Top Blue Chip Stocks For 2019

 Some might ask, why are you investing so prudently now? Most investors say they want to build the biggest nest egg they can to fund the best possible retirement when that time comes. Once that day arrives, then they’ll change their portfolio to focus less on growth and more on income.

The irony is, the stable stocks best suited to reliably fund a retirements are largely the same stocks you should arguably already own leading up to your retirement; consistency is crucial as you chip away at your financial goals.

To that end, here’s a run-down of retirement stocks you should probably already own even before you make working at a job a thing of the past. Separately or collectively, they provide a nice balance of growth and income, as well as a comfortable balance of risk and reward.

In most cases dividend — and dividend growth — is in the cards, yet not necessarily at the expense of capital appreciation as well. You’ll need that too, as inflation can and often does outpace market-wide dividend yields.

Top Blue Chip Stocks For 2019: Netflix, Inc.(NFLX)

Netflix, Inc. (NASDAQ:NFLX) was the star of the show after earnings, surging 9.6% to a new record high, eclipsing its early March levels, thanks to better-than-expected Q1 results, upside guidance and a slew of analyst upgrades. Revenues rose more than 40% from a year ago on the addition of 7.4 million new subscribers globally vs. the addition of just under 5 million last year.

When the company last reported on Jan. 22, earnings of 41-cents-per-share matched estimates on a 33% rise in revenues.

Top Blue Chip Stocks For 2019: Pepsico, Inc.(PEP)

Many investors sifting through the markets looking for perfect dividend stocks for retirees are probably after stable companies with track records of solid dividend growth. If that describes what you’re seeking, look no further than PepsiCo, which has a slew of incredibly powerful brands, and a long history of raising its payouts.

In addition to its namesake Pepsi line, the company has 22 brands that generate over $1 billion apiece in annual revenue, including Gatorade, Mountain Dew, Tropicana, Quaker, Lay’s, Doritos and Cheetos. Currently, PepsiCo dishes out $0.805 per share quarterly for a yield just under 3% — and, incredibly, 2017 marked the company’s 45th consecutive annual dividend increase.

Another factor that should appeal to retirees looking for income stocks is that PepsiCo has a wide competitive moat due to its intangible assets, cost advantages and brand power. Because it has so many billion-dollar brands, it has strong relationships with distributors and retailers. Those brands will continue to bear fruit for Pepsi as the company funnels significant resources into growth with new innovative products and creative advertising, such as its recent partnership with Yankees outfielder Aaron Judge.

There’s no question consumer tastes in the U.S. are trending toward healthier products, and Pepsi understands the challenges it faces on that score. Among its plans, it has set a target of reducing the amount of sodium in 75% of its global foods portfolio to 1.3 mg or less per calorie. But given its strong brands and long history of dividend growth, if Pepsi can adapt to healthier food trend, it should remain a great income stock for retirees.

Top Blue Chip Stocks For 2019: Texas Instruments Incorporated(TXN)

Although you might recognize the brand because of its calculators, Texas Instruments is actually one of the leading suppliers of advanced semiconductors in the world. Its Embedded Processors make it a budding Internet of Things play, while its Analog solutions ensure it remains a diversified chip leader. TXN is currently sporting a Zacks Rank #1 (Strong Buy).

The company just posted adjusted earnings of $1.21 per share, surpassing the Zacks Consensus Estimate of $1.11 per share. This has already inspired positive estimate revisions, and the firm’s outlook now looks stronger. EPS growth is now expected to reach 26.4% this fiscal year. Plus, the stock is trading at a reasonable 19x forward 12-month earnings.

Top Blue Chip Stocks For 2019: HubSpot, Inc.(HUBS)

Lewis: All these businesses that we’re going to be talking about today check all these boxes. Why don’t we first start talking about this company HubSpot?

Feroldi: Sure. I have a question for you. When is the last time, Dylan, that you answered a cold call, opened up a letter in the mail, or watched a TV commercial, and you actually changed your buying behavior?

