9 of the Best Stocks for a Starter Portfolio | Investing

The major American stock market indexes are surging, with several recently hitting fresh all-time highs. This may seem a bit surprising, given the variety of risks facing investors today. Between inflation, rising geopolitical turbulence and the threat of a recession, there is plenty that could go wrong in 2024.

However, as the adage goes, time in the market beats trying to time the market. Especially for newer investors that are building a starter portfolio, the important thing is to put capital to work regardless of how the market is looking on a day-to-day basis. Thankfully, with these nine companies, investors can start compounding their money in firms that have excellent long-term growth trajectories.

While the market may be volatile this year, there’s a good chance these nine starter portfolio stocks will be trading far higher in five or 10 years from today:

Thermo Fisher Scientific Inc. (TMO)

Thermo Fisher Scientific is one of the world’s largest lab tools and scientific equipment companies. It operates in four segments: life science solutions, diagnostic products, analytical technologies, and lab products and services.

The company engages in a constant mergers and acquisitions program; management has demonstrated a tremendous ability to find small life sciences companies and buy them at attractive prices. Today, Thermo Fisher is a one-stop shop for labs, biotech companies, pharma and academic institutions.

It seems certain that spending on health care research will surge in coming years with the aging of the population. In addition, recent reports have pointed out rising cancer rates among younger generations of Americans; the hunt for new cancer treatments is likely to foster a large addressable market for Thermo Fisher in the coming years. Thermo Fisher is still in a downturn now due to the decline of COVID-19-related revenues. This temporary dip gives astute investors an opportunity to get this long-term growth stock on the cheap.

Air Products & Chemicals Inc. (APD)

Air Products & Chemicals is a specialty chemicals company focused on industrial gases. It distributes products such as oxygen, nitrogen, argon, hydrogen and helium for a wide variety of customers. While this may not be the most glamorous of businesses, these sorts of gases are vital to all types of industrial operations. APD stock has delivered tremendous results over the decades. In addition, the company is a “dividend aristocrat,” having raised its dividend annually for 41 years in a row.

The company also has a large growth opportunity thanks to sustainability efforts. Air Products & Chemicals has a significant presence in both the hydrogen power market and in carbon capture solutions. These alternative energy and carbon-zero offerings give the company major upside as industrial firms seek to improve their ESG ratings. At the same time, the company’s core business is highly profitable and provides investors with a steadily growing income stream.

McCormick & Co. Inc. (MKC)

McCormick is America’s largest spices and seasonings company. In addition to selling its own branded goods, McCormick is a leader in producing store-brand spices along with its flavor solutions division for restaurants and institutional kitchens. More recently, the firm has made an aggressive splash in the condiments and hot sauce market, making acquisitions such as Frank’s Red Hot and Cholula.

McCormick has been in business for a century and has an unmatched supply chain. The company has employees on the ground in places such as Madagascar to ensure that it always has access to exotic spices regardless of weather conditions, political uprisings or other such uncertainties.

McCormick, in many ways, has a natural monopoly because the spice market isn’t large enough to justify having many players sourcing niche products such as cardamom or vanilla from far corners of the globe. This is a tremendous moat and makes McCormick a great long-term investment. Shares have slumped recently due to fears around the GLP-1 weight loss drugs that have slammed food stocks generally; however, it’s hard to see why this should be of particular concern to McCormick, as it mostly sells low- and no-calorie spices and flavorings.

Estée Lauder Cos. Inc. (EL)

Cosmetics giant Estée Lauder has gone through a boom-and-bust cycle over the past few years. Sales soared as the economy started to reopen from the pandemic. Consumers were flush with cash and wanted to look their best as they started going to social functions again. Estée Lauder shares would go on to hit all-time highs and reach a peak valuation north of 45 times earnings.

Since then, shares have gotten pummeled as both earnings per share and the firm’s valuation multiple have tumbled in unison. Indeed, the stock is down from a peak of $370 to just $125 today. That’s an incredible decline for such a venerable firm with a great track record of earnings-per-share growth spanning decades. While Estée Lauder is currently suffering from a massive downturn in demand from emerging markets such as China, this steep correction marks a great entry point for longer-term investors.

