Timing the market is difficult due to the competitive nature of the financial markets. Therefore, taking a step back and investing in passive gains is the way to go for many. In fact, excess trading often complicates matters as issues such as taxation, trading costs, and ever-changing portfolio risk measures enter the fray.
Although passive investing can be profitable, some stocks have shelf lives. Thus, selecting stocks with perpetual growth prospects is of the utmost importance.
I screened through several timeless stocks this morning to present my readers with three best-in-class assets. My search criteria ensured each stock was fairly priced with secular growth prospects, thereby phasing out the froth. In addition, I ensured my search included diversification benefits to present investors with uncorrelated opportunities.
Let’s discuss my three picks in detail.
Microsoft Corp (MSFT)
Microsoft (NASDAQ:MSFT) might sound like a vanilla suggestion, but keeping it simple when investing is underrated. In addition, I don’t know if everyone understands the company’s baked-in secular growth story.
Technological innovation is at an all-time high due to a regime change induced by the COVID-19 pandemic. Microsoft is aligned to serve various end markets during this regime change. For example, its access to corporate hardware clients allows it to tap into a market with a forecasted compound annual growth rate (CAGR) of 7.86%. On the other end of the spectrum, Microsoft’s rollout of mass consumer AI products allows it to achieve revenue and cost-cutting synergies.
Conventionally speaking, MSFT stock’s current price-to-earnings ratio of 37.4x is elevated; I get that. However, a distinction must be made between high quality and relative value. MSFT stock is a high-quality value stock due to its robust return-on-equity ratio of 39.17%, supported by a 5-year CAGR of 13.95%. Moreover, the firm holds significant market shares in developing industries, aligning it with a perpetual growth outlook.
I’m bullish on MSFT and think market timing is unnecessary!
UnitedHealth (UNH)
It doesn’t get as timeless as long-term insurance. UnitedHealth (NYSE:UNH) is a long-term insurance provider with a broad-based market share of 31.68%. Its robust market share, paired with its good execution, has resulted in a five-year average return-on-common equity of 25.8%, illustrating economies of scale.
Another benefit to UnitedHealth is its representation in adjacent businesses. The firm’s Optum segment has developed a portfolio of long-term insurance and healthcare solutions to complement UnitedHealth’s core business. Optum’s current CAGR of 18.89% illustrates the growth story, allowing UnitedHealth to rejuvenate profitability.
UNH stock is down by more than 5% since the turn of the year amid an antitrust probe related to its acquisition spree. Moreover, matters worsened this week as the company’s system got hacked. Although these are risks worth considering, they are short-term frictions and likely to leave long-term growth unabated.
This looks like a great buy. UNH stock has a price-to-earnings ratio of merely 20.69x, which is low for a mature stock. In addition, UNH stock’s dividend yield of 1.48% illustrates the security’s solid income-based returns.
Sibanye Stillwater (SBSW)
Sibanye Stillwater (NYSE:SBSW) endured a tough 2023 year due to systematic risk deriving from commodity price slumps and geopolitical debacles. Moreover, the company suffered mine floods last year, requiring it to rebuild infrastructure relating to its two U.S. platinum mines.
However, SBSW stock is set for a fresh start. The company’s U.S. mines are functioning once more, while its South African operations look set to pick up as the firm acclimatizes to regional electricity issues.
Furthermore, Sibanye’s renewable energy alignment is a big bonus. The company’s exposure to the lithium industry is growing via its Keliber mine, which recently achieved a 55% increase in attributable lithium resources to 702,000 tonnes. Sibanye’s strategic position in lithium and platinum mining aligns it to service the pending lithium and green hydrogen economies, attaching significant growth prospects to its stock.
SBSW stock has a price-to-book ratio of merely 0.57x and a forward dividend yield of 5.4%. This is an excellent opportunity for long-term investors.
On the date of publication, Steve Booyens held indirect long positions in MSFT, UNH, and SBSW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.