Packing your portfolio with risky hyper-growth stocks might make you feel like a genius during a bull market, but when there's a downturn, your smile just might get turned upside down. As exciting as seeing rapidly rising share prices might be, your portfolio needs to be well-diversified, and that means you need a few companies that are stable in the face of turmoil, not to mention being capable of delivering some growth all the time.
So if you're looking to make a $5,000 investment as part of a larger portfolio -- and keep it largely intact and steadily growing over time -- splitting your money between these two businesses below could do the trick. Let's dive in.
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1. Thermo Fisher
Thermo Fisher Scientific (TMO -0.33%) is a sturdy stock that's fit for holding for decades because it's one of the businesses that makes the entire biopharma sector run.
When it comes to laboratory goods and biomedical research laboratory hardware, Thermo sells practically everything at industrial scale. Whether its centrifuges, chemicals, freezers, bioreactors, or specialized analyzers for use in molecular biology experiments, the company is usually the first supplier on the list to call.
For many biotechs, it's possible to buy nearly everything necessary to operate from the company's catalog. That's a big part of the reason why the total return of its shares rose by 603% over the last 10 years, far exceeding the market's return of only 216%; it's a one-stop shop, and practically everyone in biopharma buys from it frequently.
Furthermore, the company's field application engineers and salespeople are common (and welcome) sights in many laboratories, and in my experience, good customer service is the norm. Whether it's performing routine maintenance on a customer's hardware or helping to figure out which type of analyzer device will meet the customer's needs, Thermo's staff tend to be hard working and quite knowledgeable.
In Q1, the company brought in sales of $10.7 billion.That was down 9% year over year due to falling sales of its coronavirus diagnostic tests. However, investors can be fairly confident that most of its top line will remain intact over time. That's because 43% of its revenue stems from recurring sales of consumables, like test tubes and laboratory reagents, and 39% of its revenue is from services like safety consulting and maintenance.
Meanwhile, Thermo Fisher repurchased $3 billion of its stock and hiked its dividend by an impressive 17%. With the dividend yield still at only 0.2%, you'll need to be patient with your investment. But the longer you hold the stock, the more you'll get the benefit from its dividend payments and share repurchases, both of which are long-standing features of the company.
2. Stryker
Stryker (SYK 0.70%) is similar to Thermo Fisher, but it competes in the markets for medical and surgical equipment, with special focus on orthopedic and neurotech products.
It makes everything from surgical robots to surgical inventory management systems, not to mention hospital cleaning chemicals and even gurneys, and it competes globally. While it's true that its global disposition leaves it exposed to a few additional risks, it also enables a few big advantages that the company is already exploiting.
For 2022, its sales totaled $18.4 billion, and over the last five years, its free cash flow (FCF) jumped by a startling 85% thanks to new product launches and efficiency gains wrought from its strategy of building a globalized supply chain.
Importantly, the vast majority of its revenue comes from sales of one-time use items. That means for as long as hospitals and operating rooms need surgical tools and the artificial hips used in hip replacements (among many other similar goods), Stryker should experience consistent demand for its products. It also means that the company can make incremental improvements to its existing portfolio of products to continue retaining its market share, whereas new entrants to the market would need to invest a lot more to develop a competing product from scratch.
Stryker's forward dividend yield of 1% is less than that of the market average. But since 2013, its payout rose by 183%, and the company has bought back an average of $281 million of its shares annually. The longer you hold its shares, the more those buybacks and dividend hikes should work in your favor, and there isn't much in the way of serious risk that could sink the company without the rest of the market being at risk, too.