Reshoring has become one of the overarching themes of the 2020s. In the wake of the pandemic and its ensuing supply chain disruptions, North American companies are increasingly looking to relocate their manufacturing capacity closer to home. The recent geopolitical turmoil in the Middle East and attacks on cargo ships will further accelerate this trend.

Prologis is a real estate investment trust, or REIT, that is set to cash in on this development. Prologis has grown into America’s largest industrial and logistics landlord. As many large industrial companies and retailers don’t want to own all their own warehouses, factories and fulfillment centers, Prologis has rolled up a gigantic number of these properties and then rented them out. Prologis now counts a stunning 1.2 billion square feet of properties across its portfolio globally.

Prologis shares rallied as much as tenfold coming out of the 2008 financial crisis up through their recent peak. However, the stock is now down sharply from its highs, primarily due to higher interest rates. Now, though, with the Federal Reserve set to cut rates, Prologis should resume its upward trajectory.

Diageo is the world’s largest alcoholic spirits company. It owns a wide variety of brands across nearly all major categories of spirits, along with Guinness beer. While Diageo, the corporate entity, was formed in the 1990s, its roots go back to Guinness, which was founded in 1759. Needless to say, brands that can thrive for centuries tend to make for appealing long-term investments.

In a way, Diageo serves as a perpetual bond on the cash flows from the world’s parties, social events and nightlife. The company has incredibly stable operating results and has raised its dividend (as measured in its home currency of British pounds) for more than 25 years in a row. For an investor setting up a durable starter portfolio, Diageo is the perfect sort of blue-chip growth and income holding. Diageo shares are near 52-week lows on seemingly overblown GLP-1 weight loss drug fears, which makes for an excellent buying opportunity.

U.S. tech and e-commerce stocks keep soaring to loftier heights. At present valuations, it’s hard to get excited about the American batch of companies in these sectors. In China, however, things are completely different. Chinese equities have collapsed over the past two years amid a prolonged economic slump and mounting geopolitical tensions.

For e-commerce leader JD.com specifically, shares are now back down to around their 2014 initial public offering price. That’s an incredible 80% decline from JD.com’s all-time-high price a few years ago. The funny thing, however, is that JD’s actual revenues and profits have continued to grow even as investors have given up on the company. China is facing structural challenges, to be certain, but it’s a huge market with a growing consumer class that holds longer-term appeal. At seven times forward earnings, JD.com is a tremendous bargain if China gets back on track.

Most investors gave up on Wells Fargo back in the 2010s. The bank was once highly respected and counted famed investors such as Warren Buffett among its shareholders. But Wells Fargo’s fake accounts scandals caused the bank incredible reputational damage and legal costs.

However, Wells Fargo has been in turnaround mode for a while now, and it is starting to pay off. With a fresh management team led by former Visa Inc. (V) CEO Charlie Scharf, Wells Fargo has cleaned house and is returning to good standing in the industry. The company’s earnings results are inflecting higher as well, as the bank positioned its balance sheet tremendously for the higher-interest-rate environment. Wells Fargo is paying a dividend and is running a massive share repurchase program. As investors wake up to the new and improved Wells Fargo, the bank should earn a much higher valuation and reward its loyal long-term shareholders.

Qualcomm is a leading semiconductor company focused on telecommunications. The firm originally rose to prominence on the strength of its intellectual property tied to 3G and 4G mobile telephony. Not surprisingly, Qualcomm is currently highly involved in the global rollout of 5G technologies, and the firm is already in the planning stages for 6G, which Qualcomm thinks will emerge around the end of this decade.

QCOM stock has underperformed many of its semiconductor peers over the past 18 months. That shouldn’t be too surprising, as smartphone sales have been underwhelming in recent quarters. The Chinese smartphone market, in particular, has not met analyst expectations over the past year. However, phone demand should pick back up in due time. Meanwhile, Qualcomm has an edge with AI-enabled chips for mobile devices that should generate a great deal of interest going forward.