4 Great Stocks For Beginners

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By Matt Frankel, Motley Fool Investment Planning 4 Great Stocks For Beginners 1

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What makes a good “beginner” stock? July 17, 2015 2

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The best stocks for beginners won’t make you rich overnight, but won’t make you go broke either Look for companies with a steady track record of growing revenue and low debt levels 3 Low risk

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Look for businesses will be around forever For example, people will always need groceries, ways to communicate with each other, and safe places to keep their money However, will people always buy a specific high-end brand of clothing? Or, will people always need to buy desktop computers? Maybe, but maybe not July 17, 2015 4 “100-year” businesses

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Ideally, stocks for beginners will make their money from a variety of products and services Geographical diversity is important too For example, companies that do a lot of business overseas are better-positioned to deal with a U.S. recession July 17, 2015 5 A diverse revenue stream

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Stocks with a history of dividend increases tend to make solid long-term investments And, only invest in businesses that are easily understood, at least while you’re just getting started Basically, beginners should focus on building a good foundation. There may come a time when it’s okay to take some higher risks, but it isn’t a good idea while you’re new July 17, 2015 6 Other things to look for…

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4 “Beginner” stocks to get you started… July 17, 2015 7

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1. Berkshire Hathaway (NYSE: BRK.B) Berkshire Hathaway one of the best all-around stocks in the market The company’s primary business is insurance, but investors get so much more than that… 8 July 17, 2015

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Berkshire Hathaway has more than 50 subsidiary companies, as well as a diverse portfolio of the best stocks in the market Essentially, by investing in Berkshire Hathaway, you are buying an all-in-one diversified investment portfolio July 17, 2015 9

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Just a few of Berkshire’s subsidiaries… GEICO The Pampered Chef Fruit of the Loom Clayton Homes See’s Candies Helzberg Diamonds NetJets Burlington Northern Santa Fe Lubrizol Duracell Dairy Queen 10 July 17, 2015

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Some of Berkshire’s major stock holdings… American Express Deere & Company General Motors Goldman Sachs International Business Machines (IBM) Coca-Cola Moody’s Procter & Gamble US Bancorp Wells Fargo Wal-Mart Verizon Phillips 66 Visa MasterCard Costco 11 July 17, 2015

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2. Colgate-Palmolive (NYSE: CL) Colgate-Palmolive produces many name-brand products including Ajax Colgate toothpaste Irish Spring Murphy Oil Soap Science Diet Softsoap Speed Stick 12 July 17, 2015

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Colgate Palmolive is a “dividend aristocrat”, which means that it raises its dividend year after year like clockwork In fact, Colgate-Palmolive has increased its dividend for 51 consecutive years, and has paid a dividend every year since 1895 July 17, 2015 13

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Colgate-Palmolive’s sales come from all over the globe July 17, 2015 14 Geographic diversity

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Colgate has steadily grown its sales over the years, and it is well-positioned to capitalize on the world’s growing middle class This steady growth has produced a 1070% total return over the past 20 years, and there is no reason to think the strong performance won’t continue July 17, 2015 15

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3. ExxonMobil (NYSE: XOM) The largest publicly-traded integrated oil company ExxonMobil could be an excellent way to take advantage of depressed oil prices 16 July 17, 2015

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ExxonMobil has exposure to all aspects of the oil business So, even though its exploration and production (E&P) business suffers when oil prices are down, others – such as the refining and chemicals business – actually do better Plus, its size gives it a competitive advantage, allowing the company to run more efficiently than rivals July 17, 2015 17

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During tough times, ExxonMobil has the ability to capitalize on smaller, struggling companies As one of only three U.S. companies with a AAA credit rating, ExxonMobil has access to virtually unlimited cheap capital for acquisitions or other opportunities In fact, ExxonMobil has an even better credit rating than the U.S. government! July 17, 2015 18

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In terms of valuation, not only has ExxonMobil’s share price dropped by about 20% in the past year or so, but its price-to-book value is at its lowest level since the mid-1990’s Now may be a great time to get into ExxonMobil cheaply 19 July 17, 2015

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4. Johnson & Johnson (NYSE: JNJ) In addition to its portfolio of well-known brands such as Band-aid Johnson’s baby products Tylenol Neutrogena Johnson & Johnson’s largest business is pharmaceuticals 20 July 17, 2015

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J&J’s size and brand power are tremendous competitive advantages Its size allows it to produce goods more efficiently Its well-known brands give it more pricing power than lesser-known competitors The massive pharmaceutical business is the real money maker, and the company invests aggressively in research and development, which has resulted in some innovative (read: profitable) drugs July 17, 2015 21

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Johnson & Johnson has an outstanding 53-year history of dividend increases The company pays out less than 50% of its earnings as dividends, leaving plenty of room for this to continue Even though many investors consider J&J to be a “boring” stock, it has handily beat the S&P 500’s returns over the past several decades July 17, 2015 22

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