If you’re looking for stocks to buy and hold, I have answers for you, straight from a portfolio that recently appeared in a June 25 article in The Globe and Mail, Canada’s national newspaper.
Freelance columnist Gordon Pape has been writing about investing for as long as I can remember. He’s one of Canada’s longest-serving personal finance and investing authors. He’s written countless books, investment newsletters, and columns like the recent one in the Globe.
Pape launched his Internet Wealth Builder Buy and Hold Portfolio in June 2012. It’s a combination of U.S. and Canadian stocks.
“I used several criteria to choose the stocks. These included a superior long-term growth profile, industry leadership, a good balance sheet, a history of dividend increases, and relative strength in down markets. The objective is to generate decent cash flow (all the stocks pay dividends), minimize downside potential, and provide slow but steady growth. The target rate of return was originally set at 8 per cent annually.”
Sounds pretty good to me.
The current portfolio consists of nine stocks – five Canadian and four U.S. stocks, although they all are listed on U.S. stock exchanges – one bond ETF and a small amount of cash. As Pape said, they all pay dividends.
Here are three I particularly like.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is the second-largest holding in Pape’s IWB portfolio.
UnitedHealth is the largest health insurer in the U.S. with nearly 16% market share, 600 basis points higher than Elevance Health (NYSE:ELV), formerly known as Anthem. UNH stock has taken it on the chin in 2024, down over 9%.
The decline is due to a cyberattack in February against Change Healthcare, the company’s claims processing clearinghouse that it acquired for $13 billion in 2022.
In Q1 2024, the cyberattack cost the company $872 million, with estimates as high as $1.6 billion for the entire year. To make matters worse, it’s facing a possible class action lawsuit because of the attack.
While class action lawsuits are common in a litigious America, they are not a good look for a company that possesses significant amounts of sensitive data.
Nonetheless, the issue will pass, and UNH is expected to bring in $26 billion in annual adjusted net earnings.
Walmart (WMT)
While I thought about selecting Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Google’s parent, and the third-largest holding in IWB, but Walmart (NYSE:WMT) is the world’s biggest retailer, so I went with it instead, the largest of nine stocks in the portfolio.
While some believe Walmart stock is way overvalued and investors should take profits, the reality is that out of the 38 analysts that cover its stock, 32 rated it a “buy,” with a $73 target price, about 8% above where it’s currently trading.
In May, BofA Securities raised its target for Walmart by $8 to $75, based on the view that the company’s long-term profitability will rise due to several factors, including its digital advertising business.
In the end, while it might be expensive, Walmart is a quality company that investors are willing to pay more to own, and that’s unlikely to change anytime soon.
Brookfield Corporation (BN)
Brookfield Corporation (NYSE:BN) is one of Pape’s more successful bets. The average price paid for the alternative asset investor’s stock was 12.75 CAD ($9.35). Due to 345% cumulative gain, BN accounts for 12.7% of the buy-and-hold portfolio, making it the fourth-largest position.
I’ve been a fan of Brookfield CEO Bruce Flatt for a long time. In February 2018, I recommended investors look at the company, which at the time was called Brookfield Asset Management.
In December 2022, Brookfield changed its name to Brookfield Corporation and spun off a 25% interest in the asset management business into a publicly traded company that retained the Brookfield Asset Management (NYSE:BAM) name and ticker. Brookfield Corporation then began trading under the BN ticker, retaining 75% of this asset-light, fee-generating business model. Its investors received 0.25 shares in the new BAM for every share held in the old BAM.
Bloomberg reported on July 8 that it was working with the founding family of Grifols SA (NASDAQ:GRFS) on a take-private deal for the beleaguered Spanish pharmaceutical and chemical company.
Grifols shares are down 23% in 2024 due to a short seller report from Gotham City Research that said it manipulated its debt and profit figures to keep its share price artificially inflated. In response to the allegations, it hired an outside CEO and a new CFO.
As is often the case, Brookfield is an opportunistic investor.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.