5 Smart IRA Ideas for the Young Investor
Apr 3rd 2013 11:43AM
Updated Apr 3rd 2013 11:46AM
With the tax deadline less than two weeks away, thinking about ways to reduce your tax liability and/or eliminate your future taxes by opening or contributing to an Individual Retirement Account, or IRA, should still be at the forefront of all investors' minds.
Yesterday, I examined five great ideas for the conservative investor looking to contribute to their 2012 IRA. Today I'm going to mix things up and turn my attention to younger investors who are concerned less about capital preservation and dividends, and are more likely to seek out big growth potential and take on more risk. Here are five smart stock ideas to get younger investors started in building their perfect IRA.
1. Celgene : Biotechnology company Celgene isn't going to offer investors a dividend, but it'll make up for it in a number of ways.
To start with, Celgene's management announced plans at the JPMorgan Healthcare Conference in January to double its sales and triple its total profit by 2017 with nothing but organic growth! Sales of the company's multiple myeloma drug Revlimid remain strong, and its other cancer drug, Abraxane, gained FDA approval to treat non-small-cell lung cancer in October and has shown demonstrable efficacy in treating pancreatic cancer when combined with Eli Lilly's Gemzar.
It's also all about Celgene's pipeline. Pomalyst, the company's newest multiple myeloma drug, was approved in February as an advanced-stage treatment and could fetch in excess of $1.1 billion in revenue by 2017 according to Piper Jaffray. Psoriasis drug apremilast is another pipeline contender worth watching, with the potential for $1.1 billion to $1.75 billion in peak sales if approved by the FDA, according to the company. Celgene is the type of biotech that could morph into what we now refer to as "big pharma" over the next decade.
2. Qualcomm : Market value is just a number; despite being valued at $113 billion, there's absolutely no reason that Qualcomm can't double in size over the next decade.
Qualcomm should be an attractive investment to all young investors, as it's the only true vertically integrated mobile components supplier. The company's CDMA wireless technology is found in a myriad of electronic devices from companies ranging from Apple to Nokia. It also introduced the RF360 in February, a chip able to process RF bands on the front end that could make RF chips obsolete in future 4G LTE models. Between its Gobi LTE modems and its dominant Snapdragon processors, there's not a more dominant company in wireless technology.
The other half of the argument for why Qualcomm is a no-brainer buy is the sheer number of opportunities that exist in the emerging markets for Qualcomm to make its mark. Russia and its highly saturated market is yet to move beyond 3G capabilities, while Latin and South America are rapidly trying to upgrade their networks. Qualcomm's dominance in wireless technologies is expected to span decades, not just this decade, and it could make for a smart long-term IRA investment.
3. Amazon.com : No, you don't need your glasses; that really does say Amazon.com! Amazon might be referred to as a bloated blimp by some analysts -- and even a few of my fellow Fools -- for its lack of bottom-line profits, but what I see in Amazon is a trifecta of growth coming from its marketplace, its cloud systems, and its streaming content.
In terms of marketplace, I give Amazon a one-up over eBay because of Amazon's first-in-class focus on mobile access and its Kindle Fire, which gives the company a differentiable factor that eBay simply doesn't have.
With regard to cloud computing, Amazon's EC2 virtual data center and S3 storage farm are the models by which other cloud providers develop their own clouds. In streaming, Amazon is giving Netflix a run for its money by expanding overseas and utilizing its enormous cash balance to strike advantageous content deals.
4. Silver Wheaton : It can be difficult to make a strong case for long-term ownership of some miners, but a company like Silver Wheaton -- which offers up-front cash investments in order to gain royalty interests in silver and gold mines -- is a smart way to play the metal and mining sector.
Silver Wheaton currently has 14 long-term silver contracts under its belt with an average silver purchase price of just over $4 per ounce. Doing the math on the current spot price for silver (as of this writing) nets Silver Wheaton a profit margin of about $23 per ounce. It should also be noted that Silver Wheaton isn't responsible for any of the mines' costs that it invests in beyond its up-front payments.
What makes Silver Wheaton extremely attractive is that the demand for silver is only going to increase as technological devices proliferate throughout the globe (silver is a great electrical conductor). With Silver Wheaton locking up a long-term silver and gold deal with HudBay Minerals last year, I feel confident its royalty interests engine still has plenty of life left in it.
5. MasterCard : With the younger generation using plastic now more than ever, it only seems logical for them to consider investing in payment facilitator MasterCard.
MasterCard offers investors a lot of incentives despite its minute dividend yield. For starters, both it and Visa are solely payment processors and not lenders, which absolves them from any liability that many of its peers carry if debtors don't repay their loans.
Second, the emerging-market opportunity for MasterCard is enormous, with its chief financial officer, Martina Hund-Mejean, noting that 85% of all global transactions are still being conducted in cash.
Finally, there's ample domestic demand and new modes of payment still in their infancy. Prepaid debit cards, for example, open up a whole new pathway of growth for MasterCard for consumers whose credit was ruined during the recession and who currently don't qualify for a bank card. Don't be shocked if MasterCard beats Google or Apple to $1,000 per share.
There you have it -- five smart ideas for the younger investor looking to open or contribute to an IRA. Do you have a company you've invested in for your retirement account that you'd be willing to share with the community? Feel free to post your stock and your reasoning in the comments section below.
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The article 5 Smart IRA Ideas for the Young Investor originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Amazon.com, Apple, eBay, Google, JPMorgan Chase, MasterCard, Netflix, and Qualcomm. The Motley Fool recommends Amazon.com, Apple, eBay, Google, Netflix, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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