This year was a terrible year for investors as the S&P 500 Just had its worst first half performance since 1970. With the market falling 21% in the first six months of 2022, investors are certainly being tested right now. The best course of action, as is usually the case, is to stay focused on the long term.
Here are three no-brainer stocks investors should consider even if the rest of the market is a deteriorate† These companies are proven winners and can enhance anyone’s portfolio.
1. Home depot
With 12-month lagging revenue of $153 billion, leading home improvement chain DIY store (HD 1.75%† is the first on the list of stocks to consider now. A long-standing industry leader, this company caters to DIY and professional customers alike by helping them with all the tools and supplies they need to get projects done.
What makes Home Depot a good investment in times of market turmoil is that it has a long operational history of success. Because the company serves the massive housing industry, its importance to the US economy cannot be overstated. As the biggest financial transaction in most people’s lives, owning a home (and upgrading it) will always be a priority. As home prices continue to rise over time, demand for Home Depot’s products should be strong.
Home Depot shares are down 33% so far this year (as of July 1). This is partly due to the slower growth compared to the huge gains made last year. In addition, investors fear that higher mortgage rates will cool the hot housing market, causing many homeowners to delay completing renovation projects. I think this potential short-term headwind is definitely something to watch out for, but with a price-profit (P/E) ratio of just 18 today, it’s time to buy Home Depot stock.
The top dog in the clothing market, Nike (FROM -1.00%† is a company with a powerful brand associated with a winning mentality. It has long been a company closely associated with consumers who constantly desire quality clothing and footwear. Revenue for the last fiscal quarter (ending May 31) totaled $12.2 billion, essentially flat year over year.
Nike’s intense focus in recent years on building its digital footprint is already paying off. The company counts more than 300 million members in its digital ecosystem, which provides invaluable data on marketing and product decisions. Thanks to this initiative, management hopes that 50% of Nike’s revenue will come from digital channels in the near future.
Pandemic-related restrictions in China, Nike’s fastest-growing market, have hampered sales growth in the country. And supply chain and inventory challenges, factors that have impacted many other companies in the global economy, are also taking their toll on Nike. Add to that the threat of a looming recession, where consumers could wait for discretionary purchases, and it’s no surprise that Nike has seen its stock price plummet 39% this year.
Today’s Nike P/E ratio of 27 is well below the company’s lagging five-year average, making the stock an easy investment to make amid the market turmoil.
Another giant in his business is none other than Starbucks (SBUX 3.76%†† The sale of caffeinated drinks and food is a highly sustainable business model. Starbucks, with its 34,630 stores worldwide, generated record second-quarter sales of $7.6 billion in its most recent fiscal quarter ended April 3.
Like Nike, Starbucks has a robust digital presence. The premium loyalty program, now with 26.7 million active members in the US, is an important funnel to drive customer engagement. Because coffee lends itself to repeat purchase behavior, Starbucks’ rewards program has been wildly successful, as 54% of US store sales in the past quarter came from loyal members.
Starbucks has faced different situations in its two largest markets. In the US, sales are bounce back strong as consumer mobility continues to increase. However, in China, where Starbucks today has 5,654 stores, recent COVID-19 lockdowns have hurt the company as same-store sales fell 23% last quarter. On the positive side, however, management believes these issues will resolve themselves.
“We remain very optimistic about our future growth in China,” said CFO Rachel Ruggeri of the second quarter earnings call. Dropping 32% in 2022, the shares are trading at a price-to-earnings ratio of 21. Now seems like a good time to buy the world leader in coffee.
These three excellent companies – Home Depot, Nike and Starbucks – are excellent stocks that investors can rely on to build a solid foundation for any portfolio. They have sustainable competitive advantages and because of their long and successful business history in slow-moving industries, they are sure to be there for decades to come.