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Americans have an abundance of retirement tools available, but arguably none provides better benefits than the Roth IRA.
The biggest benefit of a Roth IRA is that it allows your investment gains to grow completely tax-free over the life of the account. As long as the accountholder makes no unqualified withdrawals, investment gains will not be taxed,and they won't count toward your income during retirement, which can potentially relieve you from having to pay a Medicare surcharge or tax on your Social Security benefits from earning too much.
Roth IRAs are also exceptionally flexible. Accountholders have access to the money they contribute at any time, for any reason, without tax or penalty, and a handful of exceptions exist -- first-time home purchase or medical expenses exceeding 7.5% of adjusted gross income, to name a few -- that allow for withdrawal from a Roth IRA without penalty.
But my favorite aspect of the Roth IRA is that it requires investors to think long-term. Roth IRAs, under normal circumstances, can't be accessed until age 59 1/2 and have a five-year rule in place that requires investment gains to remain within the account for at least five years. This aspect makes a Roth IRA a particularly attractive option for long-term investors.
With this in mind, here are the seven best Roth IRA stocks you can consider buying for 2017.
Within the healthcare space, Gilead Sciences (NASDAQ: GILD) is a stock that should be turning some heads. It's recently struggled to grow as gross-to-net discounts on its flagship hepatitis C products have increased, right along with competition in the HCV space. Yet, the recent discount in Gilead's share price creates a perfect opportunity for investors.
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Keep in mind that Gilead maintains the lion's share of hepatitis C market share because of the convenience and efficacy of its trio of HCV drugs. It's going to be difficult to displace Gilead when physicians and consumers trust its products, and there are plenty of patients left to be treated worldwide. Gilead's innovation in HIV with new TAF-based regimens continues to garner it significant market share. When all is said and done Gilead has generated nearly $18 billion in operating cash flow over the trailing 12-month period, which will allow for continued investment in HCV, HIV, hepatitis B, and nonalcoholic steatohepatitis, as well as M&A potential. Add a 2.4% dividend yield as icing on the cake and we have what could be one of the safest cash cows in the healthcare space.
Bank of America
Among financials, few stocks look as attractive as money center giant Bank of America (NYSE: BAC), which for years has struggled under the weight of historically low interest rates and legal settlements with the Justice Department tied to the mortgage meltdown.
Image source: Bank of America.
However, Bank of America should benefit over the long term from the normalization of interest rates as well as its push to balance its loan portfolio between consumer and commercial accounts. In its latest 10-Q filing, Bank of America estimated that a 100-basis-point increase in long-term and short-term rates would increase its interest-based income by $6 billion. On the flipside, B of A has ample cost-cutting opportunities as consumers shift into mobile banking, which could allow it to reduce its physical presence and overhead costs. With a growing dividend, fewer legal expenses, and a cleaner balance sheet, Bank of America could be a stellar Roth IRA candidate for 2017.
Another "bright" idea for investors to consider adding to their Roth IRA in 2017 is solar-panel manufacturer First Solar (NASDAQ: FSLR). Shares of First Solar have been recently hit by weaker demand and financing concerns that have plagued some of its peers -- but it could be the perfect opportunity for you to buy.
Image source: First Solar.
What's most intriguing about First Solar is its healthy balance sheet and the long-term growth forecasts of photovoltaic installation. First Solar ended Q2 with $1.67 billion in cash and just $273 million in debt, meaning that nearly 40% of First Solar's current valuation is comprised of its net cash. Looking ahead, First Solar believes it could have 24 GW in potential booking opportunities, while GTM Research believes U.S. photovoltaic installation will top 20 GW a year by 2020, nearly triple what was installed in 2015. If crude oil prices once again start climbing (which is widely expected by pundits), expect solar demand to pick up.
If you're itching to add a growth stock to your Roth IRA, look no further than social-media giant Facebook (NASDAQ: FB), whose dominance is unmatched. During the second quarter Wall Street and investors learned that mobile daily active users had climbed over 1 billion, representing a 22% year-over-year increase, while advertising revenue growth of 63% nearly doubled cost and expense growth of 33%. All told, Facebook's net income nearly tripled in Q2 2016 from the prior-year period.
Image source: Facebook.
Now here's where things get interesting: Facebook hasn't even monetized Messenger, Instagram, or WhatsApp yet. Mind you, all three of these assets have huge subscribership, but Facebook's strength in ad demand through its flagship site has allowed it to slow-step its growth so as to keep its users (and investors) happy. As scary as this may sound, Facebook is still in the early stages of its long-term growth cycle.
Financial-services giant MasterCard (NYSE: MA) is another company deserving of consideration, given its track record of growth. According to MasterCard CFO Martina Hund-Mejean, 85% of the world's transactions are still being conducted in cash, which gives MasterCard and its handful of rivals a potentially high growth, sustainable opportunity to penetrate regions without ample credit service infrastructure, such as Africa, the Middle East, and Southeastern Asia.
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Also working in MasterCard's favor is the fact that it's solely a credit services facilitator. Since MasterCard doesn't actually lend money, it doesn't have to worry about the possibility of defaults. This is why MasterCard performs well even during global recessions. It also doesn't hurt that the barrier to entry in the credit services sector is relatively high, meaning there are only a few competitors. With $3.1 billion in net cash, $4.4 billion in operating cash flow over the trailing 12-month period, and a growing dividend, MasterCard could charge higher over the long run.
Your Roth IRA could be flying on cloud nine if you consider purchasing stock in Spirit Airlines (NASDAQ: SAVE), a low-cost airline. Lower crude prices have pushed jet fuel prices lower, which normally would be a good thing for all airlines. But, lower jet fuel costs have allowed major airlines to be more price-competitive with Spirit, which is the company's primary customer allure, thus hurting its share price of late.
Image source: Spirit Airlines.
This drop in Spirit's share price could be the perfect opportunity to buy given its bare bones pricing model. Spirit's low-cost tickets put the emphasis on its high margin ancillary fees. By charging for everything from printing boarding passes to carry-on baggage, Spirit encourages the consumer to handle as much as possible prior to arriving at the airport, which helps reduce its costs. Further, its fleet is only 5.2 years old, on average, meaning its planes spend time in the air as opposed to in the garage. Plus, when jet fuel prices do rise, Spirit's planes will be quite fuel efficient.
Last, but certainly not least, a long-term hedge bet that could be worthy of consideration is gold miner Barrick Gold (NYSE: ABX). The obvious concern here would be that Barrick Gold is dependent on strong gold prices to drive the majority of its profit. However, there are other reasons Barrick could be worth buying for your Roth IRA in 2017.
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For starters, Barrick Gold offers the lowest all-in sustaining costs among large gold miners, with the company lowering its AISC forecast to a midpoint of $770 an ounce during the second quarter. This provides an excellent buffer against downside in physical gold prices. Also working in Barrick's favor is that the long-term demand in gold is expected to rise. China's on track to consumer around 1,050 tons of gold in 2016, with state-owned Shanghai Security News forecasting 1,200 tons of demand by 2020. Barrick is benefiting from lower debt levels as well, having repaid $4 billion in debt since the beginning of 2015. Adding Barrick could be the perfect way to make your Roth IRA shine.
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Sean Williamsowns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.
The Motley Fool owns shares of and recommends Facebook, Gilead Sciences, and MasterCard. It also recommends Bank of America and Spirit Airlines, and has the following options: short October 2016 $85 calls on Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.