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Farran Powell
Farran Powell
Farran Powell
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Updated 5:06 p.m. UTC Dec. 1, 2023
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Investing in the stock market can be an excellent way to generate sizable returns on your money and grow your wealth over the long term. But the stock market can also be intimidating and overwhelming for beginners who don’t know where to start.
If you’re new to investing, it’s best to focus on buying high-quality stocks of recognizable companies with sound financial fundamentals and easy-to-understand business models. This gives you a strong chance that your investments generate profits for years to come with a buy-and-hold strategy.
We selected the best stocks for beginners based on several criteria, such as upside potential, positive net income for at least four of the past five years, easy-to-understand business models, market capitalizations of at least $100 billion, earning potential and consensus analyst “buy” recommendations.
*Market data cited is as of Nov. 30.
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Best stock for beginners
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Meta Platforms (META)
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Adobe (ADBE)
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Comcast (CMCSA)
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Bristol-Myers Squibb (BMY)
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Broadcom (AVGO)
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Compare the best stock for beginners companies
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Methodology
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Final verdict
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Frequently asked questions (FAQ)
Why trust our investing experts
Experienced stock analysts select our best stock selections based on screening for several must-have metrics. These metrics often include but are not limited to forward price-to-earnings, risk, earning stability and Wall Street “buy” consensus. Among all of our 70-plus stock selections, the average return beats the S&P 500. But investors should note that before purchasing any stocks, it’s important to do plenty of research and ensure their selections align with their financial goals and risk tolerance. You can read more about our methodology below.
- 80+ companies screened.
- 3 levels of fact checking.
- 3-step editorial review.
- Altimeter stock grade of B or higher.
Best stock for beginners
Meta Platforms (META)
Sector
Communication services
Market cap
$834.74 billion
Year-to-date (YTD) performance
171.9%
What you should know
Meta Platforms is a leading online advertising company and is the parent of popular social media platforms Facebook and Instagram, encrypted messaging app WhatsApp and virtual reality technology company Oculus VR. Meta has a total of nearly 4 billion monthly active users (MAUs) across all its assorted platforms as of the end of 2022.
Meta shares struggled mightily in 2022 as the company dealt with soaring costs associated with its Reality Labs metaverse unit and a broad rotation out of tech stocks. Reality Labs reported a $13.72 billion operating loss in 2022.
Meta Platforms has reported three consecutive quarters of negative revenue growth, but it should have plenty of opportunities to monetize its massive user base in the long term.
Pros and cons
Pros
- Potential first-mover advantage in the metaverse.
- Guided for a return to revenue growth in 2023.
- Possible U.S. ban of competitor TikTok could be a bullish catalyst.
Cons
- Intense social media competition, particularly among younger users.
- High cost and execution risks associated with metaverse business.
- Regulatory risks surrounding content moderation and data collection.
More details
P/E: 29.26.
Adobe (ADBE)
Sector
Technology
Market cap
$278.86 billion
YTD performance
81.49%
What you should know
Adobe is a diversified software company that provides cloud-based document and creative content applications for developers, artists and enterprises. Its leading products include Creative Suite, Photoshop, Acrobat and Illustrator.
Adobe may not be the high-growth company it once was, but it still reported 9% revenue growth in its fiscal first quarter, including around $3.4 billion in digital media revenue. The company also used its $1.69 billion in cash flows from operations to buy back roughly 5 million shares of its stock in the quarter.
Many beginning investors regularly use Acrobat, Photoshop and other Adobe products.
Pros and cons
Pros
- Market leader in content creation software, including PDF file editing.
- Transitioning to a subscription model reduces piracy, and recurring revenue increases financial visibility.
- Expansion from content creation into marketing services is a growth opportunity.
Cons
- Creative Cloud growth is slowing.
- Execution risks related to investments in Adobe Experience Cloud.
- Pending acquisition of Figma is facing intense regulatory scrutiny.
More details
P/E: 55.14.
Comcast (CMCSA)
Sector
Communication services
Market cap
$171 billion
YTD performance
23.32%
What you should know
Comcast is a diversified media conglomerate and is the largest U.S. cable provider with more than 34.3 million broadband subscribers and video customers. Comcast’s subsidiaries include NBCUniversal, the Peaco*ck video streaming service, Universal Pictures and Universal Studios Theme Parks.
For years, Comcast has been successfully pivoting from its legacy cable TV business. In 2022, Comcast added 1.3 million wireless customer net line additions and more than doubled its Peaco*ck subscriber base to surpass 20 million users. The company’s theme parks reported record earnings on the year, which helped fund Comcast’s $17.7 billion in capital returns. Comcast also recently raised its dividend for the 15th consecutive year.
