So far, we've shared 15 of the 20 picks in our special real money portfolio with our Fools around the world, and it's now time to wrap things up. Today we're here to bring you the final round of high-conviction stock and fund picks that we believe are well positioned to make money over the next five years.
But before we reveal our last picks, we wanted to take a moment to dig a bit deeper into our thought process behind how we constructed this portfolio and how you can use this knowledge in your investing process.
The importance of diversification
You may have noticed throughout the past month that we have repeatedly hit on the concept of diversification, or owning multiple stocks across different corners of the market. This is important because the more stocks you own, the more you reduce security-specific risk in your portfolio. We're all about owning good names, but if you only own a small handful of companies, you may be exposing your portfolio to unnecessary risk. That's why the April Fool's Portfolio has 15 stock positions, in addition to our broader ETF exposure. More stocks = lower overall risk.
How long is long term?
Another thing you'll see a lot across the Foolish universe is this idea of investing for the long run. Generally, this means that we believe that Fools should be investing in the stock market with a minimum 3-to-5-year time frame in mind. If you need your money before then, you probably shouldn't be investing those funds in stocks! And the longer your investing time horizon, the greater the chance you have of earning a positive return on your investment. More time = less chance of losing money.
The proof is in the pudding
If you're still a bit skeptical about why we place such importance on these concepts, we would invite you to check out our Simulators tool. This tool is available to all of our Premium members (you can find it under the Tools menu on your Fool Premium homepage).
The Simulators tool puts the two above concepts to the test with some hard data. As you'll see, portfolios consisting of just five random Stock Advisor picks produced a positive five-year return 86.4% of the time. But if we bumped that up to 25 random SA picks, it would have historically generated a positive five-year return 97% of the time. Likewise, if our simulation held those same 25 SA picks for only one year, there was only a 78.2% chance of getting a positive return in that time frame.
We encourage you to visit the Simulators tool and see for yourself how diversification and long-term investing can really give your portfolio a positive boost!
Now let's get back into the details of our April Fool's Portfolio!
Just as a reminder, here is the allocation plan we are working toward for this portfolio:
- 15 Stocks: 75% of our portfolio (5% each)
- 5 ETFs: 20% of our portfolio (4% each)
- Cash: 5% cash reserved
Here's how our recommendations have stacked up so far. (Read our previous reveal articles here, here, and here.) If you haven't purchased these stocks or ETFs yet, we recommend doing so as soon as possible:
- Vanguard Total Stock Market ETF (VTI 0.07%) -- 4%
- Vanguard Total International Stock Market ETF (VXUS 0.05%) -- 4%
- Vanguard Small-Cap ETF (VB 0.32%) -- 4%
- Vanguard Real Estate ETF (VNQ -0.05%) 4%
- Amazon.com (AMZN 0.23%) -- 5%
- Etsy (ETSY 4.76%) -- 5%
- Pinterest (PINS -0.36%) -- 5%
- Disney (DIS 0.09%) -- 5%
- MercadoLibre (MELI -10.38%) -- 5%
- Microsoft (MSFT -0.32%) -- 5%
- Paypal (PYPL 1.39%) -- 5%
- Berkshire Hathaway (BRK.B 0.50%) 5%
- Intuitive Surgical (ISRG 0.18%) 5%
- ServiceNow (NOW 0.23%) 5%
- Starbucks (SBUX -0.17%) 5%
And now let's check out the final five investments that we're purchasing for our April Fool's Portfolio:
Vanguard Value ETF (VTV 0.32%)
Portfolio Weighting: 4%
This exchange-traded fund is being added to our lineup to provide some important style-based diversification for our portfolio. Because the Fool's investment approach tends to be more growth-oriented, many of our stock recommendations -- including those in this portfolio -- also land in the growth style box. This fund focuses on the value side of the style spectrum, which should balance out the growthier flavor elsewhere in the portfolio.
The Vanguard Value ETF tracks an index that uses several different measures to assess the value orientation of each security, including price-to-book, price-to-earnings, and price-to-sales ratios. This fund should round out our ETF allocation nicely with its more value-oriented focus.
Apple (AAPL -1.00%)
Portfolio Weighting: 5%
Apple is the designer of ubiquitous iPhones and Macbooks and (more and more) the supplier of digital services like Apple TV+, streaming music, health, financial services, and more. It's also the largest company in the world, and as it showed this week, one of the most successful.
During this last quarter, the Cupertino, California, company grew revenue an impressive 54% with strong performance across all its key categories, including iPhone (sales up 66%!), Macbook, and services, where sales grew 27% to a quarterly record of $16.9 billion. Wearables, like the Apple Watch, grew 25% to another record. There are now more than 660 million paid subscriptions across the various Apple digital platforms.
