As with all things investing, there’s no hard and fast rule regarding which companies should form your core portfolio stocks. Still, for most retail investors with sufficiently long investment periods, a handful of commonalities should form the backbone of your search for core portfolio stocks. If you research each of these companies enough, you’ll notice a handful of those themes popping up. But, at a high level, these potential core portfolio stocks combine a proven operational methodology that’s led to plenty of growth, sufficiently strong financial positioning, and enough visible upside potential moving forward to make long-term capital appreciation a compelling prospect.
Sharkninja (SN)
Staking your core portfolio stocks with a consumer discretionary stock €” let alone an appliance manufacturer €” may not seem the best move, considering the sector’s relative instability in light of shaky economic conditions. But Sharkninja (NYSE:SN) consistently bucks that trend to the point where the company’s sales have grown at a 20% compounded annual growth rate since 2008, weathering plenty of stormy market conditions in the meantime.
Listed on public exchanges just last summer, shares already returned 77% to early investors (more than 3x the S&P 500’s performance over the same period), and there’s little indication that the company’s momentum is slowing soon. The company’s most recent quarterly report includes a 25% sales spike, which is particularly notable considering blue-chip retailers like Target (NYSE:TGT) saw significant sales slumps. Overall, Sharkninja’s strong consumer market positioning and wide-ranging product line make it an easy pick among core portfolio stocks today.
Markel Group (MKL)
Markel Group (NYSE:MKL), an insurance company, may seem a strange pick considering the sector’s typically tight margins, even as they can reap the rewards of high short-term bond yields with their considerable cash floats. But there’s more to Markel Group €” a lot more.
Some call Markel Group a “Baby Berkshire Hathaway” (NYSE:BRK-A, NYSE:BRK-B), with good reason. The company’s CEO, Thomas Gayner, is running the insurance company along the same lines as Warren Buffett runs Berkshire, that is, using the firm as a large holding company That uses “underwriting profits to invest in equity, via both publicly traded stocks and ownership stakes in private companies.” It seems to be working, too €” Gayner and Markel’s “Baby Berkshire” structure returned 475% over the past 20 years, compared to the S&P 500’s 370% gain over the same period.
Though shares seem steep, much of the industry’s bearish analysis focuses on Markel’s core sector €” insurance underwriting €” rather than acknowledging Gayner’s unconventional approach to operational actions. This means that if you take Gayner’s historical performance at face value and think it has legs moving forward, shares are grossly undervalued, considering its long-term potential upside.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT), the final pick for long-term core portfolio stocks, blends the best of multiple worlds: smart money management, plenty of long-term upside, and forward-thinking management that still knows how to innovate despite the company’s size €” unlike Google (NASDAQ:GOOG, NASDAQ:GOOGL).
Microsoft’s intelligent positioning within the wider AI world will likely greatly benefit the company moving forward. Even if you’re skeptical of the wilder AI claims, as I am, there’s little doubt that the tech threatens legacy search engines while offering a new range of productivity tools to complement and boost Microsoft’s existing software suite. Microsoft’s strategic investment in the top AI firm by a mile, OpenAI, means that they have a front-row seat and default early entrant positioning to begin building whatever the next “big thing” may be.
Ultimately, we’re in a position similar to the early 2000s, where search engine tech was around the corner, but no one recognized the tool’s massive potential nor how it could turn massive profits over time. And no public company is as well-aligned with that future potentiality as Microsoft.
On the date of publication, Jeremy Flint held a long position in Markel Group. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.