Investors often struggle to identify investments that will build wealth for future generations, but these three companies provide potential options worth looking into.
EA boasts an expansive portfolio of popular franchises that have garnered global acclaim, cultivating an avid player base. Nvidia dominates GPU market allowing generative artificial intelligence.
Visa’s benefits and growth potential make it an attractive addition to any portfolio. The company enjoys a strong market position as the market leader in card payments, benefitting from digitalization trends as well as new geographies being explored. Furthermore, Visa boasts an excellent balance sheet, low debt-to-equity ratio, as well as having an ample cash reserve providing ample financial flexibility.
Furthermore, Visa’s profit margins are astonishing. Leveraging its massive scale to maximize profits while cutting costs to achieve strong earnings growth over the last decade; Visa has seen its earnings per share (EPS) expand at an astounding 20% annual pace – more than twice that of its wider market counterparts.
Due to these advantages, Visa’s stock has consistently outperformed the S&P 500. Furthermore, income investors find Visa an ideal pick as its steady 0.7% dividend payout has seen increases each year for five consecutive years – which speaks for itself!
Visa stock’s recent pullback has avoided trigger sell signals and appears set for an attractive retracement range. However, it should be remembered that coronavirus infection has dampened consumer spending habits; many Americans may be turning back towards savings habits as a result and this could increase credit card delinquency and slow its profit growth over time.
Investors should keep in mind that recent share price jumps have resulted in an inflated valuation, although current levels still appear reasonable with a forward P/E ratio of 26.4 and P/E-to-growth ratio of 1.73. At $13.8 billion, the company boasts an ample cash reserve that gives it plenty of financial cushion. Furthermore, its profitability rank and GF Value score suggest it offers balanced investment potential. These factors give the company a very impressive GuruFocus score of 97 out of 100, signaling a potentially outperforming investment opportunity. The rating is determined using five key aspects that have shown to have strong correlation with long-term performance.
2. Exxon Mobil
Exxon Mobil Corporation (XOM), one of the world’s premier energy and chemical firms, operates out of Irving, Texas and offers oil and gas supplies as well as refining/marketing petroleum products, plus producing chemicals.
As a major oil player, Exxon Mobil (XOM) stock tends to rise and fall along with crude oil prices. To protect long-term investing goals when looking at Exxon Mobil shares.
Exxon’s management team has put forth a seven-year plan designed to increase production while decreasing its breakeven price. This strategy includes increasing low-cost barrel production each year from areas like Permian Basin and offshore Guyana as well as shifting towards natural gas, which is more affordable than oil.
Exxon Mobil’s integrated business model gives it multiple growth drivers, including upstream assets, midstream pipelines and downstream refining and chemical facilities. This diversification helps mute earnings volatility from fluctuating oil prices – which in turn has allowed Exxon to increase its dividend for 41 consecutive years!
Investors must still carefully consider the risks associated with investing in Exxon Mobil, given its oil operations’ sensitivity to dramatic cycles which can wreak havoc with even the best-laid plans. Furthermore, its industry is facing existential threats due to growing pressure to limit carbon emissions and accelerate renewable energy development; rising regulations, lawsuits, and breakthroughs in clean energy technology all present potential barriers that make producing fossil fuels much more difficult than previously.
Exxon Mobil’s capital spending plans could prove volatile over the coming decades, given its massive Permian Basin expansion project and subsequent costs incurred there. That could translate into ups and downs in its share price over this timeframe.
Investors will also want to monitor Exxon Mobil’s debt load. At present, Exxon owes more than its market value in debt – something which could become problematic should oil prices drop significantly and the company needs additional capital in order to continue growing its operations.
Kenvue is J&J’s latest consumer health spinoff to hit the market, selling its stake for the first time since 2021. Kenvue boasts a vast brand roster including Tylenol, Band-Aid, Listerine, Aveeno and Neutrogena; share prices dropped after it posted second quarter earnings Thursday but were later recovered due to J&J suggesting an exchange offer to reduce its stake sooner than anticipated.
Kenvue boasts a comprehensive brand portfolio, giving it pricing power and helping sales and margins withstand inflationary pressures more readily than its competitors in its space. Furthermore, its size allows it to establish favorable relationships with suppliers that allow it to achieve economies of scale that smaller rivals cannot match. These advantages make Kenvue an excellent investment option for dividend-focused investors as its strong cash flow even with modest sales growth can deliver significant dividend growth potential.
Investors should keep in mind that profitability alone doesn’t make for a great stock, particularly considering competition from both private label products as well as industry giants like Bayer Consumer Health and Procter & Gamble. Furthermore, its brand recognition hasn’t translated to higher profit margins yet and ranks lowest among its contemporaries in return on invested capital according to analysts.
Legal issues facing J&J in relation to its talc lawsuits could also present potential difficulties, which may affect its reputation and stock performance. While J&J can survive this challenge thanks to its immense size, Kenvue might find itself facing additional lawsuits and facing more setbacks than expected.
Kenvue Healthcare may present investors with an intriguing opportunity in the healthcare space, yet investors should wait before purchasing shares until it demonstrates it can boost profitability and margins while remaining unaffected by potential legal threats. Once these factors have been resolved, then Kenvue could make for a worthwhile addition to a diverse portfolio.
Nvidia quickly established itself as the market’s go-to choice to capitalize on the rapid development of artificial intelligence (AI). While latecomers might assume all the easy money has already been made in this trillion-dollar chipmaker, Nvidia shares still offer plenty of upside potential.
Nvidia’s surging revenues and earnings can be attributed to strong demand for its AI chips across a wide variety of applications such as automated electric cars, cloud gaming and the metaverse. This growth has helped soften some of the blow from global chip shortages as well as U.S.-China trade tensions which have plagued the semiconductor industry more broadly.
Nvidia has reported quarterly earnings ahead of analysts’ expectations over the last two quarters, and analysts predict further strong earnings growth throughout this fiscal year – which should cause its full-year EPS figure to more than triple.
But Nvidia is an expensive stock to own due to its rapid growth and high valuation multiples. At present, its trailing price-to-sales ratio stands well above its five-year average and almost twice that of its current year median.
Nvidia’s rapid expansion should eventually lower its P/S ratio closer to that average value; the key question being whether this growth can continue.
That will depend on how quickly demand for Nvidia’s AI chips slows. If it happens quickly, Nvidia could lose out on rapid sales gains made during an exciting period for sales growth.
Concerns are also raised by Nvidia’s dependence on Taiwan Semiconductor Manufacturing Co (TSM) for production, which creates the potential for supply disruptions that could impact its sales.
Nvidia could be one of the top stocks to invest in 2024 if it can sustain its growth, though investors must carefully weigh all risks prior to purchasing Nvidia stock. Research could reveal alternative opportunities that might better fit with your portfolio than Nvidia; that is why keeping an open mind when searching for the next great opportunity pays. As The Motley Fool does not hold positions in any stocks listed here, feel free to subscribe for free today and try one of our Foolish newsletters today.