10 Stocks To Buy In 2018 [VERIFIED]
The year 2022 was a lousy one for the stock market. Even after factoring in dividends, the S&P 500 fell 19.4% in those 12 months, while the tech-heavy Nasdaq composite took a 33.1% haircut. The catalysts behind Wall Street's sell-off are all too familiar: Inflation, soaring interest rates, persistent recession fears and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn't ignore, and many previously high-flying stocks took a beating as the "risk off" mindset came to dominate markets. This, thankfully, provided a window of opportunity for investors to snap up great companies at a discount entering the new year.
10 stocks to buy in 2018
Before each new year, U.S. News selects 10 stocks to buy for the year ahead. Here's a rundown of the 10 best stocks to buy for 2023 and how each has fared thus far based on total returns, which include dividends:
First up is Apple, the largest publicly traded company in the world, if you exclude government-backed behemoths such as oil giant Saudi Aramco. Like other tech stocks, AAPL shares had a rough go of it in 2022, as recession fears and soaring interest rates spooked investors in the sector. Following a rare 26.4% pullback in 2022, Apple now trades at 26 times earnings, offering investors a sound entry point into the $2.5 trillion iPhone maker. Although its most recent earnings report technically missed expectations, that was more due to supply chain snarls than demand issues. In fact, Apple reported an active-installed base of more than 2 billion devices, and revenue in its high-margin services segment surpassed $20 billion. AAPL stock is bouncing back from its 2022 woes, with shares up 22.5% in 2023 through March 23.
Taiwan Semiconductor Manufacturing, a $500 billion business and the dominant high-level foundry for advanced chips, is next on the list. In the semiconductor industry, foundries are companies that manufacture chips for other companies, and TSM enjoys a massive market share for chips 7 nanometers and under. Apple, which has started to shift its supply chain away from China, is one of TSM's biggest customers. The company reported fourth-quarter results that beat both top- and bottom-line expectations, with revenue jumping 43% and earnings per share surging 78%. Trading at just 14 times earnings and paying a 2% dividend, TSM is, incidentally, yet another Buffett holding, and its shares have been crushing it in early 2023, posting gains of 27.7% through March 23. TSM is the best-performing stock among the best stocks to buy so far in 2023.
Farr, Miller & Washington is a "buy-to-hold" investment manager, which means we make each investment with the intent to hold the position for a period of 3-5 years. Nevertheless, in each of the past twelve Decembers I have selected and invested personally in ten of the stocks we follow with the intention of holding for just one year. These are companies that I find especially attractive in light of their valuations or their potential to benefit from economic developments. I hold an equal dollar amount in each of the positions for the following year, and then I reinvest in the new list.
The following is my Top 10 for 2018, listed in alphabetical order. Prices are as of the December 19 close. This year's Top Ten represent a nice combination of growth and defensiveness. Seven of the 11 S&P 500 industry sectors are represented, and their average long-term estimated growth rate (in earnings per share) is well in excess of the overall market. On average, these companies are much larger than the average S&P 500 company while carrying an average dividend yield of about 2.1 percent.
We expect sustained double-digit earnings growth over the next 5 years, and this growth should not be particularly economically sensitive. The stock trades at 19 times the consensus for calendar year 2018 earnings per share, which represents a slight premium to the S&P 500. In addition, the stock offers a 2.6 percent dividend which should also grow over time.
The reset in commodity prices has forced companies to find ways to live within their cash flow, and ExxonMobil reached free cash flow neutrality (cash from operations covers capital expenditures, dividends, and any share repurchases) in 2017. Additionally, the company may benefit from policy changes that open more drilling areas or improve relations with Russia. The stock trades at 20 times estimated calendar year 2018 earnings per share. The stock also offers a 3.7 percent dividend yield.
MDT has faced a variety of headwinds in 2017, including natural disasters and IT disruptions, but we expect its new product cycle to drive top-line growth in 2018. Moreover, management has cost-saving initiatives in place that will help boost the bottom line.
The stock trades at just 16 times calendar year 2018 earnings per share, which represents a discount to both its peer group and the S&P 500. We view this stock as an attractive holding for long-term investors, especially given that we believe earnings should continue to grow in a down market. The company also offers a 2.2 percent dividend.
