We all hope that our favorite stocks will crush the market this year. But what’s actually more important is their performance over time – by that I mean a period of at least five years. The good news is that these types of players are much easier to pick than those that provide a quick – and perhaps short – win. What indicates long-term potential? Elements such as a history of earnings growth and solid growth prospects.
I consider these players to be easy wealth builders as their high quality trades are likely to result in stock gains over time. Many of these fantastic long-term stocks are trading at great prices these days. Let’s look at three that can help you get rich.
1.Amazon
Amazon (AMZN -1.81%) may not look like an enticing buy considering recent earnings. The company reported its first annual loss in nearly a decade — after struggling with higher inflation and other economic headwinds.
But ignoring this stock market giant today could be a big mistake. That’s because Amazon has what it takes to deliver long-term growth. First, it’s important to note that Amazon is a leader in two markets that are growing at double-digit rates: e-commerce and cloud computing. The company should benefit from this as soon as the economic pressure eases.
Second, Amazon is wisely preparing for these better times. The company increased its investment in technology infrastructure by $10 billion last year. This is to support the cloud computing business — its biggest moneymaker. Amazon has also expanded its Prime subscription service, moving into other areas like healthcare.
Another positive step: Amazon is working on improving its cost structure. That should help him through today’s difficult times and lead him to long-term success. After all, Amazon’s sales continue to grow. Last year, it rose 9% to $514 billion.
Today, the stock is trading near its lowest level since 2016 in terms of revenue. It’s a great entry point given Amazon’s prospects in both e-commerce and cloud computing for years to come.
2. hardware store
During tough economic times, investors have turned away from companies dependent on consumer spending. But some of these companies have actually held up very well. Home Depot (HD -1.63%) is the perfect example.
The world’s largest home improvement retailer has seen strength in both its DIY and professional customers. The demand for home improvement projects has not abated. In fact, 11 of Home Depot’s 14 merchandise divisions saw sales growth last quarter. And six departments even recorded sales growth above the company average.
Importantly, the company’s professional customers say that backlogs are solid. This is great news as it suggests these customers will continue to shop at Home Depot in the coming months to complete these new projects.
Speaking of the pros, they represent a tremendous growth opportunity for Home Depot over time. This market is worth $450 billion. Home Depot is working to gain market share by making the shopping process seamless for these customers. This includes investments in fulfillment capabilities and the digital platform.
Home Depot’s shares are trading for less than 20 times forward earnings estimates — and that seems pretty cheap considering the company’s progress, even in tough times.
3.Nike
Nike (NKE -0.59%) has been struggling lately due to various economic factors: rising inflation, supply chain problems and the negative impact of exchange rates. But the latest earnings report suggested brighter days could be just around the corner.
The sports equipment maker said the inventory spike that weighed on earnings is now a thing of the past. The company has been working to bring inventories back to healthier levels — and that should help earnings in the coming quarters.
Despite recent challenges, Nike’s brand strength has helped deliver continued sales growth. In the most recent quarter, total revenue, Nike digital sales, and direct Nike brand sales all grew at double-digit rates. And diluted earnings per share actually rose 2%.
Back in 2017, the company made efforts to strengthen its digital and direct-to-consumer business. And those efforts helped it continue to grow during the worst of the pandemic as it connected with fans online. Today, events like new sneaker drops on the SNKRS app continue to drive digital sales.
Nike shares are trading at 34 times trailing 12-month earnings. That’s less than over 60 a few years ago. Nike continues to be a popular brand around the world. And we have seen that even in a difficult economy, growth is driven forward. So, looking ahead, it’s reasonable to be bullish on Nike’s earnings outlook — and share performance over the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions at Amazon.com, Home Depot and Nike. The Motley Fool has positions in and recommends Amazon.com, Home Depot, and Nike. The Motley Fool recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
