Last week, the three major American indices – the iconic Dow Jones Industrial Average, reference S&P 500, and highly technical Nasdaq Composite – closed to new historic highs.
For some investors, it is just not attractive to put money into the service of the market at an all time high. However, history has conclusively shown that if you keep your high quality investments for a long time, no matter when you put your capital to work – you will most likely make money. For example, there has not been a 20-year continuous period in history where buying an S&P 500 Tracking Index would have cost you money. Value exists, if you have a long-term mindset.
Best of all, you don’t have to start with a fortune to build wealth on Wall Street. If you have $ 3,000 in cash on hand, which won’t be needed to pay bills or cover an emergency, that’s more than enough to buy the next trio of obvious stocks, all of which have the ability to easily double your money.
If growth stocks are what tickles your fancy, social media platform Pinterest (NYSE: PIN) is your ticket to doubling your initial investment.
To state the obvious, social media companies have particularly profited from the coronavirus pandemic. Since many people have chosen to stay at home to reduce the transmission of the virus, people have turned online to interact and be entertained. One of those biggest beneficiaries has been Pinterest’s platform, which allows users to share the things, services, and places that matter to them. The company’s monthly number of active users rose 37% in 2020, compared to an annual average of 30% in the three years before the pandemic.
Even as user growth slows down and returns to historic growth levels, Pinterest remains in excellent shape for gaining greater ad pricing power. During the second quarter, the company likely approached or surpassed 500 million monthly active users, with most of that growth coming from international markets. Even though the average revenue per user (ARPU) is lower outside of the United States, the ability to double the international ARPU several times over this decade is what gives Pinterest the potential for sustainable double-digit growth.
Another cool thing about Pinterest is that it has one of the most transparent user bases on social media. Advertisers looking to target their post won’t find this any easier than Pinterest, where users post their interests publicly.
Over time, Pinterest should have no problem connecting merchants with its clearly motivated user base. This gives the company a real chance to become a top ecommerce destination this decade.
Annaly Capital Management
Investors in dividend-paying stocks can also easily double their $ 3,000, although they may need to be a little more patient. Mortgage Real Estate Investment Trust (REIT) Annaly Capital Management (NYSE: NLY) is the perfect income action to double investor money.
A REIT is a uniquely structured company that turns real estate into a source of income. For example, Annaly borrows money at low short-term borrowing rates and uses that capital to acquire assets, such as mortgage-backed securities, with a higher long-term return. This difference between the higher long-term yield and its borrowing rate is known as the net interest margin. The more Annaly can get this margin, the more income she can potentially generate. And since it is a REIT, it avoids normal corporate tax rates by analyzing almost all of its profits as dividends to its shareholders.
The enemy of the mortgage REIT industry is the flattening of the yield curve. When the yield curve flattens, the company’s net interest margin typically decreases. In comparison, a steepening in the yield curve, coupled with very clear and slow monetary action by the Federal Reserve, is an ideal scenario. Historically, the recovery of the US economy has led to a steepening of the yield curve. In other words, we are at the point in the economic growth cycle where mortgage REITs like Annaly are doing their best.
To make things even better for long-term investors, Annaly almost exclusively buys agency securities. The agency’s assets are guaranteed by the federal government in the event of default. While this added protection reduces the long-term returns that Anna earns from her asset purchases, it allows the company to intelligently use leverage to increase its profit potential.
Annaly has consistently posted an average dividend yield of around 10% for over two decades. If you reinvest your payments and Annaly’s stock price increases modestly as her book value increases, your initial investment could double in as little as five years, or even sooner.
A third stock that has shown its ability to double investor money time and time again is the conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). For those of you who may be less familiar with Berkshire, we’re talking about the company billionaire (and CEO) Warren Buffett has run for more than five decades.
Since taking charge of Berkshire Hathaway in 1965, the Oracle of Omaha business has on average … average… an annual return of 20% on the nose for its shareholders. A 20% return may not seem so impressive at first glance, but after achieving an average annual return of 20% for over 55 years, Berkshire Hathaway’s overall return with Buffett as CEO is 3,393,710%. (performance of Class A shares), 4 weekend. Buffett has effectively created over $ 500 billion in shareholder value for his company.
The most obvious benefit I can point out of owning Berkshire Hathaway shares is that you get Warren Buffett and his trusted investment team as pseudo portfolio managers. Buffett has a knack for identifying companies with clear competitive advantages, and he’s not afraid to hold onto his investments for years or decades to allow his thesis to come to fruition.
In addition, the Oracle of Omaha and its investment team have packed Berkshire Hathaway’s nearly $ 313 billion investment portfolio with cyclical stocks in information technology, financials and of basic consumption. Buffett fully understands that the US and global economy spends a disproportionately longer period of time growing than contracting. The Oracle of Omaha plays a simple numbers game that favors patient investors.
While it’s not clear whether Berkshire Hathaway can maintain its average annual share price appreciation of 20%, which would double investor money in less than four years, the focus of the company on dominant cyclical companies should make it easy for shareholders to build wealth over time. .
This article represents the opinion of the author, who may disagree with the “official” 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.