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OPINION

The Best Advice I Can Give Any Investor

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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It's the best way I know to create significant wealth in the stock market.

It's been one of the guiding principles for my $100,000 portfolio in my Top 10 Stocks advisory, my selections for the 10 Best Stocks to Hold Forever, and my Top 10 Stocks for 2012.

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Put simply, you can make a lot of money investing in companies that dominate their market.

But I doubt that's news to you. You've heard something similar for decades. Today, I want to prove to you that this technique works.

For example, take Philip Morris International (NYSE: PM).

Philip Morris dominates the cigarette industry thanks to its ownership of seven of the world's top 15 brands, including Marlboro, the No.1 cigarette brand worldwide. It's not a complex business. And you don't need to be a hedge-fund manager to see why owning Philip Morris is likely to make you money.

Its dominant position in its market has led to huge gains for investors. And those gains all start with company profits.

Philip Morris' net profit margin stands at 28%. This means the company turns nearly a third of its revenue into pure profit.

Most companies don't even come close to this. The average net profit margin for all members of the S&P 500 is 11%.

When you invest in world dominators like these, good things tend to happen.

Since being spun off from Altria (NYSE: MO) back in 2008, Philip Morris has bought back $20 billion worth of shares and paid $14 billion in dividends. It's raised its dividend 67%, and the stock is now paying DOUBLE the average dividend yield paid by the overall market.

Over time, these shareholder-friendly moves have led to exceptional market-beating returns.

Take a look below. Since the spin-off, Philip Morris has returned 80%. Meanwhile, the overall market has gone nowhere...
 
It's simple. Investing in dominant firms like Philip Morris is likely to pay off handsomely. I've gained nearly 20% since I added the stock to my Top 10 Stocks Portfolio last June.

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I often call stocks like Philip Morris "no-brainer" investments because I'm 100% convinced that if you buy them at the right price, then they are virtually guaranteed to make you money in the long run.

Let's take a look at another dominating company -- Intel (Nasdaq: INTC). It's not only one of the most profitable firms in America... it's also one of the best investments on the planet, hands down.

Intel controls 80% of the microprocessor market, making it a virtual monopoly. And that monopoly position has led to huge gains for investors -- every $100 invested in Intel in 1972 would be worth $198,000 today.

Just like Philip Morris, Intel has enormous margins -- it turns 24% of every dollar in revenue into pure profit.

In 2011, Intel earned $54 billion in revenue -- that's greater than the gross domestic product of 110 different countries. It increased its dividend 110% in the past five years and spent $14 billion on share buybacks in 2011 alone.

And if you need more proof that Intel is a great investment, how about the backing of the world's greatest investor? Warren Buffett's Berkshire Hathaway (NYSE: BRK-B) recently bought 9.3 million shares of Intel valued at more than $240 million.

For Top 10 Stocks, I waited to buy Intel until I saw a dip in its share price. That proved to be a smart time to buy. The stock has already delivered 38% gains since I added it to my real-money Top 10 Stocks Portfolio in September.

Intel is a great investment. But most investors look at stocks like Intel the wrong way.

Because the stock has delivered incredible gains for investors over the years, they think they've "missed their chance." They believe that to make money in the stock market, they need to "go where the action is."

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I'm convinced this is why most investors lose money in the stock market.

Action to Take --> If you want to earn serious wealth in the market, then it's not going to be with companies that are "hot" today and then forgotten months or years from now. Those companies are often extremely risky.

The best stocks usually won't make you money overnight. They take time to reach their potential. In the meantime, they dominate their markets... pay generous dividends... and buy back billions of dollars worth of shares.

[Note: To learn more about some of my favorite "dominating" companies, be sure to watch my recent presentation. It includes more information -- including several names and ticker symbols -- of my Top 10 Stocks for 2012. This includes one company that has $8.25 per share in cash (45% of its share price) and another yielding 8.0% that has nearly doubled its net income year-over-year. Click here to watch.] 

-- Paul Tracy

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