Please ensure Javascript is enabled for purposes of website accessibility

Got $3,000? Here Are 3 Stocks to Buy and Hold for the Long Term

By Howard Smith - Jan 28, 2021 at 6:50AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These three companies can bring diversification, and downside protection, to any portfolio.

Even with markets near all-time highs, stocks are a good way to create long-term wealth. But thinking through a strategy is more important when it's difficult to buy at bargain prices. 

Part of a strategy that makes it emotionally easier to stay invested through a market correction is to focus on some downside protection. That can come in the form of income, a solid balance sheet, or a large moat for the business. If you have $3,000 to invest right now, NextEra Energy (NEE 0.33%), Garmin (GRMN 3.17%), and Walt Disney (DIS 2.28%) can give you each of those, along with long-term growth. 

man looking at fossil fuels on the left, converting to renewable energy solar and wind on the right

Image source: Getty Images.

A sector worth owning

It only makes sense to have some money invested in renewable energy right now. The only question may be how exactly to do it. There are choices across the risk spectrum, but as a foundation, NextEra Energy is a good choice as both a leader in the growth portion of the sector, and an income provider from its utilities. 

NextEra owns Florida Power & Light, the largest regulated electric utility in the U.S. by retail megawatt-hour sales, as well as Gulf Power, which serves northwestern Florida. Its other subsidiary is NextEra Energy Resources.

NextEra Energy Resources is the global leader in wind and solar power generation. It currently has a backlog of renewable projects that's larger than its existing portfolio. That gives NextEra Energy confidence to predict between 6% and 8% annual earnings growth through 2023. The stability of NextEra's utilities allows it to expect about 10% annual dividend growth through next year. So the business gives investors income as well as ownership in the growth of the renewable energy sector. 

Balance sheet backstop

Investors should always consider a company's financial position. That's especially true when stocks are trading at rich valuations, and an investor may want additional protection. Garmin, the maker of outdoor recreation devices, has a pristine balance sheet. 

As of the quarter ending Sept. 26, 2020, Garmin had approximately $2.7 billion in cash and marketable securities and no debt. That cash position translates to more than 11% of the company's total market capitalization. Garmin also generated $236 million in free cash flow in the third quarter, and that was after increasing spending on research and development (R&D) by 18%. That cash more than covers the company's dividend, which gives investors a 2% yield.

The R&D spending helps fund the company's innovation. Its products are as popular as ever, as the 19% year-over-year revenue growth showed in the third quarter. Other than a pandemic-induced dip in early 2020, revenue growth has been strong for years, and there's no sign of that reversing

GRMN Revenue (TTM) Chart
Data source: YCharts. TTM = trailing 12 months.

A unique business

A large moat is especially important for an investment when buying at relatively high valuations. Disney's moat is unique in that it comes from its group of businesses themselves. The interconnectivity of its film business, theme parks, cruises, and direct-to-consumer media is unmatched. 

reopening of Walt Disney World with cast members in front of castle

Image source: Walt Disney.

While many areas of Disney's business are still struggling with theme parks restricted, cruises suspended, and movie releases delayed, its Disney+ streaming service has been an overwhelming success. 

At its investor day presentation in December, management said growth in the service "exceeded our wildest expectations" with 86.8 million subscribers as of Dec. 2, 2020. CEO Bob Chapek added that it is a "one-of-a-kind service featuring content only Disney can create." 

Investing for the long term

With markets trading near highs, investors should keep in mind that wealth generation occurs over long periods. But trying to time the market by holding money while awaiting the perfect entry point is rarely a successful strategy. Instead, investors should focus on solid businesses, and lean toward companies with added downside protection that dividends, solid balance sheets, and unique offerings can provide. 

If you have $3,000 to create a diversified group right now, NextEra Energy, Garmin, and Disney should fit the bill. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$105.61 (2.28%) $2.35
NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$75.04 (0.33%) $0.25
Garmin Ltd. Stock Quote
Garmin Ltd.
GRMN
$102.49 (3.17%) $3.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.