It pretty much goes without saying that things change, and they can change fast. Apple introduced the first smartphone a short 11 years ago, and now they are ubiquitous. Many of our current technologies are less than 20 years old. The key to investing, especially for long-term buy and hold accounts, is to buy companies that will still be as relevant, if not more so, in the future.
In a fascinating new research work, the analysts at RBC put together what they are calling the IMAGINE 2025 Portfolio, with the title of the work being Themes, Opportunities and “The Law of Accelerating Returns.” The firm went to their analysts all around the globe for input, and the report noted this:
Our IMAGINE 2025 research report was an unprecedented collaboration across the RBC Capital Markets Global Research department to identify the themes and opportunities across sectors we believe will become the norm by 2025. Our process was brought full circle by asking our global analysts to identify the public companies under coverage they felt were positioning most boldly and effectively for the future based on our futures framework. The result? Our Imagine 2025 Portfolio. We believe the following names, across geographies and sectors, are best positioned to outperform over a seven-year time horizon through 2025.
RBC had selections in seven different sectors, we selected one from each. We made sure they all traded on American exchanges.
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Global Industrials
Northrop Grumman Corp. (NYSE: NOC) was ranked as one of the top five defense contractors by sales last year. The company provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide.
The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.
The Information Systems segment offers advanced solutions for Department of Defense, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.
The Technical Services segment provides logistics, modernization, and sustainment services; and other advanced technology and engineering services, including space, missile defense, nuclear security, training, and simulation services.
Shareholders receive a 1.34% dividend. The Wall Street consensus price target is $372.06, and the shares closed trading on Tuesday at $315.12.
Global Technology
Alphabet Inc. (NASDAQ: GOOGL) continues to expand and is even working on a driverless car now. This global technology company is focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The consensus price target is $1,270.32. The shares closed Tuesday at $1,167.14.
Global Financials
Shares of JPMorgan Chase & Co. (NYSE: JPM) trade at a very reasonable 11.3 times estimated 2019 earnings and could also respond well in a rising rate scenario. One of the leading global financial services firms and one of the largest banking institutions in the United States, it has about $2.6 trillion in assets. The company as it is today formed through the merger of retail bank Chase Manhattan and investment bank JP Morgan.
The firm has many operating divisions, including investment and corporate banking, asset management, retail financial services, commercial banking, credit cards and financial transaction services. Earnings were outstanding, and the analysts remain very positive on the shares for the balance of 2018.
JPMorgan investors receive a 2.02% dividend. The consensus price target is $121.02. The shares closed Tuesday at $106.62.
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Global Health Care
Gilead Sciences Inc. (NASDAQ: GILD) share traded a very reasonable 10.6 times estimated 2018 earnings. This biopharmaceutical company discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The recent acquisition of KITE allows for entry into the CAR-T space, indicating a renewed focus in oncology.
The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
The consensus price target is at $85.96, and the stock closed Tuesday at $76.75 a share.
Global Telecom and Media
Walt Disney Co. (NYSE: DIS) is a top consumer media company and is hot in pursuit of the Fox media assets. Its stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming. Combining that revenue growth with the company’s solid media networks and interactive presence, and 2018 revenue estimates could be conservative.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations.
Disney shareholders receive a 1.58% dividend. The consensus price objective is $116.63, and shares closed trading at $106.03 on Tuesday.
Global Consumer
McDonald’s Corp. (NYSE: MCD) does a ton of business overseas and still remains a solid pick for investors seeking dividends and a degree of safety. The fast-food giant is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.
The company posted solid first-quarter results and shares took off, as menu price increases fueled the big earnings beat. Same-store sales in the United States grew 2.9%, in line with analyst expectations. Global same-store sales were also strong, rising 5.5% and topping estimates of 3.7%, as the number of customers coming through the door rose 0.8%.
McDonald’s shareholders receive a 2.53% dividend, and the consensus price objective is $186.69. Shares closed Tuesday at $160.62.
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Global Energy
Schlumberger Ltd. (NYSE: SLB) is expected to benefit from increased exploration and production spending. This top oil services company is the world’s largest provider of services and equipment used in drilling, evaluation, completion, production and maintenance of oil and natural gas wells. Revenues in 2017 totaled $30.4 billion, and EBITDA was $6.9 billion.
The company operates in the oilfield service markets through three groups: Reservoir Characterization, Drilling and Production. Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services and Schlumberger Information Solutions.
Shareholders receive a 2.88% dividend. The consensus price target is $78.66, and the stock ended Tuesday at $69.49.
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Seven top companies that RBC feels will still be very relevant in 2025, and the goods or services they provide potentially will become the norm across the globe. All are great picks for buy-and-hold portfolios.
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