This is the second article in a series of four. To see the first 30% of my dream retirement portfolio click here.
With the services sector represented its time to address the need for a conglomerate to make sure my retirement portfolio can reach almost every other sector.
3M Co. (MMM) - The brand portfilio isn't the best of all the conglomerates but the company has maintained a healthy balance sheet and could tap the credit markets at very favorable rates to go on an acquisition spree. Trading a little over 12x forward earnings with an almost 3% dividend yield, there is plenty of value in the shares at the current price. TTM Revenues are almost 30 billion dollars with profit margins approaching 15%. MMM is a great way to play the global economy and provides the best choice among conglomerates when value and debt/equity is taken into consideration.
Now that the services sector and conglomerates are represented in my dream portfolio I think it is very important to make sure the best of tech is also.
Apple Inc. (AAPL) - Is my favorite company in the world. They have the brand recognition, cash flow and valuation to be the bellwether of my retirement portfolio for years to come. We recently wrote about Apple, and I continue to believe the shares are poised for a move above $1000 in the near future. The dividend that was announced early this year is sure to grow every single year and will prove to be a dividend aristocrat before my time to hang it up has come. At 10.5x forward earnings and EPS growing 65% per year over the past 5 years I feel more than comfortable putting 10% of my retirement in Apple.
Google Inc. (GOOG) - I see Google as a giant tech ETF that just happens to be run under one roof with really great leadership. The autonomy given to employees to just go out there and make something great is why I like Google as the last tech piece in my retirement portfolio. Apple has the hardware taken care of and GOOG is on its way to dominating everything else. Trading at 11.5x forward earnings with 146 dollars in cash per share a growing dividend is in my future. My only concern is that the Motorola Mobility acquisition was as stupid as it seemed to be. The upside is that management has learned from its mistakes and continue to foster the culture that has brought up search and email that we cannot live without. With revenue at $40B per year and profit margins at 27% it is only a matter of time before Google will be able to scoop up all of Facebook, Inc. (FB) shares on the cheap (Zuck will be begging for $8 per share in 5 years) and turn Google+ into the success we all thought it should be.
These 3 stocks represent the next 30% of my dream portfolio. Look out for the upcoming Part 3 of Managing My Own Retirement Is A Dream.
Disclosure: I am long AAPL.