To help celebrate America’s independence, today I want to give you what I think are two of the American stocks to buy for a quintessentially American portfolio. But first, I’d like to share a message from former Cabot CEO Tim Lutts, discussing what Independence Day means to him, and American investors.
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What The Fourth of July Means to Me
For more than 30 years, my July Fourth celebration included marching in the local parade while playing my clarinet in Wilson’s Band, a ragtag group of some 30 volunteer musicians of varying ages and skill levels. But eight years ago, facing the sad truth that my skill level was declining toward an embarrassingly low level, I retired from the band.
No longer do I march around the neighborhood playing the same three songs.
No longer do I drink a Budweiser at the halfway mark while the rest of the parade catches up to the band.
And no longer do I march alongside my high school girlfriend, who flies up from Texas for the weekend to see family and friends.
But I still celebrate the holiday, and I hope you do, too, because freedom is the bedrock of our country.
For starters, there are the five freedoms guaranteed by the First Amendment.
Our Five Freedoms
Freedom of Religion
Freedom of Speech
Freedom of the Press (that’s my business)
Freedom to Assemble Peaceably
Freedom to Petition the Government for Redress of Grievance
Subsequent Amendments guarantee us the right to bear arms, the right to not quarter soldiers, the right to equal justice, the right to own private property and more, but it’s that right to own private property that I want to address today.
Your Right to Invest
The Constitution does not specifically give us the right to invest. But it does give us the right to own private property, and it’s under that umbrella that investing activity (or inactivity) takes place.
Investing, of course, is the practice of buying something with the expectation that it will be worth more in the future.
Most Americans do it when they buy a house; history has taught us that houses generally appreciate over time (ignoring the costs of maintenance, which are generally more than offset by the benefit of having a place to live).
But many Americans never get to experience the thrill of investing in stocks. In fact, according to a Gallup poll done earlier this year, just 61% of Americans said they had money invested in the stock market.
That’s the highest level it’s been since the 2007-09 recession, although still below the pre-recession high of around 62%.
And why is this?
One factor is wealth inequality (as opposed to income inequality). With 85% of the country’s wealth in the hands of the top 20% of the population, the lower 80% have precious little to invest.
Another factor is wealth accessibility—if most of your equity is in your house, as is the case with many people, it’s hard to turn that into investible cash.
And another factor is that Americans are losing confidence in the future—and who can blame them? Between our deeply polarized government and the fissures opening across Europe, western civilization appears to be on the ropes.
But I’m not discouraged. I’ve always subscribed to the theory that it’s darkest just before the dawn, and that in the long run, the trend remains up for the stock market and for our standard of living.
So one of my goals at Cabot is to get people to see that there are oodles of opportunities for investment, if only they will open their eyes!
-Tim Lutts
There are plenty of top stocks to buy right now. To me, the following two stand out as American as apple pie.
2 Quintessential American Stocks (with Good-Looking Charts)
American Stock #1: Walmart (WMT)
Walmart is the largest employer in the world, with 2.3 million employees in over 11,000 stores across 25 countries. Founded by Sam Walton in Rogers, Arkansas, in 1962, the company was incorporated in 1969 and already doing $10+ billion in annual sales.
The company is included on this list for a handful of reasons. 1) It’s ubiquitous; there are more than 4,600 Walmart stores across 52 U.S. states and territories. 2) It’s welcoming; sure, you can pay for Walmart Plus (their alternative to Amazon Prime), but the stores are accessible (and affordable) for all consumers, regardless of wealth, membership, race or creed. 3) It’s entrepreneurial; in just a smidge over 60 years Walmart grew from a single store to the biggest retailer on the planet. And it did that by identifying a massive need for more affordable products in an inefficient retail environment.
As for the stock, it’s lagged the S&P 500 in the last decade, returning about 10% annually with dividends reinvested (compared to a 12.5% return in the S&P), but is currently trading just shy of all-time highs set earlier this year. It’s not the fastest horse, but it’s a reliable stock whether or not the U.S. enters recession territory.
American Stock #2: Coca-Cola (KO)
Founded in 1892 in Atlanta, Georgia, the company has gone on to claim more than 40% of global non-alcoholic beverage sales, a $300 billion market this year. That’s expected to grow at about 4% annually over the next four years; it’s not exactly a red-hot sector. That said, Coca-Cola is popular enough in parts of the country that “Coke” is shorthand for a “soda” or a “pop,” and one of the most dreaded bits of dialogue you can hear in a restaurant is, “Is Pepsi okay?”
But there are a few good reasons to flag this as another stock that reflects the American spirit. Coke has the lion’s share of the carbonated beverage market because it pays close attention to industry trends and listens to consumers. It’s spent the last decades building a portfolio of popular brands while continuing to deliver the taste and quality its consumers expect (except for the New Coke fiasco). That attention to detail allows Coke to remain relevant even as the beverage market changes (low/no-calorie, seltzer water, energy drinks, etc.).
As for the stock, like WMT it’s lagged the S&P over the last decade, returning only 7.6% with dividends reinvested. It’s also trading near all-time highs set earlier this year. But the current dividend yield of 3% makes Coca-Cola an attractive, defensive, income-generating stock.
Neither of these stocks is likely to rocket overnight, but like the American spirit, they’ll endure.
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