The overall market may look and feel overvalued right now. But let's be real -- you can still find compelling individual stock prospects.
Things change a bit, however, when you're talking about new picks for a retirement account. You can only contribute so much money to these vehicles in any given year, and there's no tax benefit when you suffer a trading loss within an IRA. That's why you'll want to be more conservative with your retirement fund's investments, maximizing growth while minimizing risk.
Here are three stocks that are better suited than most for a retirement portfolio. The key common thread for all three underlying companies is certainty.
Philip Morris International
The worldwide smoking-cessation movement is getting traction. But it's not getting nearly as much traction as you might think. The World Health Organization predicts that the worldwide number of smokers will only dwindle from 2015's 1.32 billion to 1.27 billion by 2025, underscoring how little progress is being made on the front. Population growth isn't helping either.
Nevertheless, the world's tobacco powerhouses see the writing on the wall, even if it won't be a real problem for decades. They're managing the slow demise of traditional cigarettes by introducing alternatives like vaping and heated tobacco products. Philip Morris International (PM +6.98%) is arguably leading this charge.
Philip Morris is, of course, the owner of its namesake brand of cigarettes (at least outside of the United States -- Altria's Philip Morris USA handles the brand within the U.S.). But it's also parent to familiar brands like Marlboro and others when those cigarettes are sold overseas.
NYSE: PM
Key Data Points
Perhaps more importantly, Philip Morris International is the name behind heated-tobacco product IQOS, which is now the company's best-selling brand of... well, anything. As of its fourth fiscal quarter of 2023, smoke-free products account for nearly 40% of the company's top and bottom lines. IQOS is leading the way with 28.6 million users, up 3.7 million versus 2022's year-end count.
There's still no absolute permanency to this new, budding business that's displacing cigarettes. Inhaling anything other than air will always mean some degree of risk.
These are moves that could prolong the lives of tobacco giants for decades, though, supporting their incredible dividend payouts for just as long. Newcomers to Philip Morris International will be plugging into the stock while its dividend yield stands at 5.6%. This number's based on a dividend that's now been raised for 16 consecutive years.
Palo Alto Networks
How does the old saying go? Expect it when you least expect it?
That's probably how plenty of people are feeling right now. It's been a while since we've heard about a major data breach. Then, pow! AT&T recently announced that personal information for tens of millions of past and current customers was found online, freely available to anyone who knew how and where to look.
It's a not-so-gentle reminder that as long as computers, networks, data centers, and the internet exist, there will always be cybercriminals. That's why we'll always need cybersecurity solutions. And that's why the cybersecurity software industry will likely grow at a double-digit pace every year for the next several years. Indeed, the business will arguably never stop growing.
Enter Palo Alto Networks (PANW +3.58%).
Palo Alto is a cybersecurity outfit. It's one of the biggest, in fact, doing $7.5 billion worth of business last year alone. Analysts expect the current fiscal year's revenue to roll in nearly 16% better than last year's, extending a long-standing pace that's also expected to extend into the next several years. Per-share earnings have been growing at a similar clip, and are also expected to carry on.
PANW Revenue (Quarterly) data by YCharts.
This consistency ultimately reflects the strength of Palo Alto Network's offerings, and how they're made available to customers.
See, Palo Alto isn't just firewalls and antivirus software. It offers a wide range of integrated services ranging from remote-worker login credentials to malware detection to cloud protection -- and more -- all managed from a simple cloud-based interface. Access to its tools is also subscription-based, meaning much of its revenue is recurring. It's also reliable, as switching cybersecurity services providers can be complicated.
The strength of its business model hasn't prevented Palo Alto shares from falling nearly 30% since February. But such setbacks from this stock are unusual and usually short-lived, meaning this dip is a buying opportunity.
Nu Holdings
Last but not least, think about adding Nu Holdings (NU 1.36%) to your retirement portfolio before April comes to a close.
It's not a household name... at least not where you likely live. If you live in South America, though, things might be different. The fintech company offers a handful of credit and debit cards, along with mobile wallet services, to 94 million customers in Mexico, Colombia, and Brazil. For nearly one-third of its most active users, Nu serves as their primary bank.
It's not an uncrowded arena. MercadoLibre and StoneCo are offering similar services in many of the same markets. This is one of those cases, however, where there's more than enough business growth to go around.
NYSE: NU
Key Data Points
In many ways, South America's e-commerce industry is where North America's was a little over 20 years ago. Americas Market Intelligence believes Latin America's e-commerce market is set to grow to the tune of 24% this year, followed by 21% growth next year and in 2026.
At the same time, smartphone adoption in the region is heating up again following a pandemic-prompted lull. Research outfit Canalys reports smartphone shipments in Latin America grew 20% year over year to 31.5 million units during the final quarter of last year. Even so, GSMA says only 74% of the continent's population will be mobile subscribers by 2025, and slightly fewer still will be regular mobile internet users by then.
Moreover, much of South America is becoming "mobile first," meaning mobile phones are the primary way its residents connect to the internet.
Connect the dots. Nu Holdings is already occupying the space where most people are going. This year's projected top-line growth of 38% is sustainable for the next several years. The company's also profitable, underscoring the bullish argument.
