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3 Stocks to Build Your Portfolio Around

By David Jagielski - May 26, 2021 at 6:19AM

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These investments will help you diversify while giving you a good mix of dividends, growth, and stability.

If you are just getting started with investing or are looking for ways to strengthen your portfolio, you'll want strong companies to serve as pillars you can build around. Ideally, these will come from various industries, and together, they can generate strong returns in a wide variety of market conditions while also providing you with safety for the long haul.

Three stocks that can serve as those pillars today are Regeneron (REGN -0.06%)Village Super Market (VLGEA -0.09%), and Walt Disney (DIS 2.69%). All three stocks offer a little something different and could be solid investments to hang on to for many years.

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1. Regeneron

Healthcare company Regeneron has fallen 11% in value over the past year while the S&P 500 has soared by more than 41%, even though the business has been doing fairly well. Its COVID-19 treatment REGEN-COV added $262 million to its first-quarter results for the first three months of 2021. But even without the boost, its net product sales in the U.S. would still have generated year-over-year growth of more than 18%.

Sales from the company's flagship product, Eylea, which slows vision loss, grew by 15% to $1.3 billion and accounted for the bulk (78%) of product-related revenue. Dupixent, the profits of which the company shares with Sanofi, is another promising medication that treats asthma and other conditions. Its sales in Q1 were up 48% and represented the highest growth rate of Regeneron-discovered products.

Given that dozens more products remain in its pipeline, investors don't need to worry too much about what happens after the pandemic ends. While revenue from its COVID-19 treatment won't likely last for the long haul, Regeneron still has a strong business outside of that. 

For investors, what Regeneron offers is some solid, long-term stability. With impressive net margins of 20% or better in each of the past four years, this is a company that has consistently delivered strong numbers. And although its share price hasn't performed well of late, that just makes it all the more attractive a buy right now. Trading at a forward price-to-earnings multiple of just 11, this is a dirt cheap buy given that the average holding in the Health Care Select SPDR Fund trades at more than 27 times its profits. 

2. Village Super Market

Village Super Market is also a stable buy, but unlike Regeneron, it pays an attractive dividend that yields 4.1%. That can help pad your returns in case the stock isn't doing all that well -- shares of Village Super Market are up a modest 6% over the past 12 months. The company operates over 30 supermarkets in the Northeast under multiple brands (ShopRite being the most common). Its largest presence is in New Jersey, where it has 26 locations.

While you shouldn't expect much growth from this business, you will see a lot of consistency. Over the past five fiscal years, its net income has fluctuated very little -- between $23 million and $26 million. It has also generated sufficient free cash flow to support its dividend payments. Over the trailing 12 months, free cash of $55 million was more than four times the $13 million that the business distributed out to shareholders. And with respect to income, its payout ratio sits around 50%.

But those numbers could get better, as the company has been expanding. Last year it acquired five supermarkets (and other assets) from Fairway Group in a bankruptcy auction. And that is already having a noticeable effect on Village Super Market's financials. With sales of more than $1 billion during the six-month period ending Jan. 23, the company's top line is up an impressive 20% year over year and its bottom line has grown by 73%.

Even though this isn't a high-growth stock to invest in, with strong numbers and plenty of cash flow, there could be more opportunities that open up for Village Super Market in the future. And if nothing else, it still makes for a solid income stock to hold on to.

3. Walt Disney

If it is growth you're after, not all blue-chip stocks can deliver -- but Disney is one that does. Amid the pandemic, the company's theme parks have been struggling, but now that vaccination rates are on the rise, there's plenty of reason to be optimistic that Disney's sales numbers will be much stronger in the years ahead.

The company released its second-quarter results on May 13, and for the six-month period ending April 3, sales of $31.9 billion were down 18% year over year. While sales from its media and entertainment division have declined by a modest 2%, it was Disney's parks, experiences, and products segment that took a beating, generating roughly half of the $13.2 billion that it reported during the same period last year.

The Disney+ streaming service, however, has been growing at an impressive rate; the 103.6 million subscribers it boasted as of the end of the period was more than triple the 33.5 million of a year ago.

What's promising is that even with the steep drop in revenue, the business still reported a profit of $1.1 billion over the past two quarters, although that is down 58% year over year. Besides a loss in revenue, restructuring and impairment charges of $527 million -- nearly double the $295 million incurred the year before -- also contributed to the loss of profit. The difference is that last year, the expenses were due to the company's acquisition of 21st Century Fox, whereas this year they relate to closures.

But the future remains bright for Disney. It is a stronger brand moving forward, especially with the acquisition of 21st Century Fox. With growth from its Disney+ streaming service and a possible surge in demand for its theme parks once things get back to normal, the business could be booming in the years ahead. Investors are already anticipating that, with its shares up 48% in 12 months. The stock has been a solid investment over the years, and it'll likely remain that way for the foreseeable future.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
$623.50 (-0.06%) $0.40
The Walt Disney Company Stock Quote
The Walt Disney Company
$120.85 (2.69%) $3.16
Sanofi Stock Quote
$44.04 (1.43%) $0.62
The Select Sector SPDR Trust - The Health Care Select Sector SPDR Fund Stock Quote
The Select Sector SPDR Trust - The Health Care Select Sector SPDR Fund
$132.44 (0.38%) $0.51
Village Super Market, Inc. Stock Quote
Village Super Market, Inc.
$22.51 (-0.09%) $0.02

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

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