Three stock picks for Tony Stark and how the Avengers' invest their money.
Tony Stark is the second richest super hero at a net worth of over $12 billion, what does he do with his money?
We see just a snapshot of the Avengers’ lives in the movies. What else do they do with their time? How would the Iron Man invest in stocks and what can we learn from it?
That’s exactly what we’re looking at in today’s video, what would Iron Man invest in and how can you use it to make your money work for you?
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Tony Stark Net Worth
CNN Money estimated Tony Stark’s wealth at $12.4 billion, the second richest superhero ahead of Bruce Wayne but way behind Black Panther’s $90 trillion fortune. According to Forbes, Stark Industries books over $20 billion in revenue every year which would make it the 149th largest among U.S. companies.
Now Stark donates a lot to different charitable foundations but he’s still got a lot of walking around money. How would he invest it? Is there something we can learn about Iron Man’s favorite stocks?
We’ll first look at the Tony Stark investing strategy and then three stocks perfect for the iron man himself.
How Would Tony Stark Invest?
Stark may act like he knows everything but when it comes to something outside his wheelhouse, he’s ready to defer judgement to the experts. That makes me think when it comes to making his money grow, he’d be following an investment strategy made famous by legendary investor Peter Lynch.
Lynch ran the Magellan Fund from 1977 to 1990, beating the stock market in all but two years and booking a 29% annualized return over the period. In his book, One Up on Wall Street, he’s famously quoted as saying, “Invest in what you know.”
Now most people read this as invest in the things you buy and use on a daily basis. People end up putting their money in shares of Disney or Ford Motor because they like the products. The problem is, this is the furthest from what Lynch had in mind.
Invest in what you know means investing in the industry in which you have deep professional experience. This means understanding how the industry works, how it makes money and the competitive forces that drive it.
You might love the movies and products put out by Disney but do you understand how the entertainment industry works? Do you understand how it makes money on licensing, how upstarts like Netflix and now Apple TV are competing for market share and how Disney’s media networks like ESPN are being challenged with the shift to over-the-top viewing?
Now this isn’t a new strategy of investing. This is how the analyst world works, with most Wall Street analysts working just in a specific sector or a few industries. For individual investors, it means developing that deep expertise in one group of stocks. You put some of your money, maybe between twenty to thirty percent in the best stocks in that group, then you invest the rest in broad index funds that give you exposure to the rest of the market.
With this strategy, you’re not trying to be an expert in all things. You put most of your money in that diversified mix of funds to get market returns. With that small portion you invest in individual stocks in your area of expertise, you get the opportunity to juice your portfolio with stronger returns. You get a higher upside but it won’t wreck your portfolio if you’re off a little because you’ve still got those diversified funds as well.
3 Stocks Iron Man Would Love
So we know Tony is all about tech. He’s shifted Stark Industries from a weapons manufacturer to a leading tech conglomerate. He knows the tech side, what’s innovative, and he knows the business side.
I think I’ve found three stocks the Iron Man would put in his portfolio.
Our first Iron Man pick is Check Point Software, ticker CHKP, an leading pureplay in cybersecurity. The company has been shifting to a subscription-based model instead of individual products and it’s driving strong sales growth. Customer retention is above 90% and the company’s cloud-based security product is an industry leader.
These cybersecurity plays aren’t cheap but there’s been a lot of consolidation in the field and the best of breed are coming to the top. The CSIS puts cyberattacks at a cost to the global economy of over $600 billion a year and with the problem increasingly coming from large organized networks and state-sponsored actors, cybersecurity will be one of the guaranteed growth sectors for decades.
Check Point earnings are expected 5.4% higher over the next year to $6.04 per share and a 21.2-times price multiple.
Next is Western Digital, ticker WDC, the $15 billion leader in hard drive storage and a growing force in the flash storage market. There’s been massive consolidation in data storage around the slow death of hard drive technology with just Western Digital and Seagate remaining to control 80% of the market. WDC has been shifting to flash with its 2016 acquisition of SanDisk and has the scale and innovation to be successful.
It hasn’t been an easy transition with shares down almost 50% since March of last year but the company has paid down over $6 billion of the debt since the SanDisk acquisition and has $4.3 billion in cash equivalents on the balance sheet. That’s nearly a third the stock’s market cap in cash so a healthy financial position to work from.
Earnings are expected to bottom out over the next two quarters before rebounding to $5.03 per share in 2020. That puts the shares at just 10-times next year’s earnings and the firmer footing could bring a lot of investors back to the company.
While it’s not exactly the small tech-darling it used to be, Apple is still an innovative powerhouse in the sector. Shares are down since last September as the new product lines have mostly failed to impress but this is a company that’s evolving into everything we do.
Apple went all-out to sign the big names like Oprah Winfrey and Steven Spielberg for its Apple TV launch. The credit card has gotten mixed reviews so far but will give the company a financial component that could pay off strategically.
Profits are expected to come in 3.7% lower over the next year to $11.71 per share but Apple’s near perfect history of beating estimates will likely put it back into growth. Even on the low expectations though, the shares still only trade for 16.5-times earnings so not a bad entry point on valuation.
We’re doing a whole series on Avengers Endgame investing from Captain Marvel to Iron Man, SpiderMan and the Black Panther. Be sure to click through to Let's Talk Money on YouTube and tap that Subscribe button so you don't miss it!