With a $2.3 trillion market cap, Apple is a massive company that generates more than $75 billion in yearly earnings. Its stock won't double overnight, but with the little dividend the company pays (and just increased by 7%) and huge share buybacks from an insanely profitable business, we think you'll be making money in Apple stock over the next several years. We also appreciate the company's commitment to supporting the environment and its renewable energy policy.
MongoDB (MDB 0.34%)
Portfolio Weighting: 5%
This past year certainly saw a pull-forward of digital transformation projects that were driven in large part due to the global pandemic. In some ways, every business had to become a technology company in order to successfully operate under such conditions. We don't believe there will be a reversion to the days of old, and do believe that the demands for modern applications will only increase from here. Developers will have to create software faster in order to remain competitive, and they will want to utilize infrastructure that's easy to work with. Fortunately for them there's MongoDB, a leading modern database provider that delivers high performance and scalability and works well with how developers code.
Many developers first get familiar with MongoDB by downloading its Community Server, which is a free version that offers just enough functionality to wet their beaks. From there its main subscription offerings are MongoDB Enterprise Advanced, which has proprietary features, and MongoDB Atlas, its hosted database-as-a-service (DBaaS) that it manages in the cloud.
To give you a sense of just how popular the platform is, let's put some numbers behind it. According to the company, its database platform has been downloaded over 155 million times. And its most recent fiscal year saw healthy revenue growth generating $590.4 million, up 40% year-over-year. And it's winning larger relationships. At the end of the previously mentioned period it had nearly 100 customers that were spending over $1 million a year, up almost 60% year-over-year. And while the company isn't profitable yet, we believe that its platform, developer following, and growth trajectory warrants our investment.
Shopify (SHOP 1.61%)
Portfolio Weighting: 5%
Our April Fool's Day portfolio wouldn't be complete without a nod to Shopify. Founded by CEO Tobi Luke in 2006 after his frustrations grew from a lack of good e-commerce software to sell his snowboards, Shopify today is a $160 billion provider of an e-commerce platform that helps more than 1.7 million businesses worldwide sell their stuff. By some measurements it is the largest pure-play e-commerce platform in the world.
Many of the websites you shop at utilize the Shopify platform. The significant shift to online shopping over the past year has propelled Shopify to be more relevant, influential, and important than ever before. Revenue last quarter grew a staggering 110% to nearly $1 billion. That includes a jump of 71% in subscription revenue (the monthly fees merchants pay Shopify) and a huge surge of 137% in merchant solutions (additional fees for services like payments, logistics, capital, etc.). The value of stuff sold across Shopify's platform increased 114% in this most recent quarter.
Now this kind of growth won't be everlasting, but there is no doubt in our mind that over the next five years Shopify will be a larger player in the growing e-commerce market. And we want you to have a little starting stake in the company. You'll join Tobi, who himself is still the largest shareowner, worth more than $8 billion. And at not even 40 years old he can be running Shopify for many more years.
Teladoc Health (TDOC -4.67%)
Portfolio Weighting: 5%
Here is one of our investing team's high-conviction companies that has seen its stock fall more than 40% from its highs just earlier this year. Teladoc Health operates a videoconferencing platform that provides virtual access to medical professionals. That need was obvious during the COVID-19 quarantines when we couldn't or wouldn't visit a doctor's office. While that might change for many of us, longer-term we think the virtual healthcare trend is really only just beginning.
During the last quarter, Teladoc's network of clinicians served 3.2 million patient visits, up more than 50% from last year. Specialty care, like mental health, is often a gateway to wider adoption of Teladoc's services. In fact, patients who have a specialty visit have 40% more general medical visits than those who don't.
Calling into a doctor for a telehealth visit is what most people think of today, but end-to-end virtual health is more exciting for Teladoc (and for us). The company's big acquisition of Livongo Health puts it in a great spot to help those with chronic diseases like diabetes using Livongo's applied health signals. With 135 million Americans suffering from at least one chronic disease, the merger looks long-term good to us.
In the short term, traders have punished Teladoc's stock over fears that all the growth has been pulled forward during the pandemic. We don't think so. While the stock may be more volatile than some of our other large-cap companies, we think this new healthcare company, at a market cap of $29 billion, can make you money over the next five years. And it might help your health, too.
Well, Fools, we've come to the end of our month-long reveal of our new April Fool's Portfolio! You now have all the pieces of the puzzle to recreate this portfolio for yourself. If you haven't purchased all of our recommended ETFs and stocks, you can still get in on the action.
And don't worry -- we'll still be providing updates on the investments in our portfolio as conditions dictate. So know that we'll be monitoring our picks and bringing you the latest and greatest in news and our team's thinking.
Remember that the April Fool's Portfolio is designed to be a long-term investment, and we certainly hope that you'll be investing with us accordingly.
We look forward to providing you with more updates on this first-of-its-kind portfolio in the weeks, months, and years ahead.