beginner stocks

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By Matt Frankel, Motley Fool Investment Planning

4 Great Stocks For Beginners

April 15, 2023

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What makes a good “beginner” stock?

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• The best stocks for beginners won’t make you rich overnight but won’t make you go broke either.

• Look for companies with a steady track record of growing revenue and low debt levels.

Low risk

April 15, 2023

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• Look for businesses that will be around forever.

• For example, people will always need groceries, ways to communicate with each other, and safe places to keep their money.

• However, will people always buy a specific high-end brand of clothing? Or, will people always need to buy desktop computers? Maybe, but maybe not.

“100-year” businesses

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• Ideally, stocks for beginners will make their money from a variety of products and services.

• Geographical diversity is important too.• For example, companies that do a lot of

business overseas are better-positioned to withstand a U.S. recession.

A diverse revenue stream

April 15, 2023

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• Stocks with a history of dividend increases tend to make solid long-term investments.

• Also, only invest in businesses that are easily understood, at least while you’re just getting started.

• Basically, beginners should focus on building a good foundation. There may come a time when it’s okay to take some higher risks, but it isn’t a good idea while you’re new.

Other things to look for…

April 15, 2023

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4 “beginner” stocks to get you started…

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April 15, 2023

1. Berkshire Hathaway (NYSE: BRK.B)

• Berkshire Hathaway one of the best all-around stocks in the market.

• The company’s primary business is insurance, but investors get so much more than that…

April 15, 2023

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• Berkshire Hathaway has more than 50 subsidiary companies, as well as a diverse portfolio of the best stocks in the market.

• Essentially, by investing in Berkshire Hathaway, you are buying an all-in-one diversified investment portfolio.

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April 15, 2023

Just a few of Berkshire’s subsidiaries…

• GEICO• The Pampered Chef• Fruit of the Loom• Clayton Homes• See’s Candies• Helzberg Diamonds

• NetJets• Burlington Northern

Santa Fe• Lubrizol• Duracell• Dairy Queen

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April 15, 2023

Some of Berkshire’s major stock holdings…

• American Express• Deere & Company• General Motors• Goldman Sachs• International Business

Machines (IBM)• Coca-Cola• Moody’s • Procter & Gamble

• US Bancorp• Wells Fargo• Wal-Mart• Verizon • Phillips 66• Visa• MasterCard• Costco

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April 15, 2023

2. Colgate-Palmolive (NYSE: CL)

• Colgate-Palmolive produces many name-brand products including– Ajax– Colgate toothpaste– Irish Spring– Murphy Oil Soap– Science Diet– Softsoap– Speed Stick

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• Colgate-Palmolive is a “dividend aristocrat”, which means that it raises its dividend year after year like clockwork.

• In fact, Colgate-Palmolive has increased its dividend for 52 consecutive years, and has paid a dividend every year since 1895.

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• Colgate-Palmolive’s sales come from all over the globe.

Geographic diversity

Source % of sales

Latin America 27%

North America 20%

Europe/South Pacific 18%

Asia 16%

Africa/Eurasia 6%

Hill’s Pet Nutrition 13%

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• Colgate has steadily grown its sales over the years, and it is well-positioned to capitalize on the world’s growing middle class.

• This steady growth has produced a 1070% total return over the past 20 years, and there is no reason to think the strong performance won’t continue.

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April 15, 2023

3. ExxonMobil (NYSE: XOM)

• The largest publicly-traded integrated oil company.

• ExxonMobil could be an excellent way to take advantage of depressed oil prices.

April 15, 2023

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• ExxonMobil has exposure to all aspects of the oil business.

• So, even though its exploration and production business suffers when oil prices are down, others – such as the refining and chemicals business – actually do better.

• Plus, its size gives it a competitive advantage, allowing the company to run more efficiently than rivals.

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• ExxonMobil’s size and diverse revenue streams allow it to perform well during tough times and even pursue acquisitions or other strategic investments

• As one of only three U.S. companies with a AAA credit rating, ExxonMobil has access to virtually unlimited cheap capital for acquisitions or other opportunities.

• In fact, ExxonMobil has an even better credit rating than the U.S. government!

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April 15, 2023

• In terms of valuation, not only has ExxonMobil’s share price dropped by about 20% in the past year or so, but its price-to-book value is at its lowest level since the mid-1990’s thanks to sector weakness, even though the company remains strong.

• Now may be a great time to get into ExxonMobil cheaply.

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April 15, 2023

4. Johnson & Johnson (NYSE: JNJ)

In addition to its portfolio of well-known brands such as

– Band-Aid– Johnson’s Baby Products– Tylenol– Neutrogena

Johnson & Johnson’s largest business is pharmaceuticals.

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• J&J’s size and brand power are tremendous competitive advantages.– Its size allows it to produce goods more efficiently.– Its well-known brands give it more pricing power than

lesser-known competitors.

• The massive pharmaceutical business is the real money maker, and the company invests aggressively in research and development, which has resulted in some innovative (read: profitable) drugs.

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• Johnson & Johnson has an outstanding 53-year history of dividend increases.

• The company pays out less than 50% of its earnings as dividends, leaving plenty of room for this to continue.

• Even though many investors consider J&J to be a “boring” stock, it has handily beat the S&P 500’s returns over the past several decades.

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