This year has shown the potential benefit of investing in individual company stocks rather than buying passive tracker funds, as markets have been volatile while individual stocks like chipmaker Nvidia have rocketed.
Yet, buying direct equities is complex and nobody knows which ones will be the winners until afterwards.
Many investors shun direct equities as a result, but for those willing to take a chance, Mark Nelson, senior equity analyst at Killik & Co, has picked out five global companies that he expects to weather today’s uncertainty and generate strong returns.
Mr Nelson says investors are split as they wait to see whether inflation has been beaten and interest rates have finally peaked, yet these five should have staying power.
Are they the best five stocks in the world to buy today? Only time will tell.
1. The Walt Disney Company
As one of the most successful companies in the world, Walt Disney needs no introduction.
Yet, lately, its shares have shown all the animation of its live-action remakes of old classics, falling 0.13 per cent over 12 months and 22.25 per cent over five years.
This leaves it trailing New York’s S&P 500 index, which rose 9.88 per cent over the past year and 58.89 per cent over five years.
Mr Nelson pins this underperformance on concerns over Disney’s underwhelming legacy TV businesses, which include ABC and its stake in sports media business ESPN.
Selling these would help pay down some of Disney’s $45 billion debt, and signal to markets that it’s now a new media company rather than an old one.
Disney’s streaming service is the future. It lost $387 million in the fourth quarter but that’s a huge improvement on last year’s $1.4 billion loss. Mr Nelson says profitability now beckons.
The board is investing $60 billion into its theme parks and cruise line operations and these offer an even bigger opportunity.
“Disney’s domestic theme parks have exhibited strong historical results and are a crucial profit driver, with previous investments resulting in meaningful increases in park attendance and higher profits,” he says.
Expanding and enhancing theme parks based on popular franchises such as Frozen, Black Panther and Coco could also drive returns, Mr Nelson adds.
Cruise lines are an “under-appreciated bright spot” as their family staterooms mean the company can host more passengers per cabin than any rivals.
“This has led to double-digit returns on its previous cruise investments and with three new ships launching in the next few years, profits should grow,” he says.
Investing in Disney hasn’t been much fun lately. That could change.
Minnesota-based Ecolab offers water, hygiene and infection prevention services to help make the world cleaner, safer and healthier, and reduce energy, labour and water usage.
Investors have been cleaning up, too, with the share price rising a healthy 17.41 per cent over one year.
Over five years, it is up just 12.28 per cent, as pandemic lockdowns savaged its restaurant and hotel customers.
Then, when inflation took off, it struggled to pass higher input costs to customers.
Mr Nelson says Ecolab is regularly named one of the most ethical and sustainable companies in the world, and consistent product innovation has driven market share gains and revenue growth.
It is more than four times larger than its nearest competitor but accounts for only 10 per cent of a potential $152 billion global market, and should take a bigger share at the expense of smaller, less able competitors, Mr Nelson says.
The company's latest results show third-quarter sales were up 8 per cent to $4 billion year on year, with earnings per share up 18 per cent.
Mr Nelson says Ecolab is “back to winning ways”, with double-digit EPS growth anticipated over the coming years.
LVMH Moët Hennessy Louis Vuitton, or LVMH, is a family-run luxury goods specialist that boasts 75 brands including Bulgari, Dior, Givenchy, Guerlain and Tiffany & Co.
Yet, its shares have been out of style lately, crashing 20 per cent in the past six months.
They’ve edged up just 1.34 per cent over one year, but this may only be a temporary pullback as the stock has grown a dazzling 162.63 per cent over five years.
The “turbocharged growth” of the luxury sector has slowed as Chinese demand splutters, but Mr Nelson says the strength and heritage of LVMH's brands and the sector's high barriers to entry should drive growth as emerging market demand recovers.
Its shares are trading below their long-term average valuation, too.
“This represents an attractive entry point into a very high-quality, defensive business,” Mr Nelson says.
4. Schneider Electric
French multinational Schneider Electric specialises in digital automation and energy management and operates in more than 100 countries.
Mr Nelson says it’s a play on two long-term structural growth opportunities: decarbonisation and digitalisation.
Its shares have been red hot, rising 14.3 per cent over the past year and 151.06 per cent over five years.
The International Energy Agency calculates that to hit net-zero targets, electricity’s share of the overall energy mix needs to increase to 50 per cent by 2050 from 20 per cent, Mr Nelson notes.
“Schneider’s energy management business is the leading electrical franchise globally, helping customers to make the most of their energy and to accelerate their journeys to net zero,” he says.
Its industrial automation business should also grow as industries invest in automation to improve operating efficiencies, safety and sustainability.
“This growth will be supported by Schneider’s high-quality software businesses Aveva and OSIsoft,” he adds.
He sees Schneider Electric as a defensive stock, with high levels of cash generation, supporting healthy dividends and generous share buy-backs.
“It trades at an attractive valuation for a business that we believe can grow its earnings at a low double-digit growth rate over the medium term.”
This California-based financial software business is best known for its QuickBooks accounting software and TurboTax DIY tax preparation software but has a lot more to offer.
“These core businesses are now merely the base from which Intuit is building a much more ambitious business,” Mr Nelson says.
It is aiming to become a complete end-to-end technology platform covering customer acquisition, payments, capital provision, payroll, live expert advice and compliance.
“This way, it can retain small and medium-sized business customers as they grow and their needs become more complex.”
Intuit’s 2020 acquisition of consumer FinTech platform Credit Karma will also drive growth by building a one-stop shop for consumers to organise their finances, not just annual tax returns, Mr Nelson says.
Intuit should also benefit from the artificial intelligence revolution, as it holds a massive amount of tax and financial data.
“The new Intuit Assist generative AI platform can harness this data, driving more frequent and meaningful customer engagements, and reducing churn, while boosting average revenue per customer,” Mr Nelson says.
Intuit’s shares are up 30.05 per cent over one year and 143.34 per cent over five but Mr Nelson says there could be more to come as growth may exceed current forecasts “if it can execute on its exciting initiatives in AI”.
As with any stock, there are risks, so research any company carefully before buying and only invest as part of a diversified portfolio.
Aim to buy and hold for the long term to allow time for the share price and dividends to compound and grow.