Lewis: I will tell you that I get a cold call every single day. You get those phone calls that, it’s your area code, and some telemarketer or some automated telemarketer is sending you some garbage automated message, and I’ve learned to just block every single one of them. So, never, to answer your question. [laughs] 

Feroldi: And that’s the world that we’re living in today. For decades, the traditional way that companies founded new businesses is, they would advertise with spots on TV and spots on the radio. But consumers really hate to be interrupted. That’s why they use caller ID, to make sure they never pick up a phone call that they don’t recognize. Or, they use DVR to skip TV ads. Or, they put their phone number on Do Not Call lists. These realities are making it harder and harder for companies to shout out their message to their consumers that they want to reach.

In response to that, this company called HubSpot basically is taking the traditional marketing playbook and flipping it on its head. They’re pioneering a strategy that they call inbound marketing. And the idea there is, don’t spend all your time, money and energy shouting at people and interrupting people to get them to learn about your product. Instead, try to create easy-to-use content like blog posts, like videos, so that when people are searching for a product or service like the one you’re offering, that you are easy to find. The idea is to put out blog posts that are helpful, that people will actually want to read naturally when they have a problem, and to essentially get people to come to you when they have a need.

Lewis: So, instead of blasting a message, you’re creating these organic "outreach," because the people are actually coming to you, experiences with potential customers.

Feroldi: Exactly. And think about your own shopping. When you have a problem, and you’re interested in learning about a new product, what’s the first thing that you do?

Lewis: Search it on Google. 

Feroldi: Exactly. You type in the problem to Google, or maybe you go to YouTube and look at a video for how to solve it. That’s exactly what HubSpot does. They offer tools that help companies to grow their social media presence, or to rank highly in search engine optimization, and to really put out free-to-consume content that builds up their brand and helps them to build trust with customers, so that when they are actually ready to buy, they’re already familiar with the company. This has proven to be hugely impactful for getting new customers to come onto the brand.

Lewis: It sounds like a business that rides the tailwinds of e-commerce and digital marketing very well, too.

Feroldi: Absolutely. And HubSpot’s target market is, they’re going after businesses that have between 10 and 2,000 employees, so they’re going after the small companies that don’t traditionally have the huge budgets.

Lewis: So, they’re kind of a fix for resource-poor companies, basically. [laughs] It’s nice to be a one-stop-shop. And that’s actually something we’re going to see with a lot of these businesses we’re going to talk about, is, you have a provider that makes it really simple to do something that you would have an entire department do if you were a larger company.

Feroldi: Absolutely. HubSpot sells using a software-as-a-service or SAAS model. Customers come on and they subscribe, and they can use all kinds of tools to help manage, basically, that filter process that brings new customers into their business. 

And these guys are growing like crazy. They currently have over 41,000 customers that have signed on to their platform, and the average customer spends over $10,000 per year with HubSpot, so that translated into about $375 million in revenue last year. So, these guys are just growing like crazy, and companies everywhere are really signing onto their platform.

Lewis: And that growth comes at a price, and we’ll see that with all these companies we talk about. I think they’re a roughly $4.5 billion company right now. So, you think about that, that’s a little bit more than 10X sales.

Feroldi: Yes.

Lewis: And that’s what you’re going to pay for these very scalable businesses that are growing very quickly.

Feroldi: Absolutely. And these guys are growing like mad, and they’re absolutely in build-out mode. HubSpot only recently became profitable and cash flow positive because they were investing everything that they earned back into the business to scale out their platform. But, I’m personally interested in this business because they are free cash flow positive, so, they’re no longer consuming cash at the rate that they once were. Their co-founders are still highly involved in the business. In fact, they’re the CEO and CTO. Their company culture just gets rave reviews on review sites like glassdoor.com. 

And while they’ve already grown like mad, and investors have already done very well by buying into the company after the IPO, the company thinks that its total addressable market is about $45 billion annually. You compare that to the $375 million that they pulled in last year and the tailwinds that they’re riding, and I think this business can grow very, very quickly for years to come.

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