3 wealth-compounding stocks to beat the market this decade

Large Hershey Kiss display in Hershey, Pennsylvania

Key Points

  • Three names stick out as having the pricing power that undeniable moats offer.
  • Check out this stock list's double-digit returns and steadily growing dividends.
  • The Hershey Company, Ulta Beauty, Inc. and Equity Residential may be great targets for your portfolio.
  • 5 stocks we like better than Equity Residential

Because the Federal Reserve (the Fed) has announced potential interest rate cuts for this year, an expectation priced in for March is now being pushed as far back as May or June, according to the FedWatch tool at the CME Group Inc. NASDAQ: CME. A rising level of uncertainty may push the fundamentals of stocks to be the primary concern when selecting future investments

Names that fit this criteria of bullish and solid fundamentals, the ones that will likely be dependable wealth compounders in the next decade, include household names like Hershey Company NYSE: HSY, other consumer discretionary favorites like Ulta Beauty Inc. NASDAQ: ULTA and even more abstract but strong macro plays like Equity Residential NYSE: EQR

What to look for 

First, it's a game of business moats, which is fancy for "brand loyalty" and "penetration."


Hershey's snacks are not limited to its famous chocolate. You can find them at virtually every supermarket and convenience store or on the shelves of thousands of households in the United States and globally. If you gave someone $38.8 billion in cash (Hershey's market capitalization), it would be nearly impossible to replicate what this brand has done.

Similarly, beauty products are likely to never go out of favor since Ulta's consumer base will still need to keep up with skincare regardless of whether the economy booms or busts.

According to its annual reports, this business has achieved a 90% retention rate from its membership base.

Last but not least, as long as people need a place to live and create demand for residential property, real estate investment trusts (REITs) like Equity Residential benefit from this basic population need.

When companies achieve these status levels and steady demand 

from a loyal customer base, financials come in place, particularly starting with gross margin rates. If Ulta and Hershey have the brand penetration and loyalty they are perceived to have, it should come with some pricing power and high margins.

Get down to numbers

On a gross margin basis, Ulta generates an undisputed rate of over 40% to be head and shoulders above the rest of the industry, proving its pricing power is more than present. Hershey's gross margin is equally impressive at 45%; pricing power and brand loyalty allow management to invest aggressively in further growth.

Because real estate doesn't operate on gross margins as retail companies do, you can look to the health of their cash-flowing properties as a shareholder. Because Equity Residential can afford to pay its shareholders an annual dividend yield of 4.5%, analysts feel comfortable projecting a price target of $66.01 a share, or a 10.1% upside from today's prices.

These stocks offer you the stability found in names held by the Consumer Staples Select Sector SPDR Fund NYSEARCA: XLP, all the while exposing yourself to the growth in stocks inside the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY.

Each dollar you invest in Ulta and Hershey is set to compound (in the long-term) by over 20% on average.

While less aggressive of a growth play, Equity Residential offers a stable dividend and exposure to the appreciative properties of real estate, which still works whether interest rates are high or low.

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Should you invest $1,000 in Equity Residential right now?

Before you consider Equity Residential, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Equity Residential wasn't on the list.

While Equity Residential currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Consumer Staples Select Sector SPDR Fund (XLP)N/A$75.14+0.9%2.45%24.92N/AN/A
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$170.51+0.4%0.79%N/AHold$0.07
CME Group (CME)
4.5628 of 5 stars
$215.48+1.1%2.13%24.29Hold$215.70
Hershey (HSY)
4.4735 of 5 stars
$186.33+0.7%2.94%20.59Hold$223.33
Ulta Beauty (ULTA)
4.9262 of 5 stars
$417.98+1.1%N/A16.05Moderate Buy$561.29
Equity Residential (EQR)
4.2984 of 5 stars
$62.54+1.6%4.32%28.43Hold$65.32
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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