Best Stocks To Own For Retirees: Investing in retirement is different than investing in your 20’s. You don’t have as much time to make up for a big loss, so putting your money in a hot new stock becomes less of an opportunity.
Because of this, many retirees opt to put their money in the lowest risk investments possible, like bonds. The problem is that bonds alone are not going to help you generate retirement income. You need to have some stocks in your investment portfolio so that you are bringing something in. The only question is which ones?
In this article, we are going to look at nine of the best stocks for retirees to own.
Charlie Munger Hearts Costco, Should You?
Costco [NASDAQ: COST] is a membership warehouse retailer. The company charges a membership fee for people to shop its warehouses and its website. It currently has 782 locations around the world, up from 762 at the beginning of September 2018.
Costco provides members with a mixture of national brand products and private label goods – often at a steep discount compared to other retailers. It achieves these cost savings by purchasing in bulk and only minimally handling the merchandise before it is sold.
Whereas many retailers spend time and money on workers to unpack the goods to be sold, label or tag them individual, and move them to a shelf or sales display, Costco effectively brings the crate to the sales floor.
There is no back room, no window dressing, and no frills. This helps the company keep costs low.
Further, Costco buys in limited quantities. Its customer come to know this, so there is a sense of urgency on many purchases.
Inventory turnover is often so fast and the time for those products to reach the sales floor so low, that Costco ends up sells through the product before it was obligated to pay for it.
That sounds like a good place for any retailer to be in, but don’t forget – Costco is a membership warehouse. Worldwide, the company had 53.9 million paying cardholders at the end of FY2019, up from 51.6 million at the end of FY2018 and 49.4 million at the end of FY2017.
Costco does face competition.
Other warehouse clubs like Walmart’s Sam’s Club and big retailers like Walmart or Amazon give the membership warehouse subscription company a run for its money, but Costco has shown strong growth over the years. Plus, it pays a dividend yield. It’s only 0.88%, but it’s something.
Berkshire Hathaway Is A Cash Machine
Berkshire Hathaway owns several subsidiaries, with ownership percentages varying between 80 to 100%.
Insurance and reinsurance are a big part of what it does as well as rail transportation for freight and energy distribution.
Berkshire Hathaway is also involved with manufacturing and it owns large stakes in consumer product companies, like Apple, Bank of America, American Express, Coca-Cola, Delta Air Lines, Southwest Airlines, and Wells Fargo.
If Berkshire Hathaway sounds very diverse, it is – but remember, it is also a holding company. The firm is completely decentralized. There are no integrated business functions between the businesses, subsidiaries, and equities it owns – and Berkshire Hathaway does not get involved in the day-to-day management of its investments. Instead, the firm focuses on how capital is allocated and the executive management in place.
As a whole, Berkshire Hathaway has been so successful that Warren Buffett is idolized by the finance world. To this day, Buffett is in charge of almost all the big decisions that Berkshire Hathaway makes along with Charlie Munger, the Vice Chairman of the Board.
The only problem with that is that Buffett is almost 90 and Munger is over 95. While there is a succession plan in place, the holding company could take a serious hit if Buffett or Munger were unavailable or unwilling to work anymore.
Waste Management Owns U.S. Landfills
It owns several subsidiaries. These subsidiaries handle all operations. Collectively, they are the largest waste management services entity in North America.
Waste Management leads the pack in solid waste management. It also boasts the largest network of landfill sites in North America with 252 locations.
In some places Waste Management creates energy from the trash it collects. The company is the leading recycler in North America as well.
Trash collection is a fairly stable business – everyone needs trash collection to a degree – but competition in this space can be very intense.
While Waste Management competes most directly with national waste management companies, it also faces competition from local governments and private sources.
Smaller companies have been consolidating and, in some areas, they are giving Waste Management a run for its money.
Most bids are competitive, so Waste Management could lose out if its bid is even marginally higher than that of a rival company.
Managing costs can be difficult, especially when limitations and legislation on waste management is constantly changing and becoming more expensive. Commodity prices come into play too. As a company, Waste Management has to walk a fine line.
Alphabet (Google) Has A Virtual Monopoly On Search
The company is also involved with television, self-driving cars, and access to the internet. Alphabet refers to its other interests as “Other Bets.”
Most of what Alphabet is doing with Google is actually powered by machine learning and its constant companion, AI (artificial intelligence).
This helps Google give better search engine results, recommend videos on YouTube, use Google Assistant, or search Google Photos more efficiently.
For advertisers, which is one of the ways that Google earns money, machine learning enables them to target adds more effectively.
Google does face fierce competition. The big risk isn’t so much that people will stop using Google – it’s that Google will lose to competitors on specific functions. For instance, people could start using social media networks for their queries instead of using an Internet search engine and that rend could compel advertisers to take their marketing dollars elsewhere.
That said, Google is also very popular. Over one billion people use a Google product every month. It could also strike gold with one of its Other Bets.
LabCorp Is Hedged Against Healthcare Reforms
Laboratory Corporation of America [NYSE: LH] is a life sciences company that offers clinical laboratory services through LabCorp Diagnostics and end-to-end drug development through Covance Drug Development.
