How We Picked Our Best Stocks for 2019

Nov 19, 2018

Remember The Story of Ferdinand? That children’s book from 1936, still in print, tells the tale of a Spanish bull who refuses to embrace his heritage and fight to the death in the corrida. Ferdinand, an icon of pacifism, would much rather lie under a cork tree and smell the flowers. And at the end of the story, after Madrid’s finest picadors and toreadors try—and fail—to goad him into a bullfight, our hero retires to his pasture to follow his bliss.

This classic came to mind this fall as we grappled with the question: Can a bull market simply graze away until it dies of old age?

As T. Rowe Price’s John Linehan pointed out at Fortune’s Investor Roundtable, bulls are rarely so lucky. They’re usually slain either by recessions or by speculative excess—or, in the case of our previous bear market, from 2007–09, by both. Back then, the housing bubble detonated across the economy. Today there are similar warning signs, including rising debt and lofty valuations for U.S. stocks. But they have remained faint enough to foster hope that our current bull—the oldest on record, at 9¾ years—might have a couple of years left to meander among the daffodils.

So could this bull be the exception, the one whose heartbeat just gradually slows until it stops? It seems possible. Much of the stock-market volatility of 2018 reflects investors’ sense that trends that generated big recent gains are waning rather than vanishing. Big Tech is here to stay, but its growth has to slacken someday. China is a juggernaut, but it’s not invulnerable. Yes, the U.S. hit 4% GDP growth, but the sugar rush from tax cuts can’t last forever.

Our Investor’s Guide this year focuses on coping with this aging process. In our lead story, “Safety Meets Strength”, senior writer Jen Wieczner highlights companies that can sustain their growth even if the economy loses vitality. In the last bear market, tech, health care, and consumer staples fell into that category (see the chart below). But the common threads among likely winners this time around are pricing power and customer loyalty. As Melda Mergen of Columbia Threadneedle Investments puts it, these are “companies that can control their own destiny.”

With U.S. stock prices at a potential peak, investors should also be looking abroad. Nine of the 30 stocks Wieczner recommends are of non-U.S. companies. And in “Emerging Bulls”, editor-at-large Shawn Tully makes a compelling case for the opportunities created by the youthful energy of emerging-market economies. (Stocks in these markets are an astounding 60% cheaper, relative to companies’ earnings, than American equities.)

Another theme for mature audiences: Even the most experienced investors are never too old to try new things. In “The Death and Life of Value Investing”, Adam Seessel delivers an insightful account of how Warren Buffett and his acolytes learned to see the value of tech companies. And in “Nelson Peltz’s Twin Challenges”, Fortune’s Geoff Colvin tells a cautionary tale about how investors can suffer when older companies—in this case, GE and Procter & Gamble—struggle to age gracefully. (Watch for these stories on Fortune.com later this week.)

Click the images below to find more stories and more advice. —Matt Heimer

Nigel Cox for Fortune Magazine 

The 30 Best Stocks to Buy for 2019—in a Bull or Bear Market

Rising interest rates and geopolitical tensions are creating new threats to global growth. The best move for investors? Buying companies that are strong enough to control their own destiny, no matter what the economy does.—By Jen Wieczner with additional reporting by Scott DeCarlo

Reed Young for Fortune Magazine 

The Best Investing Advice for 2019 From Fortune’s Experts

Our panel of investing experts hasn't been fazed by the market's recent bumpy ride. Here's where they're spotting profitable opportunities.—Moderated by Matt Heimer

How Fortune’s Best Stocks Performed in 2018

Financial and healthcare stocks soared, while Chinese stocks got hammered.—By Matt Heimer

The Best Bond Funds to Buy for 2019 as Interest Rates Rise

As the bond market braces for a downturn, here’s how to invest.—By Lucinda Shen

Nigel Cox for Fortune Magazine 

Why Emerging Markets are a Screaming Buy

Stocks in the developing world are volatile but inexpensive.—By Shawn Tully

Nigel Cox for Fortune Magazine 

An Evolve-or-Die Moment for the World's Great Investors

The dominance of tech stocks has forced some of the best investing minds—including Warren Buffett himself—to reexamine their thinking. Who will adapt and survive?—By Adam Seessel

This article originally appeared in the December 1, 2018 issue of Fortune.

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