There is no better vehicle for creating generational wealth than investing in stocks. They have performed better than gold, bonds, real estate, and even cryptocurrency. While over short periods of time one asset class or another may outperform stocks, the long-term results prove that if you want to accumulate large amounts of wealth, investing in stocks is the way to go.
A Deutsche Bank study showed that over the past 100 years, equities beat out gold by 5.6% per year, housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
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It's clear that if investors want the best chance of enjoying a comfortable retirement, investing in stocks -- and staying in the market for the long haul -- is the way to go. That's why the nugget of investing wisdom that says "it's not about timing the market, but your time in the market" is so true.
If you have $1,000 to put to work today, the following pair of winning stocks have the potential to pay off over the years and decades to come.
Alibaba
Chinese e-commerce giant Alibaba (BABA 0.79%) has suffered due to no real problem of its own making, but rather the draconian response of Beijing to the COVID-19 pandemic. During the lockdowns in China, consumers were often prevented by government rules from ordering food and other items to their homes.
Chinese consumers have come to shop online for many of their daily needs every bit as much as their counterparts in the West, and on Alibaba's platform they have been readily able to find almost everything they're looking for. It's how Alibaba has grown to be the largest e-commerce platform with over 900 million active Chinese consumers.
But it also serves other countries as well, including the U.S., and has branched out into other verticals such as local consumer services, digital media and entertainment, logistics, and perhaps most importantly, cloud services.
Very much like its U.S. counterpart Amazon, Alibaba has become more than just an online retailer, and it views the cloud as "the biggest opportunity of our time." Its cloud service business became profitable in 2021 for the first time since it was launched 13 years ago. Alibaba is also gearing up to delve deeper into the industrial internet sector with DingTalk, its communication and collaboration platform used by 5 million enterprises and organizations globally.
While the Chinese economy is slowing with retail sales, industrial output, and housing all weakening, the relaxation of Beijing's zero-tolerance COVID policies should help ease the constraints Alibaba and others have felt.
But the long-term growth story is what's more important -- even with the stock up 80% from the lows it hit last fall, shares are still a third of their all-time high and Alibaba remains a good turnaround story with a long runway of opportunity.
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McCormick
If you've ever cooked anything more than ramen noodles, there's a good chance you're intimately familiar with the next company to consider putting into your portfolio. McCormick (MKC 1.05%) is the spice and seasonings king, with an extensive portfolio of flavorings and condiments for food and beverages. Along with its name-brand spice rack, it also owns popular mustard brand French's, Frank's RedHot, Old Bay seasoning, Lawry's, Zatarain's, and more.
McCormick stock is down 12% over the past year due to the effect of inflation on its margins, but also because of the ongoing impact of the significant debt it took on to acquire the food business of Reckitt Benckiser (which brought French's, Frank's, and other brands into the fold). While it's been steadily paying it down, the spice maker still has $3.9 billion in long-term debt and $1.5 billion in short-term borrowings, with just $343 million in cash.
Even with the stock off over the past 12 months, McCormick isn't your classic bargain-bin business. It still carries a premium valuation that you would expect from a leading global brand, and it typically never offers much of a discount. So why buy now?
McCormick is a solid, dividend-paying company. It has provided a payout every year since 1925 -- and for the past 37 consecutive years, it has increased that payout. There are only a few dozen companies with a similar track record. And with a payout ratio of 52% (the amount of profits paid out to shareholders as dividends), there is a good measure of safety as well as room for future growth. The dividend yields 1.9% annually.
An income-producing stock provides good ballast for your portfolio when times get tough, and is a steady performer when the clouds clear. McCormick could be what you need to give your portfolio that bit of zest.
