Are you looking for some stocks to invest $1,000 in right now?
If so, you will want to think about mitigating risk. When you only have a small amount of savings, it pays to play it safe with your investments, because you might need to sell them to pay for an emergency some day. This is one reason why less-well-off investors are often encouraged to invest more conservatively than their wealthy counterparts: when you’re richer, you can “afford” to take more risks.
With that in mind, here are two fairly safe stocks you could consider investing $1,000 in right now.
Canadian National Railway (TSX:CNR) is a mature, established company with a strong competitive position. It is a railroad company with only one major competitor in Canada and only a handful in the United States. This lack of competitors gives CNR a kind of economic moat; the fewer competitors you have, the more of the market’s sales volume you capture, and the higher the prices you can charge.
Railroads in general enjoy one major advantage over alternatives like trucks: they’re cheaper. It costs more money to move a given amount of something by plane or truck than by train. All railroads enjoy this advantage; in CNR’s case, the advantage is compounded by the company’s strong competitive position.
Is CNR’s competitive position translating into strong profits for the company? By all accounts, it is. Over the last 12 months, CNR had a 30% net income margin, which means that 30% of its revenue is profit. It also had a 13.5% return on equity, which means each dollar of book value produces $0.135 in profit. That’s pretty good.
CNR has also enjoyed a reasonable amount of historical growth, growing its earnings at 9.5% per year over the last 10 years. The only downside is that the stock is a little pricey, trading at 21 times earnings, which is somewhat high for a company with only modest growth.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is a high-quality Canadian asset management company. It runs a number of high-quality investment funds for high-net-worth investors. BAM is a very asset light business, meaning it doesn’t own very many assets, and therefore has relatively minimal recurring costs. This helps keep the company very profitable: in its most recent quarter, it had a sky-high 50% gross margin. That would have to make Brookfield Asset Management one of the most profitable big companies on earth.
How has BAM managed to become so successful?
One factor is its business strategy. The company runs funds with investors’ money, rather than its own, so it doesn’t assume a lot of risk.
A second factor is Bruce Flatt’s leadership. Flatt is one of the best Canadian chief executive officers in recent memory, having grown Brookfield by percentages that vastly outstrip the market averages. That hasn’t just been due to stock price increases, but the performance of BAM’s underlying businesses. The company (or rather the predecessor company, which is now called Brookfield) compounded its earnings at a high-teens growth rate over several decades — a strong showing, and as long as Flatt stays on, it’s one that’s likely to continue.