Back when I had a financial-services practice, it was common for my clients in their 50s to lean toward ultra-conservative investments such as investment-grade bonds. However, with five to 10 years until retirement, becoming overly conservative is wasting one of an investor's most valuable assets: time.
High-risk, high-reward ultra-growth stocks aren't a good alternative, but there are several stocks with solid growth prospects that make ideal conservative alternatives. Three stocks well worth a look if you're in your 50s are cloud data center leader Intel (INTC -2.86%), software design mainstay Adobe (ADBE 0.66%), and tech industry stalwart IBM (IBM -0.05%).
Just scratching the surface
If Intel's third-quarter financial results, scheduled for Oct. 26, are anything like last period, shareholders can expect the company's strong run to continue. Intel stock is up 17% the past three months and is bumping up against its 52-week high of $41.04 a share.
Intel's recent rally may raise concerns about its valuation. However, at just 15.6 times trailing earnings -- its peer group average is 25.5 -- and a meager 13.6 times forward earnings, it's one of the best values around. As for Intel's second quarter, it was a home run led by a record-breaking $14.8 billion in sales.
Intel's PC division reported a 12% increase in revenue to $8.8 billion, and cloud-based data centers rose 9% year over year to $4.4 billion. The Internet of Things (IoT), incorporating artificial intelligence, were also strong, with IoT sales up 26% to $720 million. Not to be outdone, Intel's memory solutions skyrocketed 58% to $874 million.
With its 2.65% dividend yield and its inexpensive share price, Intel offers investors in their 50s growth potential, value, and income.
Steady as she goes
Similar to Intel, Adobe is coming off another record-breaking quarter of its own, reporting $1.84 billion in revenue, an impressive 26% rise over last year. But why Adobe is worth considering if you're in your 50s was its 34% jump in subscription sales to $1.57 billion. Subscriptions are critical to Adobe because of the steady, annualized recurring revenue (ARR) it generates.
Perhaps the best news to come out of last quarter was Adobe's jaw-dropping trailing $4.87 billion in ARR. In addition to the reliable foundation it provides, it also helps keep a lid on overhead because of the lower costs of servicing existing customers. Adobe's operating expenses increased last quarter, but at 16% it was considerably less than its revenue growth.
The result of revenue growth while controlling spending pushed Adobe's per-share earnings up a jaw-dropping 56% to $0.84, well above last year's $0.54 a share. Adobe's already strong balance sheet got a boost thanks to its $704.4 million in cash flow from operations, well above 2016's $517.9 million. Cash and equivalents climbed over $1 billion year over year to $1.77 billion.
A reliable revenue foundation and outstanding yet conservative growth potential are why Adobe is worth consideration for pre-retirees.
Back in business
IBM also shares similarities with Intel, including its low share price and a transition to cutting-edge markets. For IBM, it's targeting new markets through its combined strategic imperatives segments which include the cloud, cognitive computing, mobile, and data security. If last quarter is any indication, it appears there's light at the end of IBM's tunnel.
Total revenue of $19.2 billion and per-share earnings of $3.30 were flat compared with a year ago, and IBM's strategic imperatives rose 11% to $8.8 billion, led by a 20% jump in cloud revenue to $4.1 billion. IBM now boasts an annual cloud revenue run rate of $15.8 billion, and strategic imperatives sales of $34.9 billion.
Big Blue offers investors in their 50s outstanding value trading at 13.3 times earnings compared to its peer average of 20.7. Looking ahead, IBM's priced at even more attractive 11.4 times expected earnings. And with a yield of 3.8%, IBM's dividend is awfully attractive.
Limited downside risk, growth potential, and income are why IBM is a stock to consider for investors in their 50s.
Investing in stocks scares many investors in their 50s. With the right choices, you can find a good balance between risk and reward that will help you reach your financial goals more easily.