There are plenty of exciting companies out there. Tesla is a prime example. CEO Elon Musk is covered daily by major publications throughout the world.
This excitement has created plenty of wealth for shareholders. Since 2010, Tesla’s stock price has increased by 1,000%.
But boring stocks can make you rich too. The mere fact that they’re boring can create huge buying opportunities.
I did the work for you by rounding up three top stocks that, despite their boring business models, have made millionaires out of long-term investors.
Doing everything right
Badger Daylighting (TSX:BAD) is a Canadian environmental services company specializing in soil excavation.
Still with me? I warned you that these stocks were boring.
Maybe you’ll be excited by the returns Badger has generated. Since 2011, shares have increased by 800%. In the past eight months alone, the stock has nearly doubled.
In 2018, the company posted record revenues and EBITDA, along with rising profitability and a 6% dividend increase. Oh, and the company repurchased 1.3 million shares, after which it upsized the buyback by an additional two million shares.
What’s the secret? It’s nothing special, actually. Badger’s management team has simply focused on creating shareholder wealth by positioning the company to take advantage of multiple long-term growth industries.
Long term, the company aims to grow EBITDA by 15% annually. Now trading at just 24 times forward earnings, this stock is outrageously cheap. In 12 months, shares will trade at 18 times forward earnings — a potential discount to the market.
This stock is boring, but it should make your portfolio much more enjoyable.
Protect the downside
Information Services (TSX:ISV) is another stock that has one of the most boring names on the market, but its 5% dividend and rock-bottom valuation are worth paying attention to.
Formed in 2000, Information Services acquired an exclusive agreement to provide registry and information services to the Government of Saskatchewan. It’s responsible for things like land titles, personal property records, corporate registries, land survey data, geographic information, and more.
With a $300 million market cap and hyper-niche business model, almost no one is paying attention to this stock. There is literally only one analyst that follows the company.
This lack of awareness is likely the reason for its cheap valuation of just 15 times trailing earnings.
Because critical government services are required no matter what the economy does, Information Services is resistant to recessions. That makes its 5% dividend incredibly reliable.
It’s been paying the same $0.20 per share quarterly dividend for more than five years.
This stock won’t make you rich with upside, but it will save your portfolio during a bear market. Avoiding a 50% loss is just as valuable as a 50% increase.
The next Warren Buffett
Exchange Income (TSX:EIF) is also a dividend rock star with a payout of nearly 6%. But that’s not all.
Over the past decade, shares have risen in value by nearly 400%. If you had reinvested the dividends along the way, you would have generated annual returns of 15% — more than double the S&P/TSX Composite Index.
In December, I’d called Exchange Income a mini Berkshire Hathaway, considering it simply buys and holds great businesses “forever.” Since that call, shares have risen by 40% in six months.
Shares are still underpriced compared to their long-term potential. It doesn’t take far-fetched assumptions to see the company reach a $10 billion market cap in a decade or two. That would represent another 800% in upside.
Exchange Income doesn’t get much attention, but neither did Berkshire Hathaway during its first decade of operation. This has the look of a “perfect” buy-and-hold stock.
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David Gardner owns shares of Tesla. Tom Gardner owns shares of Tesla. The Motley Fool owns shares of Berkshire Hathaway (B shares) and Tesla. Fool contributor Ryan Vanzo has no position in any stocks mentioned. Tesla is a recommendation of Stock Advisor Canada.