As a UK-based investor, I think it’s important to look outside my home country to find investments. The London Stock Market is just a tiny part of the global equity landscape. Ignoring international indexes, such as the S&P 500 in the US, could be a mistake, in my opinion.
With that in mind, here are three S&P 500 stocks I’d buy for my portfolio today.
Market leaders
The US equity index is stuffed full of world-beating technology companies such as Apple (NASDAQ: AAPL).
This is the first stock I’d buy in the index. I think the company has a fantastic competitive advantage as consumers are, essentially, wired in to buy a new product from the business every couple of years.
Even though they’re more expensive than competitors, consumers are more than happy to upgrade because Apple’s products are well designed, work flawlessly and, to a degree, status-driven.
This is why the business can command substantial profit margins and generate a robust free cash flow.
Despite its positive qualities, Apple’s growth shouldn’t be taken for granted. Competitors are constantly nipping at its heels. Also, an economic downturn may push consumers to move away from its expensive products.
S&P 500 champion
I think one of the best consumer goods stocks in the S&P 500 is PepsiCo (NYSE: PEP). The food, beverage and snack company has its fingers in every corner of the consumer goods market. I think this diversification gives it a fantastic edge.
Over the past six years, through a combination of acquisitions, organic growth, and price increases, the company’s earnings have grown at a compound annual rate of around 7%. This isn’t the fastest growth around, but I think it’s impressive for a slow and steady defensive consumer goods business.
There are few UK stocks that own brands as recognisable around the world as Pepsi, which is why I’d buy this S&P 500 company over any UK-listed peer.
Challenges the enterprise may face as we advance include staying relevant in an era where consumers are becoming increasingly health-conscious. Rising costs may also weigh on profit margins.
Global retailer
The final S&P 500 stock I would buy for my portfolio is Walmart (NYSE: WMT). As one of the world’s largest retailers, the company is another defensive play. However, I think it’s also a growth play.
In recent years, the company has been investing heavily in its online operation. And it’s just starting to yield results. As we advance, I expect this side of the business to become a more significant part of the overall enterprise.
So while Walmart might seem like a sleepy defensive play, I think it could have the potential to be a growth investment.
That said, its online business is still relatively small compared to the likes of Amazon. Fighting off this online giant and defending its market share won’t be easy for Walmart and is probably the biggest challenge the enterprise faces.
