While millennials may be the unluckiest generation for having witnessed and lived through multiple financial catastrophes – the tech bubble burst, the Great Recession and now the novel coronavirus pandemic – Generation Z may be the most fortunate. That’s because time and innovation have combined to give them a huge leg up regarding retirement stocks.
Currently, the oldest members of Gen Z have just graduated from four-year universities, while the youngest are in elementary school and looking forward to entering junior high. As such, they have a huge advantage regarding retirement stocks because they grew up knowing nothing but digitalization. And nowadays, it’s never been easier for people to participate in the investment market.
With apps like Robinhood and Webull, and a host of others, young people have unprecedented access to financial opportunities. Moreover, social media forums and video content platforms like YouTube have completely demystified trading and investing. For prior generations, the market was somewhat of an esoteric concept and many didn’t want to get involved because of losses associated with the tech boom-bust cycle and the 2008 financial crisis.
But collectively, Americans learned that the best time to get involved in the market is when sentiment hits rock bottom; in other words, be greedy when others are fearful and be fearful when others are greedy. Combined with access to the capital markets, Gen Z have an opportunity to build up their portfolio with retirement stocks.
Still, the question remains – which ones to pick? Though this topic is open to serious debate, I believe that younger people should focus on the companies that have relevant businesses that will continue to be viable in the years ahead. As with other forward-looking ideas, the key here is not to worry about nearer-term noise. Instead, these are companies that could be power players 30 to 40 years down the line.
With this context in mind, these retirement stocks may not look like your typical long-term play, but could end up being viable financial supporters when Gen Z hits their golden years.
- Amazon (NASDAQ:AMZN)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Facebook (NASDAQ:FB)
- Intel (NASDAQ:INTC)
- Coinbase (NASDAQ:COIN)
- Crown Castle International (NYSE:CCI)
- Exxon Mobil (NYSE:XOM)
Though Amazon doesn’t typically come to mind in terms of traditional retirement stocks, for those who belong in the Gen Z demographic, there’s a lot to like about AMZN stock. First, the e-commerce giant is very much growth oriented. Over the past five years, shares have generated a return of 440%. While monstrous gains are probably behind it, younger investors can expect continued robust gains.
Mainly, this is due to the role of e-commerce. Currently, online sales represent 14% of all retail sales. In my view, it’s all but guaranteed that this allocation will increase and substantially so. First, we saw during the worst of the novel coronavirus pandemic last year that e-commerce represented 16.1% of all retail sales. That was from one acute catalyst.
What happens when baby boomers retire and well, fade into the great beyond? We’ll be left with a population that largely relies on digital commerce, not analog commerce.
Plus, at some point, Amazon will be done vacuum cleaning all the industries it can potentially disrupt. Then, AMZN stock could pay out a dividend, which would make it one of the most viable retirement stocks of the future.
Alphabet (GOOG, GOOGL)
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Typical of many high-powered technology stocks, Alphabet does not pay a dividend nor has it ever in its history. That makes it not the greatest name to own for people who currently rely on retirement stocks to provide passive income. But if you’re a Gen Z investor looking to bolster your portfolio with companies that can support you in your older years, you should give GOOG stock a twirl.
Fundamentally, Alphabet’s Google umbrella speaks the language of the internet. It practically is the internet. From its now ubiquitous email service to its advertisement network to platforms such as YouTube, GOOGL stock is in many ways the perfect Gen Z investment. Heck, even the brand Google has become part of the cultural lexicon.
I’ve never heard anyone say Yahoo it and I probably never will.
Further, I don’t think it’s out of the question that at some point, Alphabet will pay a dividend. For now, the company is focused on growth. Initiatives like Kubernetes and the containerization of data are compelling innovations. However, with a trailing five-year performance of over 200%, its growth days may be fading. So, don’t be surprised if GOOG eventually makes up the ranks of traditional retirement stocks.
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While Facebook may not be the absolute favorite choice of Gen Z – that might belong to Snap (NYSE:SNAP) or TikTok – it still represents in my view the most viable among social media firms that could become future retirement stocks. Like the companies mentioned above, FB stock doesn’t pay a dividend. Indeed, the underlying firm never has.
Yet that could change a few years down the line. For one thing, FB stock has a similar profile to Alphabet shares. Over the trailing five years, FB has gained 177%. That’s a solid figure for sure but there are also publicly traded growth firms that have delivered that in one year. So it stands to reason that FB’s glory days of stunning annual returns are fading.
