3 solid growth stocks perfect for retirees
ROlder investors may back down at the mere mention of the word “inflation” because it means that the money they have accumulated in their wallets will buy less and less of the services and items they need. This is one of the reasons it’s important to have some exposure to growth stocks in your portfolio – they can help counter the erosive impact of inflation on the value of your nest egg.
To that end, we asked three savvy Motley Fool contributors to recommend growth stocks that they believe would be smart additions to any retirement portfolio. This is why they see Abbott Laboratories (NYSE: ABT), Facebook (NASDAQ: FB), and Rental center (NASDAQ: RCII) as great choices to consider buying now.
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A powerful mix of income and growth
Eric Volkman (Abbott Laboratories): For a great retirement portfolio, let’s look at the lab – Abbott Laboratories, that is.
A healthcare company with roots stretching back over 130 years, Abbott has a broad portfolio of products divided into four categories. In decreasing order of turnover, these are: medical devices; Diagnostic; nutrition; and its operations outside the United States, established pharmaceuticals (ie, branded generics). This mix offers the company many levers for both its growth and its income.
Fortunately, sales in all four categories grew by double-digit percentages year-over-year in the second quarter (its most recent period of publication). The standout segment was diagnostics, thanks to the company’s popular COVID-19 test products. In total, this unit collected nearly 3.25 billion dollars for a growth of 63%.
The overall average age of Americans has been rising steadily for some time, and in the years to come, the elderly will form an increasing portion of the population (according to many demographic forecasts). Aside from COVID-19, demand is growing organically for the many drugs, devices and nutritional products in Abbott’s catalog. Sales of its established pharmaceuticals grew 16% in the second quarter, while revenue from its nutrition unit increased 12%. And those two results are pale compared to the over 51% growth in device sales.
A long-established company like Abbott deserves a special hat tip for managing such robust growth at all levels.
Compared to many of its healthcare peers, Abbott doesn’t spend as much capital on research and development or marketing, but it doesn’t have to be. Its products generally enjoy a good reputation and are purchased by individuals and institutions with long-standing relationships with the company. This helps Abbott generate fairly consistent profits. It is only on rare occasions that it shows a loss of profit.
This usual profitability provides a lot of money for actions that are agreeable to shareholders, such as paying a dividend. Abbott is one of the healthcare industry’s biggest payers for such compensation; in fact, with a 49-year streak of rising dividends, he’s on the verge of achieving Dividend King status. Last month it declared its 391st consecutive quarterly disbursement.
With the weight of this long history, investors can be sure that the payments will keep coming. At the current share price, the dividend pays 1.5%.
Abbott has been a significant company in the healthcare industry in the United States for decades and is well positioned to remain so for many others. It can expect further revenue growth based on demographic trends alone, and investors should anticipate more annual bumps for its consistently reliable payout.
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When the opportunity presents itself, open the door
Barbara Eisner Bayer (Facebook): If you are a retiree and rely heavily on your investment portfolio for income, it is natural that you want to be careful about what assets you hold. Falling values will directly reduce your immediate ability to pay bills.
But even cautious retirees need to have a portion of their portfolio in growth stocks. Of course, having all of the fixed income securities minimizes the risk of losing money, but it also maximizes the risk that your portfolio growth will not keep up with inflation and increase the likelihood that you will be out. run out of money before you run out of time.
Although no one has a guaranteed technique for detecting when a security is low or high, what can It is often the time when a company is going through a difficult period that has caused investors to reduce its share price. When you see opportunities like this, it’s time to take the plunge.
Facebook is a growth stock currently under attack, but the tech giant will most likely survive and thrive, which means now is the time to add it to your retirement portfolio.
If we’ve learned anything from the global Facebook blackout that lasted for several hours earlier this month, it’s that most people can’t live without at least one of the company’s platforms. And when I say “most people,” I mean the 3.51 billion monthly active users who flock to its family of apps, including its namesake social media site, Instagram, and What’s App.
However, as most people already know, Congress recently heard a host of unflattering allegations about the power of social media from Frances Haugen, whistleblower and former Facebook product manager. That’s pretty bad publicity, of course, and it seems to have triggered some sort of sell-off in the stock – making it a good time to buy. But remember: every story has two sides, and while Facebook may appear guilty in the court of public opinion, the company – which has denied the allegations – has yet to take place in court (or in this case, Congress).
Facebook appears optimistic about its ability to overcome the challenges it faces, including regulatory issues and antitrust investigations. He is also looking forward to his future in virtual reality and augmented reality. CEO Mark Zuckerberg plans to build what he calls a “metaverse” that will take advantage of these technologies. And while a lot of people don’t like this guy, it’s hard to dispute that he is a visionary who has built an extremely successful business.
Facebook is currently trading around 15% below the all-time high it reached in August. If you are one of those 3.51 billion who are used to using one or more of the company’s platforms – or if you are just looking for a growth action that will be there and will continue to grow and innovate all throughout your retirement – now seems like a good time to add the social media juggernaut to your retirement portfolio.
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A company that should do well in these uncertain times
Chuck saletta: (Rental center): The rent-to-buy industry that Rent-A-Center competes in is one that people tend to look to when their future isn’t so certain or so solid. After all, it offers people a way to get what they need even if they have “less than perfect” credit, if any credit at all.
The way it works is that Rent-A-Center gives customers the option of making seemingly reasonable weekly payments to purchase household appliances, furniture, or other somewhat expensive items. If you make all the payments on time, you keep the item. If you don’t, Rent-A-Center takes it back.
The company earns money by charging high prices for its goods, setting high interest rates and fees on its financing, and re-leasing items returned to it. For example, choosing a refrigerator at random on its site, the price of the “same cash” Rent-A-Center is $ 1,763.52, compared to $ 1,399 for an identical model at a familiar national retailer. For consumers who don’t pay cash, the Rent-A-Center price is $ 29.99 per week for 98 weeks, or $ 2,939.02 in total.
With inflation lately higher than it has been for many years, the latest jobs report showing surprisingly low numbers of filled jobs and consumer confidence plummeting, the specter of stagflation made a comeback. Add to that it looks like the Federal Reserve is gearing up to start crunching credit again, and you’ve got all the prerequisites for a near-perfect economic storm. And the people on the brink are just the demographic that tends to use Rent-A-Center’s services.
Analysts expect Rent-A-Center to grow more than 30% annualized earnings over the next five years, compared to flat earnings over the past five. The company is now trading at around 15 times its current profits, a valuation that will look like a good deal if this expected growth materializes.
The combination of reasonable valuation, decent expected growth, and a business model that can perform well in tough times makes Rent-A-Center a stock to consider for retiree portfolios.
10 stocks we like better than Facebook
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of its CEO, Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Barbara Eisner Bayer owns shares of Facebook. Chuck Saletta has no position in the stocks mentioned. Eric Volkman owns shares of Facebook. The Motley Fool owns stocks and recommends Facebook. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.