Picking “the best stock” to own is like asking the general manager of a professional sports team who is the best athlete to take in this year’s draft. Well, first of all, what sport are we talking about? And second, what needs does the team have? The GM of a baseball team in need of a shortstop will have a different answer than the GM of a basketball team who is one point guard short of winning a championship.

We have analyzed hundreds of stocks, and while no stock is the best stock for everyone, we have put together this list of three stocks that will work for just about anyone’s portfolio. These companies all have healthy balance sheets, a competitive advantage and are run by teams with a proven history of success.

NVIDIA Corp. (NVDA)

The first one is California based chip designer Nvidia. Demand for their profitable gaming, data center, and graphics chips are extremely high. The stock did sell off about 7% after their last quarterly earnings report, but that was because fears of a Russian invasion of Ukraine were particularly salient on that particular day and traders are so accustomed to huge earnings beats by Nvidia over the years that it has gotten almost impossible for Nvidia to impress the day traders.

Last quarter’s revenue was $7.64 billion, up 53% from last year, and they projected a revenue of $8.1 billion for the first quarter of 2023. They have a clean balance sheet and have clearly been the leaders in the industry for years.

What we love most about Nvidia is how it has positioned itself to be the number one chip designer that will build the Metaverse, or Omniverse as Nvidia CEO Jensen Huang calls it. This already spectacularly profitable company is still positioned for massive growth for many years to come.

Morgan Stanley (MS)

The second stock we like for 2022 is the Wall Street mainstay Morgan Stanley. What we like best about Morgan Stanley is their recent acquisitions of E-Trade and Eaton Vance. Both of these acquisitions increase Morgan Stanley’s exposure to recurring and fee-based revenue streams. This will lead to MS trading at a higher price to earnings and price to book ratio. Increasing profits coupled with multiple expansion leads to explosive stock growth.

The recent pullback in the market as a whole has put Morgan Stanley’s dividend yield at right around 3%, which when coupled with their $3 billion per quarter buyback program, we believe puts a floor in the drop at its current price of around $93 per share. At this price, this safe and well established company will fit in anyone’s portfolio with years of solid growth potential ahead of it.

Deere & Company (DE)

The third stock we like is Moline, Illinois based industrial Deere. You may think of John Deere tractors as the green and yellow machines that have been planting, plowing and harvesting the fields in the American midwest for over a century. While that is true, this company has put on a masterclass of how to grow and adapt to the changing times.

Make no mistake about it, the John Deere of the 21st century is a tech company as much as a manufacturing company. We know Tesla is working on autonomous vehicles, but Deere has perfected that technology for their products years ago. If you see one of Deere’s signature tractors out planting or harvesting a field, the farmer is just as likely to be sitting behind a laptop in an air conditioned office operating a half dozen other tractors as he is sitting behind the steering wheel wearing a pair of overalls. Autonomous tractors are here and Deere without question is the industry leader.

The mindblowing tech doesn’t stop there either. They are using GPS and AI to, for example, program their rigs to apply fertilizer accurately to within inches of where it needs to go to cut down on waste and runoff. Deere is well worthy of investment among the ESG crowd.

In addition, Deere has plenty of macroeconomic tailwinds going for it. Commodity prices are high giving farmers plenty of cash flow to invest in new equipment, plus due to the pandemic, there is about a two year backlog in expected growth.

There is a little more debt on their balance sheet than we would like to see, but that is a common issue with industrials with heavily cyclical business models. They recently announced a very solid quarter with positive guidance.

The stock did not move much on the news of its better than expected quarter and positive guidance. This was likely due to fears of an impending war between Russia and Ukraine. While about 2% of Deere’s revenue comes from Russia, the stock is trading much lower than it should be, and can quite easily see a dramatic rise in the short term.

Summary

While few stocks are right for everyone, and even the surest bet can sometimes go sour, when a company has a solid balance sheet, a profitable business model, and a proven management team that is optimistic about the future, those are almost always great buys. Regardless of the current economic conditions, whether bleak or promising, stocks like that can always be found if you know how to look.

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