The last four years on Wall Street gave investors whiplash. A decade-long bull market came to a screeching halt as the global pandemic brought on one of the worst market crashes in recent memory. It quickly reversed course, giving us yet another bull run, only to see it turn into a bear market again last year.
It’s been a white-knuckle ride as the S&P 500 just closed at its highest level of 2023. It’s still below the all-time high hit back in January 2022. Who knows where we’ll be in the next few years? That’s why it’s important investors carefully choose their stocks to be only future-proof investments.
Warren Buffett likened it to having a punch card with only 20 slots. Each stock you buy fills up one of those positions. So make sure each investment you make will be one that can have a life-altering impact. Here are three generational wealth-building stocks that can set you up for the long haul.
Visa (V)
Visa (NYSE:V) is the largest payment processor. It processes 81% more payments than its nearest rival, Mastercard (NYSE:MA). It had $15 trillion in total payments and cash volume for the full fiscal year. There are 4.3 billion Visa cards in circulation compared to 3.2 billion Mastercards.
Another economic downturn could certainly impact Visa’s performance as consumers rein in spending. The long-term trajectory of consumer spending, though, is always rising. An investment in Visa is a bet on the continued growth of the U.S. economy over time. Not that consumer debt is good, but it is a fact of life.
Because Visa does not involve itself in lending, it is unaffected by consumer defaults on credit and loan payments. All those Visa cards in use don’t put Visa at risk because it is just the branding for the underlying financial institutions extending the credit. And because economic expansion far outpaces contraction, the payment processor’s overall long-term outlook remains positive.
Although Visa is the premier payment processor, its stock is not as expensive as Mastercard. Make no mistake, it still carries a premium valuation, but at 23 times next year’s earnings, 13 times book value, and 26x free cash flow (FCF), Visa is cheaper than its rival.
Visa can create generational wealth for investors willing to hold on for the long term. It’s just important not to be swayed by any short-term pullbacks in price.
Exxon Mobil (XOM)
As the largest integrated oil and gas giant, Exxon Mobil (NYSE:XOM) will be around for decades. It will keep producing the fossil fuels needed to keep the world spinning. Global governments are pushing for alternatives to oil and gas. Renewables don’t have the infrastructure in place to replace them, and it’s unlikely they won’t for many years.
Exxon plans to spend about $17 billion on “lower-emission initiatives” through 2027. It’s clear; however, the company is not abandoning its true revenue generation platform. The oil giant’s pending acquisition of Pioneer Natural Resources (NYSE:PXD) shows the extent of Exxon’s commitment to fossil fuels. The $59 billion deal may not go smoothly, though. The Justice Dept. is looking at it for antitrust violations. Even so, it is clear traditional energy sources remain as relevant as ever.
Demand for them is high, too. That translates into massive profits for Exxon. In the most recent quarter, the oil stock generated operating earnings of $9.1 billion. Despite that, its stock dipped below $100 a share and is down 7% year-to-date. Exxon trades at just 10 times next year’s earnings, a tiny fraction of estimated earnings growth, and just 10x FCF. Wall Street expects earnings will expand at a whopping 45% annually for the next five years. These are bargain-basement valuations that will pay generous dividends down the road.
Speaking of dividends, Exxon has a 41 consecutive-year track record of raising its payout. Regardless of the direction energy production takes, investors will receive rewards for years to come.
Kenvue (KVUE)
Kenvue (NYSE:KVUE) is a consumer products giant you might never have heard of before. That’s because Kenvue was the consumer products division of Johnson & Johnson (NYSE:JNJ) spun off from the healthcare company in August. It owns some of the biggest, best-known brands, including Band-Aid, Benadryl, Listerine, Tylenol and Visine.
Yet the stock stumbled out of the gate. Kenvue was priced at $22, opened for trading north of $25, and almost hit $28 at its peak. Today, it trades just over $20 a share. That’s a near-30% loss of value from peak to trough. This is a perfect opportunity for long-term investors because Kenvue will provide years of generous returns.
J&J shed the unit because it wanted to focus more closely on medicine and medical devices, which generated nearly $80 billion in revenue last year. The consumer products business posted $15 billion in sales. Its brands typically hold the top leadership position in their respective categories. It also has broad geographical diversification, with over half its sales generated outside the United States. Kenvue can expect to see steady growth over time.
The consumer products stock pays a dividend that yields 3.89% annually. Because spinoffs adopt the dividend history of their parent, Kenvue is the newest addition to the list of Dividend Aristocrats. The stock trades at 16 times next year’s earnings estimates. It means Kenvue can produce life-changing returns for investors over a lifetime of owning the shares.
On the date of publication, Rich Duprey held a long position in XOM and JNJ stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.