In this article, we take a look at 10 best stocks to buy for an 18 year old. If you want to see more best stocks to buy for an 18 year old, go directly to 5 Best Stocks to Buy for an 18 Year Old.
The broader stock market has declined substantially in bear markets.
During the Great Recession, for example, the S&P 500 declined almost 57% from its peak in 2007.
Nevertheless, the market has risen over the long term. The S&P 500 is more than double its 2007 peak for instance.
Given they are young, many 18 year olds have the advantage of being long term investors. As a result, they can have longer holding periods.
With longer holding periods, the broader market benefits from population growth and productivity growth. With more population, there are more consumers and potentially more demand for products and services. With more productivity growth, more products and services could be produced in total.
Over the long term, the broader market also benefits from factors such as companies buying back their stock. If a company buys back its stock and doesn’t issue any new ones, a company’s EPS could rise even if its earnings stays the same.
In terms of the best stocks to buy for an 18 year old, the best stock to buy is probably a popular low cost S&P 500 index fund like SPDR S&P 500 ETF Trust (NYSE:SPY).
Not only is there built-in diversification with SPDR S&P 500 ETF Trust (NYSE:SPY), but there is also relatively low fees involved.
According to the ETF, SPDR S&P 500 ETF Trust (NYSE:SPY) has a gross expense ratio of 0.0945%. In terms of the fund characteristics, the ETF has as of February 14, an estimated 3-5 year EPS growth ratio of 11.86%, a price to cash flow ratio of 14.22, and a price to earnings ratio of 20.72.
If the SPDR S&P 500 ETF Trust (NYSE:SPY) isn’t an option, the best stocks to buy are arguably quality blue chips with substantial competitive advantages and wide moats.
With competitive advantages such as strong brands and substantial scale, the companies could find it easier to maintain or grow their profitability through market cycles than companies with less of a competitive advantage.
Given some companies underperform even when they have many competitive advantages, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
In terms of the stocks to own in the future for an 18 year old, big tech blue chips that trade for fair valuations and that also have potential growth opportunities in AI are potential candidates for investment as well.
Photo by Sunrise King on Unsplash
Methodology
For our list of 10 Best Stocks to Buy for an 18 Year Old, we chose 10 stocks with substantial competitive advantages and wide moats. We ranked them based on their market capitalization as of 2/15.
For those of you interested, check out 15 Most Profitable Dividend Stocks.
10 Best Stocks to Buy for an 18 Year Old
10. BlackRock, Inc. (NYSE:BLK)
Market Capitalization as of 2/15: $108.45 billion
Although it might have the smallest market capitalization on our list, leading asset manager BlackRock, Inc. (NYSE:BLK) is still a giant given its AUM of $8.594 trillion as of Q4 2022. From 2016 to 9/30/21, the company has increased its AUM 86% and there is more AUM growth potential in the next 10 years given the continued capital inflows. If BlackRock, Inc. (NYSE:BLK) grows its AUM over time, the company’s normalized earnings potential could also increase over time. For full year 2022, the company had adjusted EPS of $35.36 and the company returned $4.9 billion to shareholders including $1.9 billion in share repurchases.
Alongside Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), BlackRock, Inc. (NYSE:BLK) is a stock with substantial competitive advantages that could be a candidate for investment for an 18 year old.
9. The Home Depot, Inc. (NYSE:HD)
Market Capitalization as of 2/15: $326.84 billion
The Home Depot, Inc. (NYSE:HD) is the world’s largest home improvement retailer with third quarter fiscal 2022 sales of $38.9 billion. For the period, The Home Depot, Inc. (NYSE:HD)’s overall comparable sales rose 4.3% year over year with comparable sales in the United States rising 4.5% year over year. For fiscal 2022, the company sees comparable sales grow of approximately 3%, operating margin of approximately 15.4%, and diluted earnings per share percent growth of mid single digits. Given its substantial scale, The Home Depot, Inc. (NYSE:HD) has higher margins than many of its competitors and the company also has a dividend yield of 2.37% as of 2/15.
8. Walmart Inc. (NYSE:WMT)
Market Capitalization as of 2/15: $395.27 billion
Leading retailer Walmart Inc. (NYSE:WMT) ranks #8 on our list of 10 Best Stocks to Buy for an 18 Year Old given its market capitalization of $395.27 billion as of 2/15. In its third quarter of FY2023, Walmart Inc. (NYSE:WMT)’s total revenue rose 8.7% year over year to $152.8 billion and the company also earned an adjusted EPS of $1.50, up 3.4% year over year. In terms of EPS estimates, analysts expect Walmart Inc. (NYSE:WMT) to earn $6.08 per share in 2023, $6.53 per share in 2024, and $7.14 per share in 2025. As of 2/15, the company has a forward P/E ratio of 22.55 and a dividend yield of 1.53%.
7. Johnson & Johnson (NYSE:JNJ)
Market Capitalization as of 2/15: $416.67 billion
Johnson & Johnson (NYSE:JNJ) is a healthcare conglomerate that has raised its annual dividend for 61 straight years through multiple recessions. For full year 2022, Johnson & Johnson (NYSE:JNJ)’s worldwide sales rose 1.3% year over year to $94.9 billion, with U.S. sales rising 3% year over year to $48.6 billion. Adjusted EPS was $10.15 in 2022, up from $9.80 in 2021. As of 2/15, Johnson & Johnson (NYSE:JNJ) has a forward P/E ratio of 14.59 and a dividend yield of 2.84%.
6. JPMorgan Chase & Co. (NYSE:JPM)
Market Capitalization as of 2/15: $421.79 billion
JPMorgan Chase & Co. (NYSE:JPM) is one of the big four American banks with a market capitalization of $421.79 billion as of 2/15. For its fourth quarter, JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon said, “JPMorgan Chase reported strong results in the fourth quarter as we earned $11.0 billion in net income, $34.5 billion in revenue and an ROTCE of 20%, while maintaining a fortress balance sheet and making all necessary investments. This robust earnings generation combined with the execution of our capital strategy allowed us to exceed our CET1 target of 13% one quarter early, and we have the ability to resume stock buybacks this quarter, as we deem appropriate. Looking further ahead, we still await details of the Basel III finalization package, but we will manage to the new requirements as we have demonstrated in the past.”
As of Q4, JPMorgan Chase & Co. (NYSE:JPM)’s book value per share also increased to $90.29, up 3% year over year. Tangible book value per share was $73.12, up 2% year over year.
Like JPMorgan Chase & Co. (NYSE:JPM), Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL) are stocks with substantial competitive advantages that could be investment candidates for an 18 year old.
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Disclosure: None. 10 Best Stocks to Buy for an 18 Year Old is originally published on Insider Monkey.