Do you have $ 5,000? Buy and hold these 3 valuable stocks for years
Whether you’re worried about a recession or just want investments that you can safely hang on to for years to come, value stocks are great options to consider investing your money in. With modest valuations and strong fundamentals, these are the types of stocks that can generate long-term wealth. Some of them also pay recurring dividends.
If you have $ 5,000 that you can afford to invest, then three stocks that should be high on your list of possible investments are AbbVie (NYSE: ABBV), Bank of America (NYSE: BAC), and Dell (NYSE: DELL). These are strong companies that together can also help diversify your portfolio by giving you exposure to healthcare, banking and tech.
AbbVie can look like an expensive buy when you consider its price-to-earnings (P / E) ratio, which is now over 40. However, this is based on the company’s past 12 months. On a prospective basis and where analysts expect the healthcare company to be next year in terms of profitability, its P / E ratio drops to a multiple of just nine. To put this in perspective, the industry giant Johnson & johnson is trading at over 17 times its future profits and Abbott Laboratories (of which AbbVie was a part) is at a multiple of over 27. That makes AbbVie seem like a cheap buy in comparison, by a mile.
One of the main reasons the company’s financial data will improve is that it now includes results from the maker of Botox Allergan. The deal was formally concluded in May 2020, which means that there has not yet been a full year in which the results and results of the company have benefited from the inclusion of the company.
When AbbVie released its first quarter results for the period ending March 31, its sales looked incredible at $ 13 billion, which is 51% year-over-year growth. However, Allergan was a big reason behind these better results; like-for-like, revenue growth is closer to 5%. But what’s important is that Allergan is now included in the sales mix, which means better profit numbers. In the first quarter, net income of $ 3.6 billion was 18% higher than the period a year earlier. And the company is optimistic about its future, forecasting that for 2021, its diluted earnings per share will hit $ 7.47 – nearly three times the $ 2.72 it reported in 2020 and 41% better than the 5 , $ 28 which she declared in the last incomplete. – year of pandemic in 2019.
In addition to these expectations, AbbVie’s dividend yield is now around 4.3%, well above the S&P 500 averaging 1.4%, making AbbVie a smart investment to add to your portfolio today.
2. Bank of America
Shares of Bank of America have skyrocketed in the past year, up more than 72%. That’s better than the 39% returns of the S&P 500 (and well above AbbVie’s modest 17% rise). But despite this incredible performance, leading banking stock is still not an expensive buy; at a forward P / E of 13, it is trading at a slightly higher valuation than its peers Wells fargo and JPMorgan Chase which are trading at around 12 times their future earnings, but that is still not a very high value for value investors. And with interest rates potentially rising as early as next year, that multiple could drop quickly, as banks can capitalize on better rates and pocket more of the spread between what they pay and what they pay. that they charge.
Bank stocks are often good value buys because they tend to show profits and are not extremely aggressive in their growth. In the last four quarters, Bank of America has generated a profit margin of 24%. And if we look at the last five years, his bottom line has generally been at least 19% of his income. The company has confirmed the strength of its financial results after passing the Federal Reserve’s 2021 stress test. As a result, he will increase his dividend payments by 17%. Other banks have also hiked rates on the back of the sector’s good performance. With a return of 1.8%, Bank of America’s payout is also above the S&P 500 average.
For long-term investors, Bank of America is an easy stock to put in your wallet and forget you own. Its great results make it one of the safest buys in the market and an above average return will give you more incentive to hang on and see dividend income grow over the years.
The tech industry usually doesn’t contain a lot of high-value purchases, but Dell is an exception. By its forward P / E below 12, it’s an even cheaper buy than Bank of America. Even a safe technological stock like Cisco is trading at over 16 times its future profits. You might not expect this from Dell given that it has already delivered 83% returns in the past year. But the stock may have even more to give: Morgan stanley recently valued the stock at $ 130 (Dell shares closed around the $ 100 mark last week).
Dell is coming off a strong first quarter of fiscal 2022 for which it reported sales of $ 24 billion in the period ending April 30. This is a 12% year-over-year increase, a marked improvement considering that over a two-year period from fiscal 2019 to fiscal 2021, its revenue only increased by 4 %. The company doesn’t think it’s luck either. With more and more businesses turning to the cloud and transforming their operations to be more digital and versatile, Dell sees a brighter future. Not only did its product sales increase 12%, but service-related revenue (which accounted for over a quarter of its revenue) also increased 10% compared to the same period last year.
While the stock is the only one on this list that does not pay dividends, investors will likely be okay with this given the potential capital gains they could earn by owning this leading IT company for many years to come. years. If you want attractive growth opportunities with great value, Dell is a stock you won’t want to pass up.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! 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.