A friend recently asked me what the best stocks to buy now were. The first thing I told him was that I couldn't answer for him: Every investor has a different temperament, with varying investing styles, and distinctive financial goals. To say that I could recommend the one or two best stocks to buy right now for him would be silly.
Yet I still want to be able to offer a perspective, and the best way I've found to do this is by describing my own situation, and what I plan on doing in the stock market. I'm in my 30s, married, and have one child, and my family lives below its means. I like investing in innovative companies and holding them for at least three years.
Back in 2011, I tabbed 10 stocks that I'd be investing $40,000 in. Since then, the portfolio has grown to $62,880. As you can see, that's beating the market by more than 10 percentage points. In other words, the portfolio would be $4,360 smaller if I had just invested it in an index fund.
Read on to find out which of these stocks I think are great buys right now.
|
Company |
Publication Date |
Change |
Vs. S&P 500 |
|---|---|---|---|
|
|
144% |
95% | |
|
PriceSmart |
93% |
45% | |
|
Baidu (BIDU +1.31%) |
47.6% |
2% | |
|
Intuitive Surgical (ISRG 2.99%) |
7.2% |
-36% | |
|
National Oilwell Varco |
-5.6% |
-53% | |
|
Starbucks |
12.9% |
-35% | |
|
Whole Foods Market (WFM +0.00%) |
81.3% |
38% | |
|
Amazon.com (AMZN 1.92%) |
69% |
23% | |
|
Apple (AAPL 1.53%) |
66.3% |
21% | |
|
Johnson & Johnson |
56.3% |
8% | |
|
Total |
|
57.2% |
10.9% |
Source: YCharts. Returns include dividends, accurate as of February 11, 2014.
So far this year, the retirement portfolio has lost ground to the S&P 500, but there have been some bright spots.
Though Apple disappointed with iPhone sales over the holiday quarter, the company's aggressive buyback plan has helped the bottom line. An 11.2% drop in net income equated to only an 8.6% drop in EPS because there were fewer shares on the market. And Apple has continued that policy moving forward.
And Intuitive Surgical, which has seen its shares fall for most of the past year, finally got some good news on the research front. An independent study says patients who undergo hysterectomies using Intuitive's daVinci system are less likely to be readmitted at a later date, which drastically reduces hospital stays.
Though both of these tidbits are good news, however, neither of these companies make the list of best stocks to buy now. Here are the one's that did:
Baidu
Shareholders in China's largest search engine have enjoyed a nice ride, as shares are up more than 80% since July of last year. Investors are no longer as worried about competition from Qihoo 360 and believe that Baidu has the ability to effectively monetize mobile searches.
But despite the jump, the company's shares still trade for about 26 times 2014's expected earnings. That may sound like a lot, but remember that the company has the overwhelming share of China's growing Internet search market, and that it is aggressively reinvesting its cash to build an even greater moat around itself.
Whole Foods
When Whole Foods came out with earnings last quarter, investors were spooked by the possibility of shrinking margins and encroaching competition. Though those are certainly fair concerns, they ignore two crucial points.
The first is that Whole Foods is the market leader in organic and natural foods. While new entrants to the market are growing aggressively, they also have a much different value proposition: Their stores are much smaller, carry fewer goods, and will probably co-exist with larger grocers.
The second is that with prices for organic goods coming down, more shoppers will make the choice to switch over to what was once seen as an option that was too expensive. That helps everyone in the industry, and none more so than Whole Foods.
Amazon
Finally, we have Amazon, which is still ridiculously high-priced by conventional metrics, but which I believe is now ripe for the picking. Analysts were concerned that revenue would be slowing in the coming quarters, and while that's a valid concern, I also think it's shortsighted.
The company has already shown itself to be adept at entering and dominating entire new markets. What once was just an online bookseller is now the major force in e-commerce, as well as cloud computing and even -- in some markets -- the grocery business. There's no telling what the company will try to disrupt next, but I believe that with shares down 13% from their all-time highs, now represents a good entry point.