More commonly referred to as LabCorp, the company tests over 2.5 million specimens every week and participates in clinical trials. Covance has a strong track record.
In 2018, it collaborated on 93% of the novel drugs the FDA approved that year as well as 94% of both novel oncology and novel rare disease drug treatments. Covance has also played a role in developing the top 50 prescription medications on the market today, by sales revenue.
LabCorp and Covance share important synergies. LabCorp has patient insights that it developed through its testing services. Its data sets cover roughly half the population in US and includes over 30 billion lab test results. Covance gathers physician-investigator data in its own right, which helps streamline drug development.
Because of these factors, LabCorp as a whole can enjoy a wide variety of customers and better hedge itself against changes in the healthcare system. Plus, LabCorp is maintaining a strong consumer focus. It now has a testing platform – Pixel by LabCorp – for self-collection as well as an online patient portal.
Amazon Is Much More Than E-Commerce
You may also know that Amazon creates a variety of devices, including Kindle e-readers, Echo devices with the Alexa personal assistant built-in, and Fire tablets, and sells a membership called Amazon Prime that provides members with a variety of benefits including free two-day shipping – but these functions only scratch the surface of what Amazon does.
Amazon is also a content creator. It develops video assets for its members as well as the general public and it has a publishing arm that lets people publish their own content, including ebooks, music, film, and apps.
The company also has a web services arm – AWS – that provides storage and database solutions for businesses and governments large and small. Finally, Amazon owns Whole Foods Market.
There is some seasonality to Amazon’s business – approximately one-third of its sales are in the fourth quarter – and it does face competition. In each industry that Amazon participates, it is met with fierce competition.
Generally, these rival firms cannot offer what Amazon does at the same low price, reaching the same geographic regions, and same variety.
However, the advent of the Internet does make comparison shopping easier and there are very low barriers to switching services.
Amazon is under pressure to keep evolving or keep slashing prices. Right now, Amazon is employing a mixture of those techniques to say on top and introducing a range of devices that leverage the content it helps produce.
Procter & Gamble Owns Brands You Use Daily
Procter & Gamble [NYSE: PG] is a company that focuses on daily use products. It manufactures and markets healthcare products like NyQuil and Prilosec as well as oral care (e.g., Crest, Oral-B), fabric care (e.g., Tide, Bounce), baby care (e.g., Pampers), home care (e.g., Dawn, Swiffer), feminine care (e.g., Tampax), hair care (e.g., Pantene), family care (e.g., Charmin), skin care (e.g., Oil of Olay), and grooming, (e.g., Gillette).
A few years ago, PG made the choice to focus its brand portfolio on products that have strong performance as opposed to more competitive pricing and that strategy has paid off with organic growth in the majority of its product use categories.
It also boasts growth that is significantly higher than others in its industry. Going forward, Procter & Gamble has also been looking at fortifying its brand family with careful acquisitions.
The end goal is to create a brand that interacts with consumers in a holistic fashion, creating value and trust in all the products PG sells.
Exxon Mobil Is A Patent Behemoth
It explores for, processes and sells oil and gas products. The company operates as several divisions and hundreds of different affiliates. These entities may be referred to as ExxonMobil as well as Esso, Exxon, Mobil, or XTO.
Competition within the industry is very fierce. Most end users do not care how its oil or gas needs are fulfilled, just that they are. This puts pressure on pricing and technology development. In the latter, ExxonMobil is at the forefront.
The company holds almost 13,000 active patents and earned some $119 million in 2018 by licensing those technologies to other companies.
Cost is a greater risk. Growing concern for the environment is forcing ExxonMobil to change the way it does things and those changes come with a cost.
ExxonMobil also faces risk with regard to supply and demand. Its access to oil and gas resources could be limited or the number of end users using its products could dwindle as more people turn to fossil fuel alternatives.
Disney Is Bigger Than You Think
Disney [NYSE: DIS] of today is more than the company that Walt Disney built. It includes its parks and resorts as well as studio entertainment, media networks (i.e., Disney, ESPN, Freeform, and consumer products.
It recently merged with some of the businesses that had fallen under 21st Century Fox, including Nat Geo and FX as well as its international tv business and its 30% stake in the streaming service Hulu.
Disney also recently launched its own streaming service, Disney+ which allows consumers to stream the movies and shows from Disney, Lucasfilm, Marvel, and Pixar.
Disney has a diverse portfolio of offerings and strong brand. Its focus on family-friendly entertainment is bound to win the company loyal subscribers. Plus, Disney can also license its content for use on other streaming services or sell DVDs of its work.
In many ways, there is an entire ecosystem in place for Disney. People enjoy its movies and characters, then buy toys and other items that feature those characters.
They go to the movies and visit its parks, then they stream content at home or subscribe to a Disney channel through cable. It is a strong value proposition and one that could keep Disney on top for years to come.
Best Stocks To Own For Retirees: Bottom Line
You don’t have to stop investing because you retire, but you should change the way that you do invest. Look towards stocks that are less risky and those that pay dividends. With a few strategic investments, you can generate a little extra money so that your retirement can be that much sweeter.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.