There is no Hall of Fame for stocks, but if there were it would include a very exclusive group of stocks that have produced strong long-term gains for investors and consistently outpaced the broader market.
The one certainty in investing is that every winning stock will also endure periods of weakness. This is a certainty, and it would be naïve to think any stock in the market will manage to beat the overall market each and every year. It is not realistic, and it is not what we are looking for.
What we are looking for are stocks that have stood the test of time, navigated both up and down markets, and are still market leaders with the potential to continue rewarding investors in the years ahead.
If there were a Hall of Fame for stock, these companies would certainly deserve a spot in the group.
Tech giant Microsoft (MSFT) has not always been a top performing stock, let’s get that out of the way at the start. As the world moved more in a mobile direction Microsoft failed to join the party which resulted in the stock being stuck in a sideways pattern for a long stretch before roaring back to life around 2010. As PC sales shrunk and Microsoft failed to make an impact in mobile computing a lot of investors feared the worst for the company but instead of rolling over Microsoft forged ahead and did not make the same mistake when it saw the potential growth in cloud computing. As the company carved out a leadership role in the sector earnings have risen and analysts see a lot of additional earnings growth in the future. Profits are up 15% annually the last five years and expect additional 15% per annum growth the next five years. Microsoft also pays a 1.5% dividend yield and has boosted its payout each of the last 15 years. The stock recently hit a record high of $131.37 and is currently trading at $125.44 with an average price target of $138.29.
Athletic apparel and accessories leader Nike (NKE) has enjoyed a strong history with the stock hitting a new all-time high in mid-April. Nike has one of the strongest brands in the world, and its apparel and athletic goods are used around the globe and are synonymous with athletic excellence. Despite its maturity the company continues to grow with profits up 9.4% per annum the last five years and analysts expects profits will continue to rise at 14% annually over the next five years. Given the company’s strong growth estimates, and its excellent brand recognition the future remains bright. There is strong, but limited competition in the sector with huge barriers of entry for new companies to come in and compete against the leaders such as Nike, Under Armour (UAA) and Adidas. NKE is currently trading at $83.31 and analysts see additional upside potential with an average price target of $91.10 on the stock.
Johnson & Johnson (JNJ)
Johnson & Johnson (JNJ) is a highly diversified company with operations in consumer goods, pharmaceutical and medical supplies and devices. The company has been in existence since 1887 and is one of the most respected companies in each of its operating sectors with some of the strongest brand names in personal health products. The stock hit an all-time high in December of $148.99 and is currently approaching its record high at $140.71. Profits are up 7.6% per annum the last five years and looking ahead analysts expect earnings growth of 6.4% annually over the next five years. In addition to strong stock appreciation JNJ has also rewarded investors with a strong dividend program with a 56-year streak of dividend growth and JNJ currently offers a 2.6% yield. Analysts see more upside with an average price target of $146.77 on the stock.
While many brick and mortar retailers have collapsed under the pressure of Amazon (AMZN) and other e-commerce companies, mega retailer Walmart (WMT) has managed to remain relevant and compete in the digital world. Walmart did not find instant success in its battle against Amazon, but the company made a couple very smart moves that have allowed it to grow and compete. Walmart boosted its minimum wage to improve employee satisfaction which in turned led to a better consumer experience and in-store sale growth. Walmart also invested heavily in its e-commerce business which have been paying off in recent years. In February Walmart reported a 4.2% jump in same store sales for its fourth-quarter, and e-commerce sales were up 43% year over year. Walmart’s efforts are paying dividends and have helped pushed the stock higher and shares are approaching their all-time high. WMT is also a dividend aristocrat with a 2.1% yield and a long 44-year streak of dividend increases. WMT trades at $100.54 with an average price target of $110.05.