatest Retirement Portfolio." I chose 10 stocks that I'd be holding for at least three years and putting $40,000 of my own money into.
So far, the portfolio has lived up to its moniker. I'll show you why it's doing so well, offer up three stocks that I think are excellent buys right now, and offer a special free report on three dividend payers every investor needs.
Vs. S&P 500 (% Points)
|Google (Nasdaq: GOOG )||6/26/11||20.1%||11|
|PriceSmart (Nasdaq: PSMT )||6/28/11||34.9%||28|
|Intuitive Surgical (Nasdaq: ISRG )||7/25/11||37.9%||34|
|National Oilwell Varco (NYSE: NOV )||7/28/11||(20.1%)||(27)|
|Apple (Nasdaq: AAPL )||6/30/11||73.9%||69|
|Johnson & Johnson||8/1/11||8.7%||1|
Eight of the 10 stocks are beating the market, and my original investment has returned $9,480 while an equal investment in the S&P 500 would have yielded just $2,520.
Before getting to my best buys, I wanted to quickly run down the companies expected to report earnings in July, and how each is expected to do.
|PriceSmart||July 9||$0.60||$511 million|
|Apple||July 16-21||$10.33||$37.3 billion|
|Coke||July 17||$1.19||$13 billion|
|Johnson & Johnson||July 17||$1.29||$16.7 billion|
|Intuitive Surgical||July 19||$3.53||$522 million|
|Amazon.com||July 23-27||$0.02||$12.9 billion|
|Whole Foods||July 25||$0.61||$2.7 billion|
|National Oilwell Varco||July 26||$1.41||$4.4 billion|
Sources: Thompson Reuters, E*TRADE.
Three best buys
First on my list of three best buys is Apple. Though the company is up more than 70% for the portfolio, I believe it still has room to run. I recently wrote a piece highlighting my three reasons for believing this, so I'll keep it short: The stock is dirt cheap; adoption of mobile smartphones is just getting started, and Apple is poised to profit hugely from global growth; and as people buy one Apple product, they are more likely to buy a second and third. That last reason is often underappreciated, and it's why I think it's helpful to view Apple as a software company just as much as a hardware one.
Second on my buy list is National Oilwell Varco. By far the biggest loser on my scorecard, this stock goes to show that valuation especially matters with cyclical stocks, and I bought on the high end. That being said, the poor performance shouldn't stop you from snatching up shares on the cheap. As I've shown, the stock closely mimics the price of oil. Any sign of resolution and recovery in Europe is likely to spur economic development and, in turn, demand for oil.
Finally, I believe that shares of Google are just silly cheap at today's prices. Recently, shares have been held down by rumors of Larry Page's poor health. While that would be a huge concern for me -- Page is a big part of my investment thesis -- I don't see reason to sound the alarm quite yet. With the company trading for just 18 times earnings and 16 times free cash flow, it is a solid buy.
Three dividends you can't ignore
Of course, here at the Fool, we love getting different opinions. Our top analysts have put together a special free report: "3 Dow Stocks Dividend Investors Need." I'll give you a clue and tell you one of the stocks is in my retirement portfolio. To find which company that is -- and what the other two are -- get your copy of the report today, absolutely free!