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Getting to the Top 5

A good friend asked me last night what I thought my Top 5 stock recommendations would be. I didn’t have them in my head, so I said I would write of that next. He’s a young man, and just starting out with a wife, and now 2 children, and is wanting to amass wealth over the remainder of his lifetime, so as to secure a retirement free of money worries several more decades down the road.

I really appreciate his question, and it causes me to think harder, as I am trying to put myself in his place… and, I am asking myself, if I had some 3 decades, or even more, to do this… what would I buy to help make sure to get me to be where I want to be for me, and my family. He’s a wise young man, and I appreciate him, and all like him, who want to get started and do something about it now.

With this goal in mind, my top 5, buy-to-hold-forever stocks would be these: UNH, NKE, ROL, AOS and JKHY. Why these? UNH is United Health. There will be no time when health care provision and insurance won’t be big business, and UNH looks to be one of the very safest-dividend growers in the field. NKE is, of course, Nike. Nike is a leader in the sports clothing and shoe field. Competitors are many, but Nike’s place seems assured, and thru their innovative products and paid top athlete promoters, I think I can see Nike as always being a leader in this field. ROL is Rollins. Check out what they do. Will there ever be a time when their services won’t be needed? They keep right on growing, and safely paying out a steadily growing dividend. AOS is A. O. Smith. Hot water heaters! They last maybe 20 years, then must be replaced. They are included in nearly all new construction, and, most of all, they are in huge demand in third-world nations where a brand new, emerging middle-class is clamoring for them. A. O. Smith is doing incredible business in this area. Rounding out my Top 5 is JKHY. This is Jack Henry. Jack who??? Jack Henry. You want to be involved in the area of financial services. JKHY is a software developer and provider to the financial services industry.  You want to be in the basic picks and shovels end of any industry, which tends to be a part few pay any attention to. But, and here’s my point…

All I do is run a search for the very safest-dividend payers and growers. I chart them with 10-years of data… first, for their 10-year history of analysts’ consensus of forward-looking earnings estimates, and then, secondly, for their 10-year history of past dividend payout. I want two things here. First, I want the smoothest upwardly trending EPS line that has grown at a rate that has handily beat that same line I’ve created for an average of all 500 companies in the S&P 500 Stock Market Index. And, secondly, I want a past dividend payout growth pattern that both beats the average for the dividend payout of the 500, and handily beats inflation, besides.

Now, the proof that these are vastly superior investments is seen in 2 things. First, their price per share chart history for the past 10 years will show price appreciation to have run well ahead of the 500, and the volatility will also likely have been less than that for all 500 stocks in the index. So, how do these 5 look in this regard?

I will write-up the answers to these questions next… and, render some further sound investment advice. O, and I should add; I own shares of all 5 of these! And, a number of others besides.

Here’s to your successful investing!
Harold F Crowell

Thanks, Denis!

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2 thoughts on “Getting to the Top 5

  1. Raheel says:

    NKE, ROL, JKHY are all top choices, except that ROL’s valuation is always unattractive.

    I acknowledge I am not familiar with UNH’s competitive advantage, need to study it more to feel comfortable.

    AOS, I doubt continuation of its high div growth, probably I am wrong.

    Good post.

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