Dear Erin, Millennials are just like every other generation: they eventually want to retire. This is, of course, easier said that one. It requires focus, discipline, and the savvy stock picking. For Millennials looking to pick up shares in a company that can help their goals, read on for all the key details.
Image Source: Motley Fool.
Brewing up long-term profits for millennials
Sean O'Reilly (AB InBev): To reach their retirement goals millennial's have no easy task ahead of them. But it is no more difficult than the financial experiences of previous generations. Living below one's means, investing for the long-term, and focusing on quality companies are sure ways to make one's retirement goals a reality. To help my fellow millennial's get started in achieving these dreams, I submit a top stock to own for the long term: AB InBev. We all know that millennials are craft beer fans, but there is more to in BUD stock than its portfolio of over 200 beers.
AB InBev is the product of a string of mergers that culminated in October 2016. It was then that AB InBev completed its merger with South African brewing giants SAB Miller. Though this deal was expensive at over $100 billion, it solidified BUD's status as the world's dominant brewer. According to Euromonitor, it holds 28% market share of all beer sales globally. But that is just part of the story. BUD possesses dominant, and often monopolistic, market share in dozens of countries including Brazil, South Africa, and Mexico. Even in the US, it has a 45% market share. Revenue grew 5% year-over-year in Q2 2017 while total volumes increased just 1%–proof that the company has pricing power. AB InBev is not only benefitting from demand for its beer but operational improvements as well. Cost savings from the SAB Miller acquisition are coming in above what was initially estimated. EBITDA for the three months ended June 30, 2017, leaped 11.8% and helped profits rise to $1.87 billion.
AB InBev has a strong foothold in an industry that millennials hold close to their hearts. With a 3% dividend yield to top it all off, AB InBev is a stock sure to reward millennial's for decades to come.
Millennials value experiences over ownership
Matt Frankel (EPR Properties): As the millennial generation starts to reach its peak-earning years, the evidence is showing that this demographic prefers spending its money on experiences, rather than simply buying things. One excellent way for millennials to invest in their own generations’ spending preferences is with real estate investment trust EPR Properties.
As of the latest quarter, EPR owns 378 properties in three main segments – entertainment, recreation, and education. The entertainment properties makeup 43% of the total net operating income, and primarily consist of megaplex theaters. Recreation properties, such as golf complexes (Topgolf is one of EPR’s major tenants), ski parks, and water parks make up another 32%, and education properties like charter schools, private schools, and early childhood education centers make up 22%.
The portfolio – particularly the recreation and entertainment segments – has grown rapidly in recent years. In fact, the company has invested a total of $3.1 billion in properties in just the past five years.
EPR Properties pays a 5.9% dividend yield which is well-covered by the company’s funds from operations (the REIT version of earnings). The combination of this high level of income and the growth that can result from the company’s property portfolio increased in value can produce excellent returns over time, and could certainly help millennials achieve their investing goals.
A stealth e-commerce play
Brian Feroldi (Manhattan Associates): Millennials have grown up accustom to shopping for stuff online, which is a trend that I don't see reversing itself anytime soon. However, it is a huge logistical challenge for retailers to provide consumers with an on-demand, omnichannel shopping experience. That's why many of them turn to Manhattan Associates for help.
Manhattan Associates offers a specialized software platform that thousands of retailers, wholesalers, and governments use to manage all of their behind the scenes logistics. The company's platform helps with things like ordering, inventory management, tracking, shipping, analysis, and more. Giving the complexities of managing a multi-channel distribution network, perhaps it is no surprise to see that business has been booming for decades.
MANH Revenue (TTM) data by YCharts
The company's long-term growth has translated into huge gains for long-term investors, but the recent retail funk has caused Manhattan's growth rate to slow. As a result, shares have pulled back sharply from their all-time highs, which has the stock trading at a tempting valuation. The stock is currently trading around 25 times next years earnings estimates. I'd argue that's a great entry price for a business that cranks out profits and has a strong tailwind at its back.
