Investing in the stock market doesn't have to be difficult. Investors can start by identifying companies that they are customers of. And then it's all about understanding that patience is the name of the game, and it's best to be in it for the long haul.
Nike (NKE 0.19%) and Starbucks (SBUX 0.47%) are two top consumer discretionary stocks trading below $110 a share that investors can buy and hold forever. Here's what you should know about these businesses.
Nike
Nike saw its revenue rise by just 2% in the most recent fiscal quarter (Q1 2024, ended Aug. 31), coming in at $12.9 billion. While this figure missed Wall Street's estimates, earnings beat expectations, sending shares higher following the announcement. The management team is watching how macro factors, like high interest rates and the resumption of student loan payments, impact spending on footwear and apparel.
Despite near-term headwinds, Nike is a business that possesses a powerful and durable brand. And this is exactly what investors should want when looking for a stock to buy and hold forever. Nike is known for its in-demand merchandise assortment that commands premium pricing in the marketplace. Plus, the company is a leader when it comes to marketing, a competency that will keep the brand relevant for a long time.
One advantage Nike has is that its industry doesn't invite much technological disruption, but that doesn't mean the business is resting on its laurels. As part of its Consumer Direct Acceleration strategy, Nike is focused on speeding up product innovations, forging deeper connections with customers, and boosting digital sales. A testament to the company's digital ambitions is the fact that in the fourth quarter of fiscal 2023, Nike saw more than 500 million visitors to its four mobile apps. This positions Nike well for the future.
Investors might hesitate to buy the shares given they are trading at a forward price-to-earnings (P/E) multiple of 29, but this is an industry-leading enterprise that will still be atop the global sports apparel and shoe market decades from now.
Starbucks
In its latest fiscal quarter (Q4 2023, ended Oct. 1), Starbucks' revenue increased 11% to a record $9.4 billion, with diluted earnings per share coming in at $1.06. Both of these headline numbers impressed Wall Street. It's also encouraging to see that both customer traffic and ticket sizes were up. For the current fiscal year, management expects sales to rise between 10% and 12%, with EPS increasing by 15% to 20%. These double-digit gains would be cheered by investors.
Similar to Nike, Starbucks' key defining characteristic is its powerful brand. After all, the coffeehouse giant has developed a successful business model that charges high prices for what is otherwise a commoditized product. By consistently delivering an elevated experience to consumers, Starbucks' position in the industry isn't under any threat, in my opinion.
And technology has long underpinned everything the company has done. Starbucks' rewards program currently has 33 million members in the U.S. alone. It's an important asset that drives engagement and repeat purchase behavior, something any retail business would want.
Looking ahead, the leadership team has set a goal of doubling its global loyalty membership count from 75 million today to 150 million in five years. What's more, the plan is to have 55,000 stores open worldwide by 2030, up from just over 38,000 today.
Rising 7% so far in 2023, Starbucks shares have lagged the S&P 500's 17% gain. And the stock still remains about 16% below its peak price, which was set in July 2021. This could be a good time to add the business to your portfolio.
