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Morgan Stanley (NYSE: MS) issued a “30 for 2018” report this month suggesting 30 companies that it believes will perform well over the next three years.
I have a problem when investment banks make these recommendations, because they fail to take into account individual investors’ risk tolerance and how these selections might fit into a long-term diversified portfolio.
So I’m further reducing this list to a few companies that I believe are stocks to be considered for the investor who has such a long-term diversified portfolio, a moderate risk tolerance, and who seeks a balance of value and growth stocks. Note, however, that these are all large-cap companies, and don’t mention small-cap and mid-cap companies that you should also have exposure to.
The Walt Disney Co. (NYSE: DIS) is definitely a choice I agree with. Disney has set itself up perfectly for decades to come with its purchase of Pixar, Marvel and LucasFilm. Already the studio is cross-marketing “Star Wars” with as many properties as it can, and launching all kinds of spinoffs that George Lucas never attempted.
The studios are all led by experienced management and great storytellers, which will drive movie, TV and ancillary revenues literally for decades. It is also a diversified entertainment conglomerate, generating money from many different sources, and all led by the solid Robert Iger.
Starbucks (NASDAQ: SBUX) has become a true global brand. What started as a place in between home and work for people to meet has become a multi-line provider of food and beverage, both in its stores and in pre-packaged foods. It has a great financial picture, a consistent and reliable brand, and CEO Howard Schultz continues to innovate.
Amazon.com (NASDAQ: AMZN) is often criticized because it doesn’t generate bottom-line profit all the time. Amazon is going to be one of these companies that one values because of what it is and what it will become. It’s essentially a massive online retailer, but reaches into cloud computing and entertainment and a host of other things.
CEO Jeff Bezos could generate a net profit whenever he wants to, but I think he sees a multi-decade opportunity to grow Amazon into a meta-business that may truly encompass all things Internet.
Visa (NYSE: V) is part-owner of a oligarchy in the world of credit cards and credit-card transactions. At this point in history, nobody is going to upset the “Big Four” of credit cards. Visa is already expanding into other financial services, but the fact that it has a lock on a giant piece of the credit-card market is what will allow it to remain a premier investment.
The ugly truth is the human race is built on credit. Americans alone have started to lever up again after several years of paying down debt. The American consumer, and consumers globally, will just keep charging purchases . . . forever.
I’ll give you one I disagree with: LinkedIn (NYSE: LNKD), which I believe is a platform in search of a business model. The stock trades at 100 times earnings, on only $2.2 billion in total revenue for 2014. That’s just crazy and I say you should stay far away from it.
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