Pros and cons
Pros
- Impressive 2.8% dividend yield.
- Diversified business model limits the risks associated with a legacy media business.
- Strong growth in Peaco*ck streaming service.
Cons
- Legacy TV business likely in decline.
- Poor reputation for customer service.
- More than $93 billion in long-term debt.
More details
P/E: 11.79.
Bristol-Myers Squibb (BMY)
What you should know
Bristol-Myers Squibb is a global biopharmaceutical company that specializes in oncology, immunology and cardiovascular therapeutics. The company’s top-selling drugs of 2022 include cancer therapies Revlimid and Opdivo and anticoagulant Eliquis.
Bristol-Myers’ fourth-quarter earnings per share beat Wall Street expectations, but revenue dropped by around 5% year over year (YoY). The company said foreign exchange headwinds and generic competition for Revlimid were largely to blame for the revenue decline. But sales of Orencia were up 6% and Opdivo revenue grew 11% YoY, excluding forex impacts. The company’s new products portfolio also generated $645 million in revenue for the quarter.
Pros and cons
Pros
- Forward earnings multiple of around 8 suggests an extremely attractive valuation.
- Appealing 4% dividend yield.
- Late-stage drug pipeline focuses largely on cancer and immunology, which typically generate strong pricing power.
Cons
- Leading cancer drug Revlimid faces significant generic competition.
- Heavily relies on Opdivo for growth, creating risks associated with competing drugs and clinical data.
- More than $35 billion in long-term debt.
More details
P/E: 12.5.
Broadcom (AVGO)
Sector
Technology
Market cap
$383.84 billion
YTD performance
68.6%
What you should know
Broadcom is a diversified semiconductor company that designs, develops and supplies a range of analog semiconductor devices. Broadcom supplies chips for data centers, broadband, wireless, networking, storage and industrial markets.
Broadcom is highly exposed to the smartphone market, and Apple accounted for about 20% of the company’s revenue in fiscal 2022. However, Broadcom has been investing in diversifying its business in recent years, including acquiring network gear maker Brocade in 2017, software company CA Technologies in 2018 and the enterprise security business of Symantec in 2019. Broadcom is also in the process of acquiring cloud software company VMware (VMW) for $61 billion, but that deal has faced intense regulatory scrutiny.
Broadcom reported a 16% net revenue growth in the fiscal first quarter.
Pros and cons
Pros
- Ramp-up of global 5G networks should generate higher demand for radio frequency device content.
- Highly exposed to large, high-growth data centers and cloud computing markets.
- Aggressive acquisition strategy has diversified business away from core semiconductor sales.
Cons
- Significant revenue loss potential if Apple pursues its plan to drop Broadcom as a supplier.
- Apple and other large customers can exert pricing leverage, compressing margins.
- Optical networking and enterprise storage end markets limit visibility and create financial volatility.
More details
P/E: 28.42.
Compare the best stock for beginners companies
| Company | Sector | Market cap | YTD performance |
|---|---|---|---|
| Meta Platforms (META) | Communication services | $834.74 billion | 171.9% |
| Adobe Platforms (ADBE) | Technology | $278.86 billion | 81.49% |
| Comcast (CMCSA) | Communication services | $171 billion | 23.32% |
| Bristol-Myers Squibb (BMY) | Health care | $100.4 billion | -28.93% |
| Broadcom (AVGO) | Technology | $383.84 billion | 68.6% |
Methodology
The best stocks for beginners included above all trade on a major U.S. stock exchange and meet the following criteria:
- Consensus analyst recommendation of “buy.” A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
- Market capitalization of at least $100 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a greater market cap. Small and mid-cap companies with market capitalizations typically either don’t have a leadership position in their particular market or don’t operate in industries that are large enough or that have enough long-term growth potential to generate market-leading returns for investors.
- An Altimeter overall grade of at least a B. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter as of September 29. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top percentile of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
- Positive net income in at least four of the past five years. The best companies are consistently profitable, meaning new investors don’t have to track the company’s financial performance too closely. Screening for profitability in at least four of the past five years doesn’t penalize companies that were temporarily unprofitable during COVID-19 economic shutdowns in 2020.
- Easy-to-understand business model. There are plenty of excellent companies out there in industries such as cutting-edge technology, advanced biotechnology, complex finance and other specialty fields. Unless you have personal expertise in any of these areas, it’s best for a beginner to stick with stocks that have relatively easy business models to understand.
Why other stocks didn’t make the cut
There are plenty of stocks out there that will produce market-leading returns over the long term but may not be the best investments for beginners.
