Investing in the stock market is not difficult. What is difficult is having the patience to allow your investment thesis to unfold over time, and the confidence to buy stocks even with the market at or near new all-time highs.
Since last week, the iconic Dow Jones Industrial Average and reference S&P 500 were at record closing highs. It might seem wise to just wait for a step back, but it could make you miss out on buying great businesses at reasonable prices, especially if you have a long-term mindset.
If you have $ 3,000 in cash that can be tapped into right now, which won’t be needed to pay bills or cover emergencies, you have more than enough to buy the next trio of foolproof stocks.
For some investors, Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) trading a stone’s throw from its all-time high would be a turning point. But it shouldn’t be. Between Alphabet’s dominance in internet search and its rapidly growing ancillary operations, it is poised to become a mainstay of cash flow this decade.
Alphabet is the parent company behind Google, the world’s most popular internet search platform. According to GlobalStats, Google has controlled between 91% and 93% of global searches for most of the past two years. With such dominance, it’s no surprise that advertisers are clamoring for placement. This core business is expected to continue to benefit from a rebound in the US and global economy, and will likely experience higher operating margins over the long term as traffic acquisition costs stabilize.
Beyond internet search, Alphabet has two very fast growing segments. The first is the YouTube streaming platform, which is one of the top three most visited social sites in the world. YouTube’s advertising revenue jumped 46% in the fourth quarter, with the platform’s annual revenue now exceeding $ 27 billion.
Perhaps even more exciting is the Google Cloud cloud infrastructure service segment. With more businesses online and in the cloud than ever before, Google Cloud was able to generate 47% revenue growth in the fourth quarter, along with grossed annual sales of over $ 15 billion. Cloud margins are expected to easily exceed ad margins over time, making Cloud Alphabet the golden ticket to serious cash flow growth by the middle of the decade.
Innovative industrial properties
Marijuana inventories in the United States are expected to provide a significant growth opportunity throughout the 2020s. According to New Frontier Data, annualized growth in cannabis sales is expected to reach 21% between 2019 and 2025. But it’s not just direct actors who will benefit from it. Auxiliary pot stocks like Innovative industrial properties (NYSE: IIPR) should also thrive.
Innovative Industrial Properties, or IIP for short, is a cannabis-focused real estate investment trust (REIT). In English, this simply means that he buys cannabis cultivation and processing facilities and rents them out for long periods of time. The goal is to generate shipments of rental income that far exceed what IIP invests in its properties.
As of the first week of April, IIP owned 68 properties covering 6 million square feet of rental space in 18 states. But the best stat here is that 100% of these facilities have been leased, with a weighted average lease term of 16.7 years. Even though the company stopped reporting its average return on invested capital over a year ago, it was over 13% by then. If it is still around that level, if not a little lower, IIP should report a full return on its invested capital in seven years or less, with everything beyond that point being gravy.
Innovative Industrial Properties is also a major beneficiary of the federal government’s failure to reform cannabis banking laws. Since marijuana is a Schedule I (illegal) drug at the federal level, some banks will not deal with direct players in the cannabis industry. IIP stepped in with its sale-leaseback program. IIP acquires assets for cash from multi-state operators (MSOs) and immediately leases these properties to the seller. This way, the MSO gets the money it wants and IIP lands a longtime tenant.
Innovative Industrial has a good chance of maintaining a double-digit growth rate and a dividend yield of around 3% for years to come.
A third foolproof stock that you can invest $ 3,000 in right now is the payment facilitation giant MasterCard (NYSE: MA).
Like most financial stocks, Mastercard is not invincible. When economic contractions and recessions strike, consumers and businesses spend less. As the business generates its income from payments, this is a recipe for lower profits. However, Mastercard is also at the center of a big numbers game that long-term investors are in great shape to win. This is because recessions are overshadowed by the average duration of economic expansions. With the typical economic expansion lasting for years, Mastercard is easily able to cope with contractions or recessions that typically last a few months or quarters.
Just like its main rival Visa, Mastercard is also not a lender. It may seem foolish (with a small “f”) for Mastercard to deny the ability to generate fees and interest income during times of economic expansion, but the benefit of this decision is visible when contractions or recessions are coming. While most banks face credit and loan defaults, Mastercard is clear and doesn’t have to put capital aside to cover bad debts. This is one of the main reasons that Mastercard rebounds so quickly from recessions.
Another thing to consider about Mastercard’s growth story is that it has a long track. Most transactions around the world are still done in cash, and there are many areas of the world that are underbanked for Mastercard to infiltrate. Despite its strong market capitalization, Mastercard is still capable of sustainable double-digit annual growth.
This article represents the opinion of the writer, who may disagree with the âofficialâ 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.