Sometimes the most "boring" stocks can actually make pretty exciting long-term investments. Here are three of our analysts' favorites that can help you build wealth in your portfolio.
Patrick Morris: An investment in Realty Income (O 0.52%) may not raise any eyebrows or generate headline attention, but as far as I'm concerned, that's a great thing.
Realty Income is a real estate investment trust that principally invests in retail properties across a host of industries, including convenience stores (from which it receives 10% of its revenue), dollar stores (9.6%), drug stores (9.4%), health and fitness properties (7%), and 43 other industries. In short, it owns the the buildings and leases them out to firms like Walgreen or Dollar General.
Its long-term leases primarily see rent rise by 1.5% annually -- and apart from its acquisition of American Realty Capital Trust and its $3.2 billion portfolio in January 2013 and various other purchases -- exciting news doesn't often come through the Realty Income press wires.
While some may bemoan the business and operations of Realty Income as boring, it has actually been to the supreme benefit of investors. Since going public in October 1994, it has had a total annualized return of 16.4%, demolishing the 10.9% return delivered by equity REIT peers and 9.5% offered by the S&P 500.
Jordan Wathen: I can't think of a more boring business than insurance. And within that industry, I can't think of a more boring company than Chubb (NYSE: CB).
Chubb seemingly has this ability to let the times just pass it by. It embodies the spirit of a boring, old school insurance company that puts profits over size. In the past 10 years, its revenue grew only 7% but earnings per share more than doubled.
It's a classic case of what happens when the management team plays the long game. Chubb doesn't worry about short-term revenue targets. If the insurance industry gets too lax with its pricing, it just stops writing insurance, directing its cash to dividends and share repurchases. This conservative style is showcased in its financial reporting. The company frequently forecasts greater losses than it incurs, evidence that Chubb is careful about the risks it underwrites.
This isn't the kind of stock that will make you rich overnight. But it is the kind of stock that could make you wealthy -- you just have to buy it and ignore it for a very long time.
Todd Campbell: Facing ever-growing pressure to cut costs to offset patent expiration, big drug developers are increasingly outsourcing trial management, monitoring, and data-crunching to contract research organizations, or CROs, like Quintiles (IQV 0.93%); and while managing a drug trial may not be as exciting as drug discovery, it is a nice and profit-friendly business.
Through the first nine months of this year, Quintiles sales are up 10.3% and earnings per share are up 31.1% from a year ago. Sales should continue to grow given that Quintiles estimates that CRO's will run 47% of all clinical trials in 2017, up from 37% today. Since drug developers spend $93 billion on drug discovery every year, that could mean billions of dollars in new revenue for the CRO industry.
Additionally, Quintiles revenue could benefit from increasing trial complexity. Hoping to tap into emerging markets, drugmakers are contracting for more global, rather than regional trials. Personalized medicine is making patient recruitment and trial design more complicated, too. Overall, with 4,060 clinical trials are under way, 19% more than there were in 2008, and Quintiles sales climbing a compounded 8.3% since 2010, this boring investment may prove to be an exciting long-term buy.
