Investing in retirement can be tricky. Investors who have left the workforce need to strike a balance between growing and protecting their portfolio. Dividends that provide a regular source of income in retirement are another important consideration. This requires certain types of retirement stocks: ones that grow steadily, reliably and are more insulated from market fluctuations.
Having said that, where do you find these type of securities? Typically, they are blue-chip companies, they are profitable, they have strong management teams in place and they have ahistory of rewarding shareholders. While not every stock fits the bill, there are plenty of worthwhile securities for investors to consider when building a retirement portfolio. Here are the three most undervalued retirement stocks to buy now in July 2023.
Berkshire Hathaway (BRK.A/BRK.B)
Former hedge fund manager turned author Whitney Tilson likes to call Berkshire Hathaway (NYSE:BRK.A / NYSE:BRK.B) “the No. 1 retirement stock in America.” Like a lot of people, Tilson praises Berkshire Hathaway for its stability and the long-term gains it has provided to shareholders throughout the decades. For most retirees, the Class B Berkshire stock is the more affordable bet. With this stock, investors get a diversified holding company that owns companies ranging from Geico insurance to the Dairy Queen restaurant chain.
Berkshire Hathaway is also known for its stock portfolio that is today worth more than $350 billion. It continues to be overseen by legendary stock picker Warren Buffett, who is 92-years-old. Berkshire is known for favoring stable blue-chip stocks and holding them for years if not decades. The main holdings in Berkshire’s portfolio include Apple (NASDAQ:AAPL), Coca-Cola (NYSE:KO) and Bank of America (NYSE:BAC). Owing mostly to its size, BRK.B stock trades at a miniscule price-earnings (P/E) ratio. The stock has gained 75% throughout the last five years, including a 20% increase in the past 12 months. This should definitely be one of the retirement stocks for you to consider.
Bank of America (BAC)
As mentioned, one of Warren Buffett’s core holdings is Bank of America (NYSE:BAC). The Oracle of Omaha currently has a $32 billion stake in the lender, which he has called his favorite bank stock. BAC stock is the type of reliable, rock-solid investment that can anchor a retirement portfolio firmly in place. The good news is that Bank of America’s shares are on sale right now. Pulled lower by the general downturn in banking stocks, BAC shares are trading down 6% on the year and are up only 4% through five years.
BAC stock is also trading at a modest nine times future earnings right now, and it offers shareholders a decent dividend payment of 22 cents a share each quarter. This results in a yield of 2.80%. Investors who buy Bank of America’s stock while it is discounted are sure to be rewarded throughout the long-term. The lender just reported second quarter earnings that were typically strong. They announced earnings per share (EPS) of 88 cents versus 84 cents that was expected by analysts, and revenue of $25.33 billion compared to $25.05 billion that was forecast on Wall Street.
Walmart (WMT)
Another stock for retirees to buy and tuck away in a corner of their portfolio is Walmart (NYSE:WMT). It is the biggest company in the world in terms of revenue with annual sales of $570 billion, and the largest private sector employer with a 2.2 million staff. Walmart is a true blue-chip stock that can provide investors with steady returns throughout their retirement. Walmart owes this success to its presence in communities large and small, and the essential nature of the items it sells. WMT stock can be expected to perform well under good economic conditions as well as bad ones.
This year, WMT stock is up 9%, bringing its gains across five years to 78%. The company also provides its stockholders with a quarterly dividend of 57 cents a share, which equates to a yield of 1.46%. Despite its size, Walmart is anything but complacent. The company is constantly innovating, expanding into grocery sales, home delivery and focusing on boosting its online sales channels since the pandemic struck in 2020. This is the kind of set it and forget it stock that investors can feel confident owning for the long haul.
On the date of publication, Joel Baglole held long positions in AAPL and BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.