Has this manic market made you more of a trader and less of a true buy and hold investor? You’re not alone. The environment has recently rewarded some short-term transactions, and obscured what can reasonably be expected in the future.
The winning investment philosophies, however, have not been changed. It’s always a game ultimately won by people willing to ignore the noise, buy quality stocks, and stick with those positions for years to come.
With that as a backdrop, here’s a look at three quality picks that are not only safe enough to be held for the long term, but also powerful enough to generate surprisingly solid gains.
You know the business. In fact, the whole world knows about the business. Consulting company Interbrand tariffs Mcdonalds (NYSE: MCD) the ninth most valuable brand of 2020, pairing with other similar rankings that rank its golden arches as one of the most recognizable logos in the world. This is huge for a restaurant chain in constant competition with other chains.
Investors who view McDonald’s as a fast food game, however, see the business at all wrong. It is rightly described by many people as a real estate company. It is first and foremost in the business of owner, to charge its franchisees not only a monthly service fee of 4% of sales, but also a rent for real estate belonging to the company. It turns out that it helps its tenants generate much-needed income by making it easier to sell cheeseburgers, fries, and milkshakes.
It is a sometimes conflicting relationship. The company’s financial demands on franchisees can sometimes seem onerous and unaffordable. However, most of them usually accept the requests of the parent organization, because the headache is worth it. McDonald’s restaurants tend to generate significantly more sales and revenue for operators than other fast food restaurants. This is how the company has been able to increase its dividend every year for the past 45 years.
While it’s not always the ideal decision, reinvesting those dividends in more stocks of the same company is a smart way to quickly grow your stake in the income-generating investment.
Investors will not have to make such a dividend decision with Nvidia (NASDAQ: NVDA), because the company hardly pays one. But that’s not why you would want to own this tech company anyway. Nvidia is a long-term buy because it is perfectly positioned to capitalize on current and future data center growth.
The company is best known as a manufacturer of computer graphics cards. It is also the name behind some computer processing chips. Ultimately, however, the underlying technology used in its graphics cards and processors is very usable in a data center. Its second-quarter data center hardware revenue of nearly $ 2.4 billion not only improved 35% year-on-year, but also accounted for more than a third of total revenue. from Nvidia. Depending on the quarter, sometimes data centers are a bigger business than video games.
The company has only scratched the surface of the potential of the data center market. Artificial intelligence is becoming more accessible and affordable in large part thanks to the efforts of Nvidia. Market research firm Omdia estimates that Nvidia processors handle 80% of the world’s AI work currently underway, and that’s an estimate that does not yet reflect demand for Nvidia’s Grace chip, which the launch is slated for 2023. The company says the Grace processor is 10 times more powerful than anything on the market today, which means investors can expect continued market dominance. AI which, according to IDC, will grow at an annual rate of more than 17% until 2023.
Finally, add JPMorgan Chase (NYSE: JPM) to your list of investments you’ll be glad you bought now.
With nothing more than a glance, JPMorgan looks a lot like every other mega-bank. Loans, investments and consumer banking are part of its repertoire. While its business is booming on some fronts, such as trading and commercial banking, this prolonged era of low interest rates has been difficult for the bottom line as banking is a more profitable business when rates are higher. But that was true of all the bank names, and the rest.
Don’t dismiss JPMorgan Chase as the wrong name in the wrong place at the wrong time, however, for several reasons.
One reason: the increasing probabilities of an interest rate hike over the next two years. While that would still leave rates at below-average levels, Federal Reserve governors collectively forecast between four and six Fed Funds rate hikes by the end of 2024. New entrants will benefit from the widening of the Fed funds rate. JPMorgan margins linked to these rate hikes.
The other often overlooked reason why this financial name is such a great long-term addition is the company’s commitment to generous dividend growth. JPMorgan Chase has increased its dividend every year since 2011 and increased it significantly. This year’s payout is $ 3.80 per share, compared to a dividend of $ 0.80 for the full 2011 fiscal year.
As is the case with McDonald’s, if you don’t need the income right now, your best bet is to reinvest those dividends in more shares of JPMorgan.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.