However, cash flows reached an inflection point in 2017, and the subscription base is now large enough to more than make up for the lost up-front cash generated under the one-time licensing model. We believe the company can grow free cash flow by double digits over the next few years which should support its valuation. The stock trades at 24 times the calendar year 2018 earnings per share estimate with a free cash flow yield north of 5 percent.
ROST trades at 22 times on a calendar year 2018 basis which represents a premium to both peers and the S&P 500. Having said this, we think this stock deserves the higher valuation given its strong cash flow generation, resilient balance sheet, and ability to generate double digit earnings per share growth. The dividend is 0.8 percent.
If management's claims are correct that pricing improvements can drive 65 percent incremental margins ($0.65 of operating earnings on each $1 increase in revenue), we estimate that the company could reach its peak profit level by recovering just half of the revenue decline witnessed since oil prices reached a top in the summer of 2014. The shares trade at 29 times the consensus estimate for calendar year 2018 earnings per share with tremendous earnings recovery potential should energy prices remain stable or move higher.
We also anticipate that the company can continue growing its global store base by 7 percent-8 percent annually, driven by outsized growth from relatively under penetrated China. Recent sizeable investments in new platforms, products, people and technologies should help enable success in hitting these targets. The stock trades at a 24 times the consensus for calendar year 2018 earnings per share, which is a discount to similar companies. The dividend is 2.1 percent.
Intuitive Surgical makes the da Vinci Surgical System, a robotic surgery system that a surgeon can control from a console. It allows surgeons to perform complex, minimally invasive surgeries with accuracy and precision. This expensive stock has been worth the investment: It has gained over 45 percent thus far in 2018.
NetApp is a cloud computing company that has spent most of 2018 delivering a string of better-than-expected earnings reports. Its most recent two quarterly reports beat analyst expectations by an average of almost 17 percent.
After outperforming the S&P 500 in 2022, health care stocks have faltered in 2023. Despite the short-term dip, the health care industry can be an excellent defensive play in an environment of economic uncertainty, as people don't typically reduce their prescription drug purchases, put off procedures or cancel doctor visits just because the economy is in a slump. The Centers for Medicare and Medicaid Services estimates that U.S. health care spending will grow by an average annual rate of 5.1% between 2021 and 2030 to reach $6.8 trillion, providing excellent long-term investment opportunities.
Yes, but only because Amgen (AMGN (opens in new tab), $194.09) is anything but your typical biotech company. It has a great deal of built-in diversity that rounds out the wild revenue swings that single-product and other more focused biopharma stocks tend to dish out. No single drug makes up more than one-fourth of its revenue, and only two drugs generate more than a tenth of its sales. All told it makes and markets 15 different therapies, addressing multiple markets.
Secondary analyses were the difference between pharmaceutical and S&P 500 profit margins in subsets of the data including (1) years with reported research and development expense (research and development >0), (2) years when these companies were listed in the S&P 500 Index, and (3) the years 2014 to 2018.
The differential profitability of pharmaceutical companies was also markedly lower over the past 5 years (2014 to 2018), and there was no significant difference between the net income margin of pharmaceutical and S&P 500 companies during this interval. Further research is required to assess whether the lower differential net income of pharmaceutical companies over the past 5 years represents a meaningful trend.
The subsidies that do harm to fisheries, and which have underpinned the dramatic decrease of fish stocks in the last 40 years, must be withdrawn by 2020. Only that way can we begin to achieve the targets that the international community signed up for when it endorsed the Sustainable Development Goals.
Where we stand now, the cost is great: harmful fisheries subsidies are estimated to total more than $20 billion a year. Not only do they fuel overexploitation, they disproportionately benefit big business. Nearly 85% of fisheries subsidies benefit large fleets, but small-scale fisheries employ 90% of all fishers and account for 30% of the catch in marine fisheries. The value of these subsidies could be used instead to invest in sustainable fisheries, aquaculture and coastal community livelihoods to reduce the pressure on fish stocks. 041b061a72