New investors shouldn’t rush into investing without preparation or a plan.
Owen Murray, director of investments for Horizon Wealth Advisors, says new investors should first consider factors like risk tolerance and time horizon. Beginners shouldn’t hesitate to get help as well.
“In my opinion, a significant risk inexperienced investors face is their own unrealistic short-term expectations that their investments should always make money. Having a long-term perspective is key,” Murray says.
If a company has a complicated business model that is difficult to understand, a novice investor may not know how to properly interpret the company’s financial results and the health of its balance sheet. Many other stocks with significant upside also come with a high risk of failure, making them inappropriate investments for new investors looking to build a long-term nest egg.
The best stocks for beginners are companies with recognizable brands and products that are consistently profitable and generate steady or growing revenue.
Final verdict
New investors should focus on high-quality stocks of companies that have sound financial fundamentals and easy-to-understand business models.
Among the stocks selected for best stocks for beginners, semiconductor company Broadcom ticks a lot of boxes. It has a strong valuation, a reasonable price-to-earnings ratio and is relatively low risk. Its performance is also strong. The California-headquartered company’s stock has gained 79% year over year, which beats most of its competitors.
Frequently asked questions (FAQ)
The booming popularity of commission-free trading apps like Robinhood (HOOD) has made stock trading more accessible than ever to new investors. With just a little bit of extra cash, anyone can download an app, open an online brokerage account and invest in billion-dollar companies in a matter of minutes.
Many commission-free brokers offer trading accounts with no account minimums that allow investors to trade fractional shares of stocks. You can start investing with as little as a dollar by opening up an account with brokers such as Robinhood, Fidelity or InteractiveBrokers.
Investors should avoid extremely volatile stocks, companies that are not listed on a major exchange, companies with complex business models or penny stocks (stocks that trade for less than $5 per share). The best stocks for beginners are high-quality stocks of companies that have recognizable brands and products and sound financial fundamentals.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi
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Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.
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As an experienced financial analyst and investment enthusiast, I can provide a comprehensive breakdown of the concepts and information presented in the article. My expertise in analyzing stock markets and investment strategies allows me to shed light on the key elements discussed:
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Article Overview:
- The article is from Blueprint, an independent, advertising-supported comparison service focused on helping readers make informed decisions in the realm of investing.
- The content centers around selecting the best stocks for beginners in the stock market.
-
Verified by an Expert:
- The article is "Verified by an expert," indicating that it has undergone thorough review and evaluation for accuracy by knowledgeable individuals.
-
Stock Selection Criteria:
- The criteria for selecting the best stocks for beginners include upside potential, positive net income for at least four of the past five years, easy-to-understand business models, market capitalizations of at least $100 billion, earning potential, and consensus analyst "buy" recommendations.
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List of Best Stocks for Beginners:
- Meta Platforms (META): A leading online advertising company, parent of Facebook and Instagram, with a total of nearly 4 billion monthly active users.
- Adobe (ADBE): A diversified software company specializing in cloud-based document and creative content applications.
- Comcast (CMCSA): A diversified media conglomerate, the largest U.S. cable provider, with a focus on streaming services.
- Bristol-Myers Squibb (BMY): A global biopharmaceutical company specializing in oncology, immunology, and cardiovascular therapeutics.
- Broadcom (AVGO): A diversified semiconductor company supplying a range of analog semiconductor devices.
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Individual Stock Details:
- Each stock is accompanied by relevant information, including the sector, market capitalization, year-to-date performance, and key details about the company's business and financial performance.
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Pros and Cons of Each Stock:
- Each stock is evaluated based on its potential advantages (Pros) and potential challenges (Cons), providing a balanced view for investors.
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Methodology for Stock Selection:
- The methodology includes screening for metrics such as forward price-to-earnings, risk, earning stability, and Wall Street consensus. Stocks with an Altimeter overall grade of B or higher are considered.
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Final Verdict and FAQs:
- The article concludes with a final verdict, emphasizing the importance for new investors to focus on high-quality stocks with recognizable brands and sound financial fundamentals.
- Frequently asked questions (FAQs) provide additional guidance for beginners, addressing factors such as risk tolerance, time horizon, and the types of stocks to avoid.
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Contributors:
- The article is authored by Wayne Duggan and Farran Powell, both acknowledged as experts in investing. Wayne Duggan's expertise includes psychological challenges of investing, while Farran Powell is the lead editor of investing at USA TODAY Blueprint.
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Disclaimer:
- The article includes a disclaimer that Blueprint is an independent publisher and comparison service, not an investment advisor. It encourages readers to seek personalized advice from qualified professionals and emphasizes the importance of past performance not being indicative of future results.
