Gloves COMING Off: Beating BUFFETT!
Ten years have passed since the Great Recession – that’s a significant length of time. The opportunities, which were available back then, will probably not return for many years, maybe even decades.
For example, take a look at Hormel Foods, which is one of the safest investments in the world and an outstanding stock performer:
In the past nine years, HRL has outperformed the major indices, but because the valuations were low and attractive in 2009, even the mediocre indices are up significantly as well.
It’s important to understand that in bull markets, one of your primary objectives is to make AT LEAST as much as the index.
In the 2000s, a famous survey conducted research that measured the results of the best-performing mutual fund compared with its clients’ individual results. The difference was unbelievable. While the fund returned an outrageously good 18.7% annually, the clients only gained 2.3% a year, because they constantly traded in and out, according to their whims.
One of the reasons that Warren Buffett advises investors, who have only a few hours a month to devote to their portfolios to have 90% of their wealth in the S&P 500, is because no matter what, over the long-term, IT WON’T FAIL YOU.
Yes, individual components in the basket are overvalued, while others are failing, but because the managers of the index constantly shuffle the stocks included, the returns have been nothing short of spectacular.
It’s almost futile to fight with the long-standing track record of American enterprise.
We may not see another juicy setup, such as the 2008 credit crunch happening soon, but the next time it does, train yourself to view it as a buying opportunity.
Between 1964 and 2017, Buffett generated an average annual return of 20%. The S&P 500 returned 9.7% annually during the same period, in contrast.
He is a freak of nature, capable of both incredible analytical thinking and stellar emotional control.
His success, though, has pushed him into a corner. Berkshire has become so large that he must pass on some amazing opportunities because they are too small for him. He admitted this in the annual shareholder meeting.
You don’t have that “problem,” so while you have not been trained to double-down on stocks in previous recessions, you will be ready the next time around.
Today, I want to share my top idea for long-term investors.
This is the first time I’m doing this with the Wealth Research Group letter. The reason is that in the next ten years, one of the largest, most recognizable brands in the U.S., has the chance to return Buffett-like gains, and I feel it is my duty to share with you what close to three years of research has uncovered.
With one click of a button, very minimal transactions fees, and a bit of discipline, we could be compounding a near 20% return for the next ten years with this investment.
To put that into perspective, $50,000, which is what I just committed to this myself, will be worth $309,000 by 2028. I believe it is entirely possible that many brilliant hedge fund managers will also make this investment in their personal accounts.
This isn’t a small-cap speculation trade, nor does it depend upon any macroeconomic outlook, such as higher inflation rates, a default on U.S. debt, or any sensationalistic predictions to come true. It deals with the known and present, not the unknown and probable.
Pharmacy retail giant, Walgreens Boots Alliance (NASDAQ: WBA) is my personal biggest bet.
Walgreens is by far the largest retail pharmacy in the United States and Europe. The company runs just over 13,000 stores in 11 countries.
It also manages one of the largest global networks, with more than 390 distribution centers, which deliver products to approximately a quarter of a million professionals annually.
The company is seriously well-managed and enjoying a tremendous growth curve.
I want to stress that the market consensus, which relates to many retail giants, is that Amazon will beat them, snag their market share, and decimate their returns. This is precisely why shares are cheap right now.
WBA is a huge business, so it will continue to grow, but this is not going to be any fireworks-type expansion takeover. Instead, an average of 8.3%-9.8% annual growth is in line with historical precedence.
Today’s dividend yield is 2.46% or $1.60 per share, but this will grow substantially.
Take a look:
Since the year 2000, dividend payments are up 1,000%. In the previous five years alone, shareholders have seen a 33% increase. To compare this to real estate, it would mean that a tenant paying $1,000 a month today would pay $1,333 a month by 2023.
By compounding, which means that you allocate the dividend proceeds to buy additional shares, you are building an even bigger position, using the profits generated by WBA’s business.
As opposed to the S&P 500’s P/E ratio, which stands at 24.78 (ridiculously expensive), Walgreens’ P/E multiple is a modest 10.7, which is not only cheap compared with the index, but also cheap compared with the company’s historical average of over 16.5. This means that over the next ten years, as it reverts to the mean, the valuation increase could be around 5%-7%.
Combining the fact that Walgreens will also continue to buy back shares, the potential for a massive, rare, and probably generationally high return, is entirely possible.
Here’s the conservative breakdown:
Dividend Yield: 2.5%
Reversion to Mean: 5%
Share Buyback Program: 1.4%
Total Returns: 17.2%
If WBA grows at 9.8%, this could become a total return of 18.7%, which doesn’t include the impact of reinvesting dividends to buy additional shares, which can boost your personal return to over 20%.
The gloves are coming off, and I am willing to bet that Walgreens will be one of the best-performing stocks by 2028 for investors who are buying today.