3 stocks Gen Y should buy

The earlier an investor starts, the longer he has to realise the benefits of time in the market.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published August 19, 2013 9:32 am AEST

Oscar Wilde said the only thing truly worth possessing in life is youth. Of course he forgot shares, but what if we were could have both? Long-term what companies offer the best prospects of making us old and rich in retirement? Here are three companies for Gen Y to consider.

Coca-Cola Amatil (ASX: CCL) is a business that spans the generation gap, passes the test of time and keeps thrashing the competition. Short-term the stock is well off 2013's highs and now looks a nice time to invest. A company with competitive advantages and rock solid future, its track record of consistent share price growth comes as no surprise. In addition, a dividend yield around 4.5% will put investors comfortably ahead of cash for a while yet.

Founded in 1849, AMP (ASX: AMP) is another business with a history of delivering for investors. Currently completing its merger with AXA Asia Pacific, it should see the economy of scale benefits as time goes by. A newly anointed chief executive will start the top job with the opportunity to take the company to another level and leverage off any upturn in global share markets. It's well positioned to benefit from the rise in compulsory employer superannuation contributions from 9% to 12% by July 2019. That's an effective 33% increase and long-term tail wind. After a period of change, present valuations look reasonable and a dividend yield around 5.1% provides an attractive backdrop.

History shows lawyers have a well-deserved money-making reputation and Slater and Gordon (ASX: SGH) is a growing business run by entrepreneurial lawyers. Operating since 1935, the firm provides commercial litigation and general legal services. A growing brand across Australia, it's also looking to grow operations in the far larger UK market. Geographic expansion, acquisitions and practice area diversification give great long-term growth potential. The group has consistently grown earnings and its dividend payout since listing on the ASX in May 2007.

Foolish takeaway

Any investor smart enough to recognise the power of dividend reinvestments and compounded returns over the long-term could generate some amazing wealth. Growth and reinvested income should be any investor's Holy Grail. These three companies have top long-term potential and while unable to provide eternal youth they should provide future riches.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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