Have $1,000 to invest right now and not sure where to put it? That's understandable. Things are up in the air at the moment. The market is crashing like it's 2008, getting double-whammied by the novel coronavirus pandemic and the oil price war set off by Saudi Arabia and Russia on March 6. Whether it's the first money you're hoping to put to work, or it's a recent deposit in an ongoing effort to save for the future, now is one of those rare periods in time where it seems there's nowhere good to invest.
My personal investing journey (as well as my formative years as a working adult) began in 2007, which wasn't ideal timing considering the global financial crisis got started that year. But what that period taught me was that even less-than-ideal timing can be wildly rewarding if you can ignore the short-term doomsday-ism and stay invested in quality companies for the long haul (since stocks are, after all, passive business ownership).
With that in mind, here's my mini stock portfolio for the next decade for those looking to put $1,000 to work right now, and plan to buy more with subsequent savings: Facebook (NASDAQ:FB), NVIDIA (NASDAQ:NVDA), Texas Roadhouse (NASDAQ:TXRH), Square (NYSE:SQ), and STORE Capital (NYSE:STOR).
Facebook: The king of social media and more
The coronavirus and oil market-fueled sell-off are only the latest blows to Facebook stock. Over the last couple of years, the company has been dealing with privacy and political backlash over its handling of user personal information and its stance on running political ads (specifically, for not eliminating them entirely if they're found to be false). A record $5 billion fine paid to the Federal Trade Commission (FTC) hasn't helped. Double-digit revenue growth that has consistently run north of 20% has been offset by much faster operating expense growth as Facebook updates its privacy and safety mechanisms.
The result is a stock that has failed to sustain positive traction since late 2017. So why buy Facebook now?
For one, even as the undisputed leader of the social media industry, revenue generated by Facebook and its subsidiaries Instagram, WhatsApp, and Messenger continues to trudge higher. Management said to expect sales growth to again exceed 20% in 2020. And after heavy spending the last two years, operating expenses are also forecast to moderate this year, paving the way for even higher earnings-per-share growth. As of this writing, the stock trades at value pricing -- just 15.5 times one-year forward earnings.
Looking even further out, Facebook has a lot of irons in the fire. Those include its Oculus virtual reality business, new e-commerce tools to help connect sellers and buyers, and payment capabilities to help small businesses and individuals move money. Love it or hate it, there's a lot going for Facebook, and this is one of my favorite stocks to add to whenever I am looking to invest money for the long term.
NVIDIA: A chip designer for the future of computing
Speaking of companies that have massive long-term potential, graphics processing unit (GPU) leader NVIDIA also tops my list as a favorite long-term buy. The GPU designer is best known for its work powering high-end video game graphics, but the chips are so much more than that these days. Getting put to use as a computing accelerator, NVIDIA's wares can be found in advanced driver assist systems in cars and fueling autonomous vehicle innovation, healthcare imaging, robotics, and artificial intelligence in the cloud and in devices at the edge of networks. Put simply, this company has a world of possibility ahead of it.
NVIDIA stock is a similar story to Facebook. After about a year of sales slump (the chip industry is a cyclical one, even for a high-growth company like NVIDIA), shares are trading for the same price as they were in 2018. The pace of innovation is on a tear, though, and NVIDIA's revenues are back in all-out expansion. Fiscal 2020 (12 months ended Jan. 26, 2020) sales ended down 7%, but fourth-quarter revenue notched a massive 41% rally from the comparable period a year ago. Even with supply chain constraints due to coronavirus, management said it was expecting another 35% year-over-year increase in the first quarter of the new year.
It's all about the long haul for this technologist, though, and shares look like an especially attractive buy for those looking a decade down the road. NVIDIA stock is currently going for 27.7 times forward earnings -- a premium to be sure, but reasonable given the potential for this computing innovator.
Other odds and ends for a well-rounded investment
Any portfolio should be diversified, so for the rest of my current buys, I'm opting for a strong consumer discretionary brand, a financial company for the 21st century, and some diversified real estate.
Texas Roadhouse is one of my favorite restaurant stocks around -- even though earnings have been hit in the last year due to minimum wage increases. That's because, even though the industry is highly competitive and average comparable store sales (a blend of foot traffic and average guest ticket size) have been trending negative for a few years now, Roadhouse has been a consistent winner. It has been able to slowly grow its store count, and guest traffic continues to tick higher.
As for the bottom line, it started to rebound during the fourth quarter of 2019 with a 45% increase. Pressure will no doubt continue in 2020 as labor cost continues to rise, but the bulk of the pain appears to be in the rear view mirror now. Plus, management continues to report positive guest traffic trends even as the restaurant industry heads the opposite direction. I also like the company's chances of bucking the coronavirus fears, as most of its stores are located in suburban areas. Going for just 15.9 times forward earnings per share, Roadhouse is a timely buy.
Here's another timely buy: Square, which continues to put up 40%-plus sales growth but is trading near multi-year lows after the recent market sell-off. There are really two businesses at work here: Square, the network of point-of-sale and software tools to help small businesses accept digital payments and manage operations, and Cash App, the peer-to-peer money sharing and investment application for consumers.
Both are fast-growing finance businesses built for the 21st century, and at only 6.5 times trailing 12-month sales, Square stock looks like a serious bargain. That's especially so considering management's call for an increase of 26% in revenue in 2020. Investment into new features like business loans at Square Capital and Cash App features like investing in fractional shares of stock means this is a growth-now, profit-later business. However, the potential is there (gross profit margin was 40% last year and is still trending up as new users sign up to the platform) for some serious return down the road.
My final buy switches gears to the real estate front. In a world that seems to be favoring digital over physical, STORE Capital has been able to grow its portfolio of real estate with quality tenants. Favoring single-occupant long-term leases (average remaining non-cancellable term was 14 years at the end of 2019), the company is well-diversified with restaurants, retailers, health clubs, auto repair shops, and early childhood development centers. Properties are also more than 99% occupied, speaking to the efficiency of this real estate manager.
Adjusted funds from operations (or FFO, real estate's equivalent to earnings per share) rose 8% last year, and based on the company's expectation for at least another 3% increase in 2020, the stock is going for just 14.1 times adjusted FFO. It has a solid pipeline for further property acquisition, development, and lease signing, and should be a solid income yield play in the years to come. Speaking of which, post market drubbing, STORE pays a yearly dividend that yields 4.2%.
For those with $1,000 to invest right now, here's how I'm allocating to these stocks: One share each of Facebook and NVIDIA, four shares of Texas Roadhouse, three shares of Square, and six shares of STORE Capital. As of this writing, that leaves about $25 left in cash to be invested later or used as a personal reward (like lunch or ice cream!) for investing for the long-term even though it feels totally wrong to do so. Power through the tidal wave of bad news, and stay focused on the future potential of these businesses.