It was a crazy year to be an investor. We’ve seen some of the craziest up-and-down swings in stock market history, and yet the S&P 500 sits pretty damn near the flat line since the start of the year.
This volatility can be particularly confusing for investors in their 50s. With retirement potentially imminent in a decade, preservation of capital is important. Then again, with data from the Social Security Administration showing that the average 65-year-old is living an average of 20 years longer, growing your nest egg for years to come is also imperative.
Knowing that inflation will reduce the value of cash put under the mattress or in ultra-conservative investment vehicles, such as bank CDs, investors in their 50s would be wise to stick with one proven wealth creator: the market. scholarship holder. If you’re in your 50s and looking for ideas for building wealth, here are three perfect stocks that offer a mix of growth, income, and capital preservation.
I know what you’re probably thinking, and no, you shouldn’t be afraid to invest in central banks – especially Wells fargo (NYSE: WFC). Even with memories of the financial crisis probably still fresh in the minds of some investors in their fifties, Federal Reserve surveillance has forced banks to improve their balance sheets and prepare for the worst.
Of course, that still hasn’t stopped Wells Fargo from being crushed in recent years. The Coronavirus Recession and the Wells Fargo Update unauthorized account scandal between 2009 and 2016 have made a number on the shares of the company.
But at just 65% of its book value, it’s also cheaper than it has ever been in the past three decades, except for a week at the height of the financial crisis more than ten years ago. Given that bank stocks are inherently cyclical and the U.S. economy spends much more time growing than contracting, Wells Fargo appears to have a good chance of recouping much (if not all) of what has gone. been lost over time.
The success of Wells Fargo also depends on its ability to attract wealthy customers. We rarely see instances where PR mistakes have a lasting impact on a bank’s ability to attract new customers. Wells Fargo should have no problem continuing to court the higher income earners and will reap the rewards of offering several products to this more affluent customer base, including mortgages and asset management services. The rich are the key to Wells Fargo’s consistently higher return on assets.
Also, note that the CEO carousel has stopped. Old Visa CEO Charles Scharf now runs the ship and he was responsible for doubling Visa’s profitability per share during his four-year tenure at the main payments processor.
A possible doubling in value over the next five to 10 years and an annual return of 1.6% to boot translates into good growth, income and a value proposition for investors in their 50s.
Innovative industrial properties
Again, I assure you, I am not crazy. Over the next decade, few industries will be able to offer the growth potential that legal cannabis can bring. But you still have to be selective when investing in this high growth space, which is why I think Innovative industrial properties (NYSE: IIPR) is a smart buy and hold choice for mature investors.
Innovative Industrial Properties, also known as IIP, is a cannabis-focused real estate investment trust (REIT) in the United States. It acquires properties for growing and processing marijuana for medical purposes in states that have legalized these activities and leases them for 20-year periods. In addition to collecting rental income, the IIP increases the rental rate paid by its tenants every year. It also collects property management fees linked to the base rental rate. This is a fancy way of saying that the IIP has a modest component of organic growth integrated into its economic model.
However, don’t be fooled by this company’s main growth driver: acquisitions. Innovative Industrial Properties is a master of sale-leaseback contract. With US multi-state operators (MSOs) having minimal access to traditional banking services, IIP acquired assets from MSOs in exchange for cash and then immediately leased the property to the seller for the long term. Until cannabis banking reform is considered in Washington, DC, IIP should continue to benefit from sale-leaseback agreements.
And did I mention that Innovative Industrial Properties is also one of the two most profitable cooking pots on the planet? On the one hand, it has a very transparent cash flow from its long-term rental contracts. On the other hand, the maintenance costs of its properties are relatively low. This combination resulted in exceptionally strong profitability. According to Wall Street analysts, the IIP is expected to exceed $ 5 earnings per share in 2021.
Ultimately, investors in their 50s would get a business that could grow steadily at a double-digit percentage (mostly through acquisitions) for the foreseeable future. Oh, and that brings in a 3.7% return.
No dividend? No problem, at least when you own a stake in a company with clear competitive advantages and a trajectory towards long-term double-digit growth potential. This is why developer of surgical systems Intuitive surgery (NASDAQ: ISRG) should be considered a staple (pardon the pun) for investors in their 50s.
In terms of dominance in the medical device space, there is no company like Intuitive Surgical. Its da Vinci Surgical System, which assists surgeons in various soft tissue procedures, has been installed worldwide for two decades. By the end of June 2020, Intuitive Surgical had installed 5,764 of its systems, which is far more than its competitors combined. Additionally, some of its deep-pocketed peers have encountered problems launching competing surgical systems, which will likely increase Intuitive Surgical’s already large market share.
There are two reasons to be particularly excited about the future of this company. First, Intuitive Surgical’s operating margins are built to expand over time. Although the sale of its expensive da Vinci systems generates significant revenue, they are complex systems to build and, as a result, the margins associated with their sale are only mediocre. The majority of the company’s margins come from the sale of instruments in each procedure, as well as from the maintenance of its systems. As more and more of its systems are installed, the percentage of sales coming from these higher margin segments will increase.
The second factor to consider here is that the company’s share of the surgery market still has incredible upside potential. Although the da Vinci System is the leader in urologic and gynecologic surgery, it still strives for first place in thoracic and colorectal procedures.
At this point, expect double-digit growth from Intuitive Surgical throughout this decade. This makes it the perfect growth stock with a healthy foundation for investors in their fifties to buy.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! 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.