Has your portfolio slowly drifted away from the well-rounded collection of stocks you meant to own when you first started investing? If so, you’re not alone. The past two-and-a-half years have been a wild time for the market, and it’s been all too easy to shed solid, reliable holdings for something scintillating but speculative.
If that’s you, don’t sweat it — there’s hope for rebuilding your holdings into something that makes much more long-term sense. Here’s a rundown of three proven, unstoppable investments that would work well as part of nearly anyone’s portfolio.
By most accounts, Costco Wholesale (COST 1.59%) shouldn’t be thriving. It doesn’t offer anything rival retailers like Target, Kroger, and Walmart don’t, and none of those retailers charge customers a membership fee just to shop in their stores.
The fact is, however, Costco has mastered the art and science of club-based retailing. As of May, the company boasts 64.4 million paying members, up by nearly 4 million on a year-over-year basis. Membership fee revenue improved from $901 million to $984 million during the same quarter, coinciding with 16% revenue growth over the course of the past 12 months. In fact, this company’s top line has grown on a year-over-year basis in every single quarter for over a decade now. Analysts expect similar sales gains this year and next, with profit growth projected to be even stronger.
There are still plenty of opportunities further down the road, too. There are over 122 million households in the United States, and thousands of businesses of all sizes, many of which are not yet members of this discount shopping club. There are also only 577 Costco stores in the U.S. and Canada — Costco’s core market — versus more than 4,700 Walmarts, almost 2,800 Krogers, and 1,937 Target stores all operating in markets that could arguably support one more store … like a Costco.
Attentive investors probably know Microsoft (MSFT 0.53%) fell short of last quarter’s earnings and revenue estimates. They also likely know the software giant recently requested employees curb their travel and training spending. The message is anything but encouraging to would-be shareholders.
Take a step back and look at the bigger picture, however. Microsoft is still looking for a better back half of calendar 2022 than analysts are, and analysts were already expecting quite a bit! Wall Street is modeling sales growth of 11.4% for the fiscal year that just got underway, with per-share profits projected to improve from $9.21 to $10.34. The company believes its intelligent cloud unit’s top line will hit $20.5 billion for the quarter now underway, up at least 20% even after factoring in currency fluctuations. Productivity and business processes revenue is expected to grow by around 7% for the current quarter after discounting the 6% adverse impact of currency value changes. That’s solid given the backdrop of brewing economic turbulence.
There’s no reason to doubt any of this outlook, either.
Think about it. While Microsoft faces some sort of competition in every market it operates within, it’s a premier name in each of those markets. Consumers and businesses alike still see productivity software like Excel and Word as go-to choices, and its Xbox console can stand shoulder-to-shoulder with Sony‘s PlayStation or Nintendo‘s consoles. In the meantime, the company’s cloud computing platform management software — called Azure — saw 40% revenue growth during the second quarter of the year, according to Canalys, outpacing the growth Amazon‘s cloud computing business mustered.
The kicker: Microsoft’s revenue is increasingly recurring, or renewable. That is to say, access to platforms like Office or Azure is increasingly “rented” for a relatively small monthly sum rather than purchased once outright. This software-as-a-service model generates predictable, consistent sales from one quarter to the next.
3. JPMorgan Chase
Finally, add JPMorgan Chase (JPM 0.27%) to your list of unstoppable investments that would be a welcome addition to almost anyone’s portfolio.
It’s admittedly a tough time to be excited about owning any bank. Despite a spate of recent hikes of the federal funds rate, interest rates are still near historic lows, crimping profit margins on lending activity. Investors fear the domestic and global economies are also edging toward recession. Not only will this reduce the need for new loans, it poses a risk to banks’ existing loan portfolios. A lousy economic environment can also be a drag on the investment banking and brokerage industry, creating yet another potential headwind for one of JPMorgan’s businesses.
If you understand that banks are highly sensitive to economic cycles, though, you can feel good about stepping into a JPMorgan position in the midst of a cyclical lull, and before the next cyclical rebound.
And such a lull is arguably already fully priced in. Shares are still down nearly 30% from their early 2022 peak despite their run-up from last month’s low as more and more sellers realize they overshot their target, so to speak. You can still buy into the stock at around 11 times this year’s expected per-share profits of $11.20, and less than 10 times next year’s expected earnings of $12.57 per share. Perhaps best of all, you’d be stepping in while the dividend yield’s at an above-average 3.33%. It’s a dividend that’s grown every year since 2011, by the way, following its 2009 reduction in the wake of the subprime mortgage meltdown.
Only time will tell how easily the nation’s biggest banking name (as measured by assets) will be able to keep growing its payout, and at what pace. There’s plenty of wiggle room for this powerhouse, though. This year’s projected earnings of $11.20 share — while well below last year’s impressive bottom line of $15.36 — is still more than enough to cover its current annualized dividend of $4 per share.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Microsoft, Target, and Walmart Inc. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.