That doesn’t have to be the end of the story, though. Despite popular social media platforms that gravitate toward youth, Facebook has 2.8 billion monthly active users. That’s roughly 36% of the world population. If Facebook were a country, it would be the size of China and India combined.
It’s highly doubtful that FB will lose this dominant profile, but it’s days of stealing gobs of market share is declining. Instead, it’s reaching maturity, which makes it perfect as a future play on retirement stocks.
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Unlike the other potential retirement stocks on this list, Intel does pay a dividend. It’s not the greatest amount, with a forward annualized yield of 2.22%. Nevertheless, that’s a non-zero number, which is a lot more than I can say for its technology peers.
Now, the knock against Intel is that the company has made a series of blunders and inexplicable gaffes that have brought embarrassment to the iconic brand. Worse yet, competitors like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) have basically drawn and quartered INTC stock fundamentally. Like vultures, they’re swooping in and nibbling at Intel’s core revenue generators.
Admittedly, what terrifies many investors about INTC stock is that you can’t afford to lose too many steps in the tech and semiconductor space. As I just mentioned, the underlying company has looked like a basketcase over recent years.
Still, this could be an opportunity for forward-thinking investors seeking potential retirement stocks. I might not buy Intel today, but over the next few decades, this kick in the rear end could be just what the tech firm needs to get its act together.
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As much as I love Coinbase, I have big questions regarding its recent initial public offering. Being one of the most anticipated IPOs in the past two decades, many bullish analysts were throwing up incredible valuation figures. I’m not so sure.
First, cryptocurrencies are going crazy. While I can understand some of the bigger tokens receiving bullish support, we’re also witnessing absolute junk being bid up to the moon. It’s great that so many folks on social media want to pump up my speculation portfolio but my goodness; these outbursts of sentiment simply don’t last forever.
Second, Coinbase runs the risk of competition. When you get down to the brass tacks, it doesn’t offer anything special from anyone else. Plus, Coinbase will not shield you from the government. Basically, you can go anywhere for your crypto needs.
But when you’re talking about future retirement stocks, who really knows what could happen? I believe that investing in virtual currencies will be seen as akin to selecting companies from the Dow Jones – completely, utterly normal, perhaps even mundane. In that case, Coinbase could play a role as one of the future retirement stocks.
Crown Castle International (CCI)
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As a telecommunications play, Crown Castle International is what you would call one of the traditional investments among retirement stocks. Structured as a real estate investment trust, Crown Castle is the country’s largest provider of shared communications infrastructure. Currently, the company owns more than 40,000 cell towers and approximately 70,000 small cell nodes.
Further, the company leases its assets to some of the top wireless service providers and herein lies the bullish narrative. As a nation, we are addicted to our smart devices, but this rings especially true for Gen Z. According to one survey, “smartphones represent their primary screen for using the internet. They watch less TV per day, on average, than their cohorts in older generations.”
I find this to be nutty, but look — this is our new normal. Until we develop technologies where we implant smart devices into our brains, devices tethered to the connectivity industry will blossom. Mobile is basically the car radio of the 1920s – and that tech hasn’t gone anywhere.
I see the same permanent relevance for smart devices. Therefore, the smart play is to add CCI stock to your retirement portfolio, irrespective of your age.
Exxon Mobil (XOM)
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I don’t suppose that an article of mine would be complete without ruffling some feathers. But I’m certain that I’m going to take some heat for this. If you will, though, just give me a chance to explain myself before you fire off an angry email to my editor.
I’ve said in prior articles and other publications that electric vehicles (EVs) are the future. Chances are, this is the correct thesis. Nevertheless, it’s still a thesis. We don’t know what transportation of tomorrow will look like. You might hate me for saying this but I think we should at least explore the idea that combustion will be relevant for at least the next 100 years.
How in the flippity-flip of eternal perdition can I say this? Having looked at the applied science of EVs, it’s possible that we may have already reached the scientific limitations of charging capacity. For instance, even with supercharging, it’s going to be around 15 minutes to charge your EV – and one shouldn’t do that too often for risk of battery degradation.
In the fast-pace world that we live in, adding more time to our “refueling” process doesn’t seem to make much sense. It’s possible, though perhaps not probable, that society will get a reality check. If so, XOM stock could be a surprisingly positive retirement booster, even for the young.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.