Congratulations on beginning your journey as an investor!
You can earn a fortune in the stock market, and one of the best ways to do so is to invest your money in high-quality businesses. Moreover, owning and studying great businesses can help you learn important investing lessons, which, in turn, can help you make even more money in the future.
Here are five excellent companies that can form the foundation of your stock portfolio.
If you want to learn about what it takes to succeed as a retailer, there's no better company to study than Costco Wholesale (NASDAQ:COST). The discount warehouse chain excels at creating a fun, treasure hunt-style shopping experience for its members, with an ever-changing selection of high-quality merchandise. Costco is also beloved by bargain shoppers for its low prices.
Moreover, Costco's membership model is a thing of beauty. The profits Costco makes from selling membership plans allow it to sell its wares only slightly above cost. These low prices produce savings for customers, which entices more people to become members. It's a powerful virtuous cycle -- one that should continue to fuel gains for Costco and its investors in the years ahead.
Netflix (NASDAQ:NFLX) can teach you the beauty of simplicity. Even as a $185 billion enterprise, the streaming video leader has a relatively simple business model. It licenses and produces movies and TV shows, and it sells subscriptions that allow people to stream these shows on their TVs and mobile devices.
The more subscriptions Netflix sells, the more content it can buy, which makes its streaming services more valuable to users and helps Netflix sell more subscriptions. This growth flywheel has swelled Netflix's paid membership count to more than 180 million subscribers -- and it should help the streaming leader gain tens of millions more customers in the coming years.
One of the most important investment lessons you can learn is just how profitable it can be to invest in the companies that are best positioned to profit from global megatrends. The trend away from cash and toward digital forms of payment is one such profit opportunity -- and Visa (NYSE:V) stands to profit from this powerful trend perhaps more than any other company.
Visa operates the largest credit and debit card network in the world. It makes money each time someone uses one of the 3.3 billion cards on its platform. Visa is enormously profitable, and it uses its bountiful free cash flow to steadily expand its digital payment empire, such as its recent $5.3 billion acquisition of financial technology company Plaid. With most of the world's transactions still conducted via cash, Visa has long runways for growth still ahead.
When it comes to investing, boring can be beautiful. Garbage collection may not be the most exciting industry, but that hasn't stopped Waste Management (NYSE:WM) from turning trash into treasure for its investors.
The garbage king owns and operates a vast collection of landfills, transfer stations, and recycling centers. Together, they form a wide competitive moat around its business. Strict regulations and homeowner opposition make it difficult to build new waste facilities in Waste Management's markets, thereby making it difficult for would-be competitors to displace it from its trash throne. That makes Waste Management one of the safest stocks around -- and a great option for beginner investors.
Apple (NASDAQ:AAPL) needs little introduction. Hundreds of millions of the technology titan's iPhones, iPads, and Macs are in use all around the world. Together, they form a combined base of more than 1.5 billion devices to which Apple sells an expanding array of high-margin services.
Apple can teach you the value of high switching costs. Its tightly integrated ecosystem of best-in-class devices and popular services -- such as Apple Music, iCloud, and Apple Pay -- help to lock in users. Once people become Apple customers, they tend to stick around, and each new Apple service they use and integrate into their lives makes it less likely they'll switch to a competitor. In turn, Apple is able to generate hefty profits year after year -- to the tune of $55 billion in 2019.
Better still, with more than $90 billion in net cash on its fortress-like balance sheet, Apple is a financial powerhouse. These enormous cash reserves, combined with its strong recurring profits, make Apple an excellent foundational stock for your initial investment portfolio.