You've come here looking for the best stocks for a $1,000 investment today. But it's challenging to deliver on those expectations because there's subjectivity involved.
After all, I don't know how long any of my readers have until retirement, how much money they have to invest now, or how many stocks they already own -- all important factors when choosing stocks to buy.
That being the case, allow me to explain where I'm going in this article. By "best stocks," I mean stocks with a long public track record for positive shareholder returns. For "right now," I've selected stocks that offer unusually cheap valuations, relatively speaking. And I believe these are safer stocks to buy whether $1,000 is a lot of money for you or not.
These stocks aren't high-risk, high-reward speculative bets.
Image source: Getty Images.
Having explained my rationale, allow me to explain why Restaurant Brands International (QSR +0.16%), Lam Research (LRCX +0.33%), and Whirlpool (WHR 0.65%) might be worth investing $1,000 into today.
1. Restaurant Brands
Restaurant Brands is the parent company of Burger King, Tim Hortons, Popeyes, and Firehouse Subs. Collectively, the company ended 2022 with 30,722 restaurant locations, almost all of which were franchised. Considering each brand opened new restaurant locations in 2022 and each experienced same-store sales growth, I'd say Restaurant Brands' business is healthy.
NYSE: QSR
Key Data Points
Personally, I can't envision a world where Burger King and its portfolio of brands disappeared. This is a globally iconic restaurant stock that will endure the next decade at a bare minimum.
The challenge for Restaurant Brands, therefore, is not survival but rather the success of its franchisees. After all, the company can really only grow if its franchisees open new locations. And they won't want to do that if they're not making enough profits. As the company's new executive chairman J. Patrick Doyle recently said, "We need every resource in this company and all of these brands focused on making our franchisees more successful."
Doyle helped orchestrate success for Domino's Pizza franchisees more than a decade ago, giving confidence he can do the same for Restaurant Brands. This will drive growth for franchisees, and ultimately drive profits for Restaurant Brands.
As it is, Restaurant Brands pays a growing dividend that currently yields 3.2%. Profit growth could drive future dividend growth. Since it went public again in 2014, Restaurant Brands has performed in line with the S&P 500. However, by reinvesting dividends, shareholders have slightly outperformed the market average. And the same could be true going forward, which is why I'd be comfortable investing $1,000 today.
2. Lam Research
Lam Research makes machines used in semiconductor manufacturing, and it reported financial results for its most recent quarter on April 19. Revenue for the first quarter of 2023 was down 5% year over year and down 27% from the previous quarter. But this downtrend is normal for Lam Research.
NASDAQ: LRCX
Key Data Points
The semiconductor industry is complex. There are a lot of players and many moving pieces. Companies do their best to predict future demand and try to have an adequate supply of components. But in reality, supply and demand are often out of sync, leading to cyclicality in the industry. This affects Lam Research as well, and the revenue growth rate displayed below is a good illustration of this.
LRCX revenue (quarterly YoY growth) data by YCharts. YoY = year over year.
Lam's equipment is used by many important players in the industry, including Samsung, Micron, and Taiwan Semiconductor. When its revenue growth plummets, it's not that the company is failing to execute. Rather, it's simply susceptible to the ebbs and flows of the industry.
The good news for investors is twofold. First, each trough in the semiconductor space has always been met by a new high within a couple of years. Therefore, I fully expect Lam Research's operating results to surge in time. Second, the market is prone to overreactions during trough periods, allowing long-term investors to scoop up shares at a discount.
The stock is only 28% down from its all-time high, and it could always fall more. However, the future of the semiconductor industry is bright, as is that of Lam Research's business. For investors willing to buy today in anticipation of a coming surge in semiconductor spending, the stock is trading at a bargain price from a price-to-earnings (P/E) perspective. And its dividend is yielding about 1.3%, which is about average for the stock.
LRCX PE Ratio data by YCharts.
Lam Research stock is up about 12 times in value over the last 10 years, fueled by growth in the semiconductor industry. Looking ahead, most economic pundits believe the semiconductor space still has outsize growth ahead, which is why I believe this remains one of the best stocks to invest $1,000 in today.
3. Whirlpool
Through its A-list portfolio of brands, Whirlpool makes consumer appliances such as refrigerators, washing machines, dishwashers, and more -- household appliances that consumers will replace whenever old ones wear out. In this way, Whirlpool always has a pool of potential customers.
NYSE: WHR
Key Data Points
That said, its financial results can experience ups and downs like Lam's. For example, Whirlpool's net sales fell 15% year over year in the fourth quarter of 2022, due to macroeconomic conditions. And for 2023, management expects net sales to drop 1% to 2% compared to 2022.
From my perspective, the business is stable, and its products will always be in demand. Therefore, I have little concern about it in the long term. And for this reason, I'm focused on how management returns capital to shareholders.
On this subject, this is another dividend stock worthy of attention. Whirlpool's dividend currently yields about 5%. Going back 30 years, the yield has only been higher on two occasions: briefly during the market crash at the start of the pandemic and during the Great Recession.
WHR dividend yield data by YCharts.
A high dividend yield can be a red flag: Investors worry of financial trouble that will lead to the reduction or suspension of the dividend. But in Whirlpool's case, I don't believe there's anything to worry about.
The company's free cash flow fell by about 50% in 2022 to $820 million. And it's only expecting $800 million in free cash flow in 2023. But even at these reduced levels, it still has ample profits to support its dividend. For perspective, it paid $390 million in dividends in 2022 -- less than half of its free cash flow, which is sustainable.
The reduction in its free cash flow is also likely temporary. When economic conditions eventually improve, perhaps in 2024, so too should the company's profitability.
As a fun mental exercise, those who invest $1,000 today can expect about $1,000 total in dividends over the next 20 years, assuming Whirlpool can maintain its dividend at the current rate. However, if dividends are reinvested and Whirlpool can periodically increase its dividend payouts by 5% annually, then shareholders could receive $1,000 in cumulative dividends in about 12 years.
The possibility of an investment paying for itself in 12 years is exciting. And for what it's worth, I'm willing to bet that millions of consumers worldwide will still be shopping for Whirlpool products 12 years from now, providing an ongoing opportunity.
Out of all the stocks on the market, I don't expect shares of Restaurant Brands, Lam Research, or Whirlpool to be the absolute best performers over the next 10 years; some other company will likely take the crown. However, I see little chance of losing money over the long term with these. All three companies have a chance for at least modest growth. And all three trade at an attractive price today.
