Uncertainty abounds for Generation X, which roughly equates to anyone born between the mid-1960s and late 1970s.
Look in the distance, and you'll see a baby boomer generation that seems ill-prepared for retirement. According to the Insured Retirement Institute's most recent report on baby boomers, 45% have absolutely nothing in retirement savings, 59% are planning to be heavily reliant on Social Security income during retirement, and 44% are carrying around sizable levels of debt, including nearly a quarter that are still paying off their mortgages.
Look in the rearview mirror, and Gen Xers are liable to see many of the same mistakes being made by millennials. For example, a five-question multiple choice financial literacy quiz offered by the Financial Industry Regulation Authority (FINRA) points out that only a quarter of millennials correctly answered four out of five questions (a passing grade). Additionally, Financial Finesse's latest study observed that millennials may be sabotaging their own retirement, possibly as a result of a lack of financial discipline or knowledge.
Perfect stocks for people in their 40s to consider buying
If people in their 40s (i.e., Generation X) want the best chance at a comfortable retirement, they'll need to be invested in high-quality stocks over the long-term. While baby boomers are starting to lose their time-based leverage, and millennials are viewed as growth-seeking risk-takers, Generation X falls somewhere in between. Capital preservation is ever so slightly beginning to creep into the picture, which might reduce your appetite for high-risk investments -- but you'll still want superior growth, given that retirement could be 20 to 30 years away.
With this in mind, here are three perfect stocks for people in their 40s to consider buying.
To begin with, biotech blue-chip company Celgene (NASDAQ:CELG) could be a fine addition for any investors who are currently in their 40s. Although Celgene doesn't bring a dividend to the table, it does offer three separate avenues of growth.
First, Celgene offers incredible organic growth opportunities with multiple myeloma drugs Revlimid and Pomalyst, as well as oral anti-inflammatory drug Otezla. Celgene has capitalized on an increasing number of multiple myeloma diagnoses, longer duration of use for its medicines, and improved pricing power for its drugs. It's also counting on continued label expansion of its existing products to drive growth. Lastly, having worked out a settlement with generic drug producers, Celgene no longer has to worry about generic Revlimid fully hitting the market until Jan. 2026. This gives Revlimid, the company's blockbuster drug, plenty of room to run and generate cash flow.
Secondly, Celgene is turning to inorganic growth to push its top- and bottom-line results higher. In 2015, it acquired Receptos for $7.2 billion in order to gain access to ozanimod, an experimental drug that has the potential to pull in $4 billion or more per year if approved to treat multiple sclerosis and ulcerative colitis.
The final avenue of growth for Celgene is through collaborations. It currently has more than 30, which allows it to potentially license first-in-class therapies to treat cancer or inflammation. Collaborating with so many companies also allows Celgene to throw its money at only the most promising clinical compounds.
A PEG below 1 and a protected lead drug for the next decade make Celgene a stock to seriously consider buying.
People in their 40s would also be wise to take a good look at NXP Semiconductors (NASDAQ:NXPI) in the technology sector. Like Celgene, NXP Semiconductors isn't likely to reward investors with a dividend anytime soon -- but that's just fine with Wall Street.
NXP is a long-term play on the interconnectedness of everything, which you might know best as the Internet of Things, or IoT. NXP devises the solutions that allow devices to communicate with one another, such as a smartphone communicating payment information to a point-of-sale device vis-a-vis near-field communication chips, or a car recognizing its surroundings and keeping a driver from drifting into another lane of traffic. This isn't a technology that's going to blossom overnight, but rather over the course of 5 to 15 years. Cisco Systems is forecasting that the global IoT market could be worth $14.4 trillion by 2022.
Also working in NXP's favor is its merger with Freescale Semiconductor in 2015, which created the fourth-largest semiconductor company in the world, if you exclude memory developers. The merger also cemented NXP as the market leader in general purpose microcontroller products, mobile payment-based semiconductor solutions, and automotive semiconductor solutions. On top of expected cost synergies tied to the merger, the deal is also expected to give NXP much improved leverage on pricing with its customers, which should ultimately help improve its margins.
With NXP's long-term growth trajectory likely in the mid-to-high single-digits and its PEG ratio well below 0.5, this appears to be a solid long-term play.
Finally, to add a little bit of income to go along with the steady growth people in their 40s would look for in an investment, I'd suggest footwear and apparel giant Nike (NYSE:NKE) as a stock worth consideration.
The biggest factor working in Nike's favor is its global visibility. According to Interbrand, which uses a proprietary formula to rank the value of the world's largest brands, Nike ranked 17th overall in 2015, with a brand value of $23.1 billion. It was one of the top risers in Interbrand's annual rankings, with 16% brand value growth from the previous year. Having such a recognizable brand allows consumers to forge an emotional attachment, which is important for Nike in terms of creating customers for life.
Nike's expansion outside the United States is another source of long-term growth. Between 2010 and 2015, Nike essentially doubled its emerging market sales, and it expects an additional 60%+ growth cumulatively from emerging markets between 2015 and 2020. Key to this growth will be Nike's focus on athleisure, as well as an increased focus on a growing customer base of active women.
Nike is also planning to turn to e-commerce to boost its sales overseas and within the United States. By integrating its website with its flagship stores, the company expects to create an atmosphere that enables consumers to shop from just about anywhere. Improving its mobile commerce experience could also be a boon for its margins, with far less overhead than its brick-and-mortar stores.
These strategies appear to be working well, with Nike reporting 12% sales growth (excluding currency fluctuations) in fiscal 2016, as well as 17% adjusted earnings growth. Tack on a 1.1% dividend yield that's likely to grow over time, and you have a very solid name in the footwear and apparel industry that you can trust.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of and recommends Celgene, Nike, and NXP Semiconductors. It also recommends Cisco Systems and has the following options: short October 2016 $95 puts on Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.