Buy these 4 stocks for a market-beating portfolio

CNBC published an article in late August discussing some non-tech stocks that investors were buying in the final months of 2024. Not all investors are buying Nvidia (NASDAQ:NVDA) and naming it.

The article and accompanying video weren’t earth-shattering, but they gave me an idea for building a four-stock portfolio for market returns.

Since I first learned about Coffee box portfolioa concept first written about in 1984 by portfolio manager Robert Kirby—he served on Ronald Reagan’s Brady Commission that investigated the causes of the October 1987 stock market crash—I came to realize that some of the best portfolios are those with fewer, not more, stocks.

In his article in the Journal of Portfolio Management, Kirby wrote, “You can make more money being active passive than active passive.”

By selecting excellent stocks held for the long term, investors can be successful in being passively active.

Here is a portfolio of 4 stocks to test it out.

24/7 Wall Street Insights

• An equally weighted tech ETF makes sense for a 4-stock portfolio.
• Berkshire Hathaway (BRK.B) is an easy pick for the financial sector.
• Interest in robotic surgery is not waning, which should benefit Intuitive surgical (ISRG) in the long term.
• Netflix (NFLX) made some tough choices that are paying off significantly.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Technology portion (allocation 25-40%)

Even though the idea for this article came to me from something discussing good non-tech stocks, any active passive portfolio should have a tech component built into it.

That being said, over the summer, we noticed a rotation from tech actions to more defensive plays.

“We’re seeing a rotation now in stocks that benefit,” says Rob Haworth, senior director of investment strategy at US Bank Wealth Management. “Real estate, utilities, defensive stocks and smaller corporate stocks are currently capitalizing on expectations of lower interest rates.” This has made tech stocks less attractive, at least temporarily,” US Bank’s wealth management division. he wrote on September 3.

For example, the The Magnificent Seven lost $1.7 trillion in two weeks in July and the beginning of August. They then struggled through most of August before skidding again in the summer days.

Technology stocks of all types are likely cheaper than they have been since early August and before. And despite the corrections, the US Bank report points out that tech stocks are on track to outperform in 2024 S&P 500 for the fifth time in the last six years.

So tech should be part of your 4-stock portfolio. Instead of picking a stock to represent tech stocks, it’s better to use a tech ETF as a good proxy.

I would use First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC). It tracks performance First Trust NASDAQ-100-Technology Sector Index Funda collection of 42 equally weighted technology stocksreconstituted once a year in December and rebalanced four times in March, June, September and December.

The 25-40% allocation depends on your comfort level with tech stocks.

Non-Tech Stock 1 (20-25%)

The three largest sectors by weight in SPDR S&P 500 ETF Trust (NYSEARCA: SPY) other than technology are financial, healthcare and communication services. I will select one from each of those sectors.

The first of the three is an index financial stock. There are currently 66 companies. The biggest of them is Berkshire Hathaway (NYSE:BRK.B). It recently became the seventh US-listed stock to reach one $1 trillion market cap. I would be very comfortable owning this stock for the long term, even after Warren Buffett dies.

I’ve been thinking about Berkshire Hathaway for a long time a mutual fund. I’m not the only one. However, unlike most mutual funds, Berkshire charges its shareholders zero fees.

The holding company’s long-term performance remains outstanding. Between 1965 and 2023, its market value per share appreciated by 19.8% compounded annually, 960 basis points higher than the index.

In recent years, the index, thanks to a heavy concentration of technology stocks, has delivered significantly better returns than Berkshire. However, Buffett is coming. Its shares are up nearly 32% year to date.

It’s a defensive play that very few others can offer long-term investors. I would place it at the higher end of the range.

Non-Tech Stock 2 (20-25%)

The second of the three is health stocks. The index currently has 64 healthcare companies. Eli Lilly (NYSE: LLY) is the largest, while Walgreens Boots Alliance (NASDAQ: WBA) is the smallest. Given the poor performance of the latter, it is unlikely to be part of the index for much longer. Its shares have fallen 83% over the past five years.

While there are many great healthcare companies out there, I have always been partial Intuitive surgical (NASDAQ: ISRG), the manufacturer of the da Vinci robotic surgical system.

Although the company was founded in 1995, it launched the da Vinci five years later in 2000. Today, it is the fifth generation of the da Vinci system. Ended the second quarter with an installed base of 9,203 systems14% higher than a year earlier.

In 2023, more than 2.2 million procedures were completed using da Vinci systems. As of June 30, more than 15.4 million procedures have been performed using its systems since 2000. Most procedures are performed for general surgery in the US and non-urology outside the US

It’s gotten so far that finding a hospital without more than one da Vinci installed is rare, and that’s great.

Non-Tech Stock 3 (20-25%)

Actor posing in front of the Netflix logo

The third and final stock is from the communications sector. Currently, the index includes 22 communications services companies. Some of the larger names are included in the QTEC ETF, so they are not considered.

While it’s tempting to choose Walt Disney (NYSE: DIS) because of the strength of its Disney Parks, Experiences and Products segment, I will move to Netflix (NASDAQ: NFLX), its streaming competitor.

Two years ago, investors were worried about what would happen to revenue when it ditched password sharing and introduced ad-supported tiers. The moves were very profitable. That’s a big reason why its stock is up 44% in 2024 and 51% over the past 12 months. Analysts believe that its shares could continue to rise.

“Our view remains that Netflix has won the global streaming wars as evidenced by its results and increased guidance (especially relative to the results of its streaming peers), and that’s what winning looks like in our view,” Barron’s reported analyst Jeffrey Wlodarczak of Pivotal Research comments from an August 30 note to customers.

The analyst raised his price target on August 30 by $100 to $900. It has a Buy rating and the target is 33% higher than where it is currently trading.

Netflix reached 277.7 million subscribers worldwide at the end of the second quarter, 39.3 million more than in Q2 2023. little real competitionNetflix is ​​on track to generate $55 a share in free cash flow by 2030.

Yes, it’s expensive, but little suggests it’s about to be dropped by one of them, including Disney.

The post Buy these 4 stocks for a market-beating portfolio appeared first on 24/7 Wall St.