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Motley Fool Issues Rare “All In” Buy Alert
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Today’s market environment is tough. We all realize that as we look at our portfolio’s performance this year. But right now, the best thing to do is focus on the long-term picture — and stocks with long-term growth potential. The good news is these difficult times offer us opportunity to get in on some of these players at a great price.
In some cases, these companies are defying the difficult market and reporting solid earnings. In other cases, the economic woes have hurt earnings — but the recovery and future growth story look promising. And in each case, if you invest, you could be looking at major returns in the coming years. Let’s check out three top stocks to buy right now.
Walt Disney (DIS -0.93%) had a long history of earnings growth — until the early days of the pandemic. The company temporarily closed parks due to coronavirus restrictions. This was particularly bad news because Disney’s parks, experiences, and products business historically has contributed the most to revenue.
Since then, parks have reopened. And demand is strong. The parks, experiences, and products business posted a 73% increase in revenue for the recently ended fiscal year. Disney’s streaming services also have added more members — totaling 57 million additions for the fiscal year. But Disney is struggling with costs, and the company missed recent earnings estimates.
Why buy Disney now? Because the company recently brought back longtime chief executive officer Bob Iger. With Iger at the helm, Disney made key acquisitions such as Pixar and Marvel. Iger also was behind the release of blockbusters like Frozen and launched the Disney+ streaming service. Importantly, the stock rose about 400% during his tenure.
Iger probably is the best person to bring magic back to the Disney story. He’s already begun launching his strategy. And if Iger’s plan starts to show progress, the shares could climb. That’s why it’s a great idea to buy Disney today. And you’ll get them for a good price — at 23 times forward earnings estimates. That’s down from 40 earlier this year.
Amazon (AMZN -1.98%) represents another potential recovery story. The company is a leader in two high-growth industries: e-commerce and cloud computing. It also makes revenue through advertising. And it’s taking steps to expand in healthcare.
The past year has been difficult for Amazon, though. Rising inflation and supply chain troubles weighed on earnings. And the rapid expansion of its fulfillment network during the earlier stages of the pandemic left Amazon with too much capacity. As a result, Amazon has reported declines in operating income quarter after quarter. And the stock is heading for a 43% loss this year.
But this is just a look at Amazon through a short-term lens. The long-term picture remains positive. Amazon is improving its cost structure — this is something that should serve it well over time. At the same time, the company is cutting investment in fulfillment and transportation, and increasing investment in Amazon Web Services (AWS).
AWS continues to grow operating income and revenue in the double digits — and it’s Amazon’s main profit driver — so investing here to prepare for the future is a wise decision.
Today, Amazon trades at its lowest in relation to sales since about 2015. This looks like a great entry point considering Amazon’s efforts today and its future prospects. And that’s why right now is the perfect time to get in on this story.
Home Depot (HD -0.42%) shares have dropped 21% this year. That’s even as the company continues to report gains in revenue and profit. In fact, Home Depot said 11 of its 14 merchandising departments posted positive comparable sales in the third quarter.
Home Depot’s quarterly sales rose more than 5% to $38.9 billion. Diluted earnings per share increased 8.2%. And the strength seen so far prompted Home Depot to reaffirm its fiscal 2022 guidance.
The world’s biggest home improvement retailer continues to see momentum in both its do-it-yourself and professional businesses. In the quarter, Home Depot’s sales to medium-to-large professional businesses grew in the double digits. And pros say their project backlogs continue to be strong. This is important because it’s a good indicator of what’s to come in future quarters.
The pros also represent a key growth driver for Home Depot. The total pro market is a $450 billion opportunity. Home Depot is on a mission to streamline the whole pro experience so that its market share can keep increasing. For example, Home Depot’s market delivery operation now manages all appliance delivery, which has improved the quality and speed of deliveries.
In spite of the difficult economic environment, individuals and pros continue to advance projects. And Home Depot’s business continues to thrive. At the same time, the shares haven’t yet followed. But that’s likely just a matter of time. Today, the stock looks cheap at less than 20 times forward earnings estimates. And that’s why buying Home Depot right now looks like a great idea.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon and Home Depot. The Motley Fool has positions in and recommends Amazon, Home Depot, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
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