Investors naturally want to own the best companies in their portfolios -- stocks that can be had at good (or at least reasonable) prices -- and then hold on to them for many years, watching their values grow. But, of course, finding them is never easy.
To help you out, below are five solid investments you might keep an eye on and consider buying -- at the right price. See which ones pique your interest. (Note that one of them is an exchange-traded fund, which trades like a stock.)
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Below are their performance records. They're mostly impressive, but remember that past performance does not guarantee future results.
Asset
5-year average annual return
10-year average annual return
15-year average annual return
Costco Wholesale(NASDAQ: COST)
25.5%
22.7%
20.5%
Paycom Software(NYSE: PAYC)
(4.8%)
25.8%
N/A
Amazon(NASDAQ: AMZN)
16%
28.6%
27.7%
Intuitive Surgical(NASDAQ: ISRG)
21.9%
25.1%
20.7%
Vanguard Information Technology ETF(NYSEMKT: VGT)
23.3%
21.8%
19.1%
Source: Morningstar.com as of Oct. 17, 2024.
Here's a closer look at each one:
1. Costco
Retail giant Costco's market capitalization recently topped $390 billion. Unlike many companies, it is striking a profitable balance of serving its employees, shareholders, and customers well -- via, respectively, competitive pay and benefits; solid returns, including dividends; and low prices, with markups mostly capped at 13% to 14%. The company recently boasted 891 warehouse stores, 614 (or 69%) of which are in the U.S.
Costco pays a quarterly dividend that recently yielded only 0.5%, but it also pays out hefty "special" dividends on an irregular basis. The most recent of those were a $15-per-share distribution in 2023 and a $10-per-share one in 2020. Unfortunately, the stock doesn't seem compellingly priced at a forward price-to-earnings (P/E) ratio of 50.1, well above its five-year average of 37.5. So if you don't own it yet, perhaps just add it to your watch list.
2. Paycom
Paycom has a more appealing valuation. Its forward P/E of 18, for example, is well below its five-year average of nearly 44. It only recently started paying a dividend that at the current share price yields about 0.9%.
This software-as-a-service business helps companies manage payroll and human resources functions. Its business has taken a hit lately, in part due to cannibalization: Its newer self-service Beti platform is drawing some customers away from its other services.
That should not be a long-term problem, though, as the company remains quite profitable with a solid balance sheet and no debt. Its revenue rose 9% year over year in the second quarter.
3. Amazon
Amazon needs no introduction -- there's possibly a box or two bearing its logo sitting on your porch right now. The stock is appealingly priced at a forward P/E of 31.6, well below its five-year average of 53.4.
Amazon is one of the "Magnificent Seven" stocks, and is a major operator in much more than just its massive online marketplace. It owns Amazon Web Services, for example, a leading cloud computing platform that's growing faster than its e-commerce site. Despite its huge size, the company is still growing its revenue at a respectable pace and is attempting to branch out into areas such as healthcare. The company pays no dividend.
4. Intuitive Surgical
Speaking of healthcare, Intuitive Surgical is the leading maker of robotic surgical systems. As of June, more than 15 million procedures had been performed using its da Vinci surgical systems, more than 9,800 of which are installed in hospitals and healthcare venues around the world.
In the third quarter, its procedure volume grew 18% year over year while revenue rose 17%. Much of its revenue is recurring thanks to service contracts and the sales of supplies and disposable accessories that are used during surgeries. It's fair to expect continued growth in the years ahead.
At a forward P/E of 62.9 -- well above its five-year average of 52.7 -- Intuitive's stock isn't a bargain right now. So perhaps you'll want to just keep an eye on it and hope for a pullback. It recently had a market cap of $168 billion, and it pays no dividend.
5. Vanguard Information Technology ETF
Finally, there's the Vanguard Information Technology ETF. Its portfolio includes more than 300 stocks, but about 44% of its value is in just three of them: Apple, Nvidia, and Microsoft. Many of us aren't expert stock analysts, so if you're not sure which tech stocks to choose, investing in this impressive ETF will quickly have your money spread across gobs of them.
Check out any of these investments that interest you. Once you learn more, you might want to put cash into some of them, or put them on your watch list.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Amazon, Apple, Costco Wholesale, Intuitive Surgical, Microsoft, Nvidia, and Paycom Software. The Motley Fool has positions in and recommends Amazon, Apple, Costco Wholesale, Intuitive Surgical, Microsoft, Nvidia, and Paycom Software. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
