Five ‘no-brainer’ stocks everyone should own

 

To be clear from the start, there really is no such thing as a “no brainer”, when it comes to investing. Even the best and brightest stocks of today can turn into disasters down the road (just remember Lehman Brothers), but there will always been a few stocks that are just too good to pass up, which I view as being momentary “no brainers”.

So if there were such a thing as a no-brainer stock, what would it look like? That is the real question we are trying to answer in this article.

A “no brainer” stock would need to display recent strength, and posses the underlying fundamentals that support future stock appreciation. We need to find stocks that are not only leaders in their respective sectors, but are expected to grow earnings at a substantial pace moving forward.

In investing, it really all comes down to earnings. Consistently reporting a profit is not enough for Wall Street. Analysts want companies to grow earnings over time, any sign of stagnation will lead to profit taking and shares will trend lower.

Each of the following stocks are not only leaders in their sectors, but are forecast to grow earnings nicely over the next year, making them no brainer stocks at this time.

If you own any of the following stocks, you may want to consider building on your current positions (assuming it does not throw your portfolio out of balance), and if these stocks are missing from your portfolio you may consider building a position in the stock at this time.

Amazon.com

One of the hottest stocks in recent years has been e-commerce leader Amazon.com (AMZN). Shares have been on fire lately, but there is still a lot of upside potential moving forward. The stock was recently upgraded by researchers at Argus to a “buy” from a “hold”, with a price target of $935. The target is higher than the average target of $860.21, but Argus sees tremendous upside, noting the company is expanding margins faster than the stock’s price has been appreciating. Analysts are overwhelmingly bullish on the stock, with 23 or 29 analysts who cover the stock rating it as a “strong buy”. Amazon is growing earnings at an amazing pace, with earnings forecast to rise by 364% this year, and by an additional 80% next year. Wall Street has always been willing to get behind the stock when the company was consistently losing money, and now that Amazon is showing profits the stock is a no-brainer.

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Chart courtesy of www.stockcharts.com

Colgate-Palmolive

Personal goods maker Colgate-Palmolive (CL) is a mature company that been in business dating back to 1806, which provides clear evidence that the company is nimble enough to survive even the harshest economic conditions and come out OK on the other side. The main reason I like the stock is that its products are consumer staples, which means that they will retain demand in any market. Among the company’s top brands are Softsoap, Ajax, Speed Stick, and of course the company’s namesake Colgate and Palmolive brands. The strong dollar has had an impact on the company’s bottom line this year, with earnings forecast to fall by 0.4% for the full year, but they are expected to rise 8.9% next year, and if the dollar starts to weaken that figure will be even higher. With interest rates forecast to rise at some point in the next six months, money will likely move out of stocks and into more traditional fixed-income assets, but stocks with the strongest dividend programs will be partially immune to the transfer. Colgate has a 2.1% yield, and the company boasts a 52-year streak of dividend increases.

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Chart courtesy of www.stockcharts.com

Big Lots

Discount retailer Big Lots (BIG) has come under pressure over the last month, but the long-term outlook for the stock remains favorable. Unemployment has improved in the U.S., which is good for consumers, but recent trends have proven that consumers remain cautious, and the lessons from the recession are still boosting the discount retail sector. Analysts see Big Lots growing earnings by 18.9% this year, and by an additional 11.0% next year. With the recent dip in the stock, shares now trade with a P/E of just 14.3, which combined with the upbeat earnings growth estimates suggests that the stock is likely oversold, and has a lot of upside potential at this time.

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Chart courtesy of www.stockcharts.com

Facebook

Social media giant Facebook (FB) managed to do what most analysts thought it would never accomplish, which was to monetize its massive mobile user base. Facebook has proven an ability to not only to build and adapt its Facebook platform, but also has shown the ability to spot and acquire other companies with big promise as well. Its acquisitions of Instagram and WhatsApp have proven very successful, and could boost Facebook stock for years. Faecbook has enjoyed massive growth in recent years, and analysts see that trend continuing moving forward. This year alone, analysts expect earnings to climb 72.8%, and 28.7% next year. Facebook has surprised Wall Street with much better than expected results each of the last three quarters, and results have disappointed only once since the company began reporting results in 2012. Facebook has proven its critics wrong time and time again, and as the company continues to grow the stock is a no brainer.

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Chart courtesy of www.stockcharts.com

Waste Management

The garbage business is far from sexy, but it is very steady and the sector has very big barriers of entry. Waste Management (WM) is one of two companies that have a stranglehold on the sector, and as populations expand demand for trash and recycling will only grow. The stock has been trending lower over the last couple months, despite the company topping estimates for both the top and bottom line in late July, but I see the pullback as a great reason to get into the stock at this time. The trash sector is slow growth, but even still, analysts expect Waste Management to grow its earnings by 9.6% this year, and by 8.4% next year. With the recent pull back in the stock, shares currently trade with a P/E of 24, which makes the stock a much better value, and in conjunction with the bullish growth estimates suggests that the stock is a great buy at the current time.

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Chart courtesy of www.stockcharts.com

Symbols: AMZN BIG CL FB WM
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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