On Wall Street, finding the right long-term wealth-building stocks is key to enhancing your investment portfolio. As 2024 progresses, investors are focusing on growth strategies that balance risk and reward. Wall Street’s history highlights long-term stock investing as crucial for financial success.
McKinsey advises against being swayed by short-term market noise, stressing the importance of stability and steady returns. The S&P 500‘s mean annual return of 9% (including dividends) from 1996 to mid-2022 illustrates the benefits of a long-term perspective. When evaluating stocks for portfolio diversification, investors should ideally look for stability, strong financial health and consistent dividend growth when applicable.
Here are three of the best long-term wealth-building stocks, offering promising opportunities even amidst market volatility.
Cisco Systems (CSCO)
First up on our list of long-term wealth-building stocks is the global communications equipment industry leader Cisco Systems (NASDAQ:CSCO). The company designs, manufactures, and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology industry.
In May, the communications equipment giant reported mixed financial results for the third quarter of fiscal year 2024. Total revenue of $12.7 billion meant a 13% year-over-year (YOY) decline. Net income slid 14% YOY to $3.6 billion, while EPS dropped 12% YOY to 88 cents. Despite the decline in revenue and net income, Cisco’s results exceeded their guidance, with strong margins and stabilization of orders.
Despite challenges, Cisco is strategically investing to enhance its artificial intelligence (AI) strategy. In late May, Lenovo (OTCMKTS:LNVGY) and Cisco announced a global partnership to deliver integrated infrastructure and networking solutions, advancing AI capabilities and digital workplace solutions. In June, Cisco joined other firms in investing in Canadian startup Cohere, part of a $1 billion global AI fund.
CSCO stock has declined more than 6% year-to-date (YTD) but offers a 3.4% dividend yield. The shares are trading at 13.8x forward earnings and 3.6x sales. Analysts have set a 12-month median price target of $53.00 for CSCO, signaling a 12% upside potential from current levels.
United Parcel Service (UPS)
Logistics and package delivery company United Parcel Service (NYSE:UPS) is the next name among our long-term wealth-building stocks. UPS operates through two primary segments: US Domestic Package and International Package.
On July 23, UPS reported subpar second-quarter results due to a decrease in average daily package transactions globally.Consolidated revenue declined 1.1% YOY to $21.8 billion, while consolidated operating profit declined 29.3% to $2.1 billion. Adjusted diluted EPS also dropped 29.5% YOY to $1.79.
Nonetheless, the company’s strategic initiatives and a 5% dividend yield make it an appealing long-term investment for patient investors. UPS plans to acquire Estafeta to enhance its position in Mexico’s manufacturing boom. Moreover, the new healthcare facility in Dublin, Ireland, and expanded ultra-cold storage in Roermond, the Netherlands, solidify UPS as a leading complex healthcare logistics provider.
So far in 2024, UPS stock has lost nearly 17%. Currently, the shares trade at attractive valuations of 17.1 times forward earnings and 1.3 times sales. Wall Street remains optimistic for UPS stock, projecting a 12-month median price forecast of $144, suggesting a potential 13% upside.
The Health Care Select Sector SPDR Fund (XLV)
Rounding out our discussion is the Health Care Select Sector SPDR Fund (NYSEARCA:XLV). This exchange-traded fund (ETF) tracks the overall performance of the Health Care Select Sector Index. By investing in XLV, investors gain exposure to S&P 500 companies engaged in the pharmaceuticals, health care, biotechnology, and life sciences industries.
Since its inception in December 1998, the fund’s net assets have grown to nearly $41 billion. It holds 63 stocks, with the top 10 comprising about 57% of the portfolio. Sector allocations include pharmaceuticals (30.6%), healthcare providers & services (22%), healthcare equipment suppliers (19.3%), and biotechnology (16.8%). Leading holdings are Eli Lilly(NYSE:LLY), UnitedHealth Group (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and AbbVie (NYSE:ABBV).
Since the beginning of the year, XLV has advanced more than 10%. Over the past 10 years, it has achieved a compound annual return of 10.9%. The ETF currently trades at 20.9x price-to-earnings (P/E) and 5x price-to-book (P/B) multiples. Given the significance of the sector in our lives, we’re optimistic about XLV’s future prospects. Interested investors should also note the current 1.5% dividend yield and a low expense ratio of 0.09%.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.