3 Foundational Stocks to Anchor Your Investing Portfolio
Every successful investor needs a strong base with their investments
If you are new to investing, like I was earlier this year, it’s important to glean as much information as possible when building your portfolio. It’s tempting to go after the hot stocks everybody is talking about may skyrocket in coming days but ultimately, every successful investor must have a strong base, much like the foundation of a good house. Picking the right ones can help set you up to keep your investment account profitable and safer from potential devastating setbacks.
There is no stock that is a sure thing. Even those with the most sterling track records are capable of losing you money in the short or long term. However, foundational stocks can help provide stability in profit making and prevent catastrophic losses, which in turn provides more flexibility in taking chances on more volatile options that may turn into home runs. Foundational stocks are expansive, blue-chippers that are so established that long-term failure is so unlikely that their demise would signal catastrophic problems for the economy in general.
There are a number of stocks that make excellent building blocks for the foundation of a strong portfolio, but here are some of my favorites.
Facebook: The social media giant only continues to grow as it absorbs other companies and expands its offerings. Just recently, they announced they will be dipping their toes into the world of cryptocurrency, which creates a whole new round of possibilities. Their aggressive and diverse approach to how they manage and build their company has made it a steady earner during their existence.
Looking at their growth chart gives a great visual example of why Facebook is a perfect foundational stock. It is currently trading at around $276.40 a share, compared to $213.06 on January 1, 2020, $186.89 on January 1, 2018 and $112.21 on January 1, 2016. Like other stocks, there have been dips, but for those in it for the longer haul, it just keeps going up. Its strong track record of not only holding value but also increasing steadily is a nice place in which to stash some of your portfolio.
Even the current federal anti-trust lawsuit shouldn’t be more than a dent in the armor in the worst case scenario. Another drawback is that they don’t presently pay dividends, but nobody is perfect, right?
Tesla: The electric vehicle and clean energy giant has had a much more meteoric rise to the top. It has been on a significant upward trend for about the last year with no end in sight. With the world increasingly turning to sources of renewable energy and green emissions, Tesla has been in the right place at the right time with their appealing vehicles.
Tesla stock was at a modest $83.67 on December 1, 2019. Now, barely a year later, it is sitting $695 a share. However, this doesn’t appear to be a flash in the pan. They are consistently profitable and have a current annual revenue stream of more than $28 billion. They also recently became a member of the S&P 500; a distinction typically reserved for companies with far lengthier histories.
A number of analysts believe that Tesla is currently traded well above its valuation and that it’s wildly overpriced. However, the stock started its meteoric rise a little over a year ago and continues to defy expectations. Given its popularity, it’s uncertain what catalyst would start driving down the price; while on the other hand, it’s peak is perhaps even more of an unknown.
What makes Tesla all the more exciting is that they are not just about cars. In fact, they dabble in a number of other products, including a recent brand of vodka they recently released. Such diversity gives even more chances for them to hit upon something that will pop and drive their business even higher.
AT&T: For investors crazing stability, AT&T is an intriguing option. The telecommunications giant has a modest price-per-share (fluctuating between approximately $27 and $49 during the past five years). However, with a current price of $29.40, it’s much more accessible and allows for the buying of more shares than some of the giants.
The primary appeal of AT&T is its generous dividends, which currently produce $2.08 annually per share. There is nothing sexy about a 7% annual yield, but it’s nothing to scoff at either. The vast number of people who use their services for internet, telephone, cellular and television service give them solid footing in a market that is almost impervious to serious decline due to the necessity of what they offer. This stock may not double or triple in price but it’s also proven to be stable and have a solid bottom and annual dividends.
DISCLAIMER: The author is not a financial advisor or expert. The opinions expressed in this article are intended for general informational purposes and entertainment only and are not intended in any way to provide specific advice or recommendations for any individual or on any specific security or investment product. Individual investors are responsible for their own money and investment decisions.
The author holds no current position in any of the companies referenced.