Of course the definition of a "no-brainer" stock will vary depending on individual likes and dislikes, but we asked a few Foolish investors to pick three with a solid track record that don't require babysitting.
With that in mind, three no-brainer stocks worth consideration are cybersecurity provider Check Point Software (CHKP 0.07%), e-commerce behemoth Amazon (AMZN 0.21%) and shares of the happiest place on earth, Disney (DIS +0.44%).
No fuss, no muss
Tim Brugger: (Check Point Software): For me the first thing a no-brainer stock needs is consistency. In other words, a stock that not only has a strong track record but has also positioned itself to maintain its historically strong performance. Check Point Software hits all the right consistency buttons.
It's unlikely there will be anything scary about Check Point's third-quarter earnings scheduled for Oct. 31. Investors can expect high single-digit revenue growth, and double-digit gains in both earnings per share (EPS) and all-important software subscriptions sales, just as it did last quarter.
Check Point's 8% spike in revenue last quarter to $459 million is only part of the story. Subscription sales and the reliable foundation of recurring revenue they represent jumped 27% to $118 million, and combined with the $202.34 million from software updates and service, 70% of Check Point's total revenue is ongoing. Thanks to its focus on slow and steady growth via its software subscriptions, Check Point's sales and marketing costs are well below that of its peers.
Expense management helped boost Check Point's EPS 18% to $1.12 last quarter, and Check Point shareholders can rest easy knowing it has $1.06 billion in deferred revenue on the books, a 19% jump year over year. Deferred revenue is a pretty good indication the future will bring more consistent growth.
Don't expect blowout quarters of 25% plus top-line increases; that's not how Check Point has positioned itself for the long term. What investors can expect is more of the same positive, reliable results, which is why it's an ideal no-brainer stock.
Image source: Getty Images.
Spreading its wings
Chris Neiger (Amazon): Sure, you probably think you know everything there is to know about Amazon. But if you're still thinking that the company is primarily focused on online retail, then it's time to revisit Amazon.
It's true that Amazon's North American retail business is a huge revenue generator, bringing in $79.7 billion in 2016. But it's the company's cloud service, Amazon Web Services (AWS), that's bringing in most of Amazon's profits. AWS generated $3.1 billion in operating income for the company in 2016, more than the company's $2.3 billion in North American retail sales over the same time.
The company reported its second-quarter results back in August, and AWS revenue grew by 42% year over year, an impressive feat considering that Amazon is a leader in the cloud computing market right now with 40% market share.
Additionally, Amazon is currently investing in a plethora of new businesses that could pay off years down the road. For example, the company's recent $13.7 billion purchase of Whole Foods puts it squarely in the U.S. grocery market. That opens up not just a massive opportunity for food sales, but the potential to dominate meal kit delivery services, grocery pickup services, and Amazon's own food delivery service.
If all that weren't enough, Amazon has increasing potential with its voice-enabled Echo devices, which already hold 70.6% of the voice-enabled speaker market. RBC Capital Markets estimates this subsegment of Amazon's business could bring in $10 billion in sales by 2020.
Amazon is, of course, a pricey stock. The company currently trades at about 140 times its forward earnings. But Amazon's dominance in cloud services and e-commerce is already strong and has more room to grow. And the company's other bets on connected devices, grocery stores, drone delivery, video streaming, etc. mean that Amazon is investing in new markets now that could have big payoffs for years to come.
The House of Mouse
Keith Noonan (Disney): With shares down roughly 6% year to date, Disney might not seem like the ""no-brainer"" stock that it has been in the past. The company's lagging performance is understandable in the face of challenges facing its media networks and other near-term uncertainties, but I think the House of Mouse still has what it takes to be a great performer.
Disney's strengths are pretty well documented at this point. It owns the world's most valuable collection of entertainment properties and enjoys strong synergies between its theatrical, theme parks, media networks, and consumer products segments. With that in mind, let's take a look at some of the recently visible threats in order to get a better picture of the company's outlook.
As my colleague Leo Sun recently pointed out, foot traffic at the company's theme parks fell last year while attendance at Comcast's Universal resorts actually increased. That's hardly encouraging, but Disney still has avenues to growth in the segment thanks to price increases and international expansion.
Turning to the movies, overall box office performance has come in below expectations this year. But, while the overall movie industry is slumping compared to 2016, Disney's last quarter saw its film segment record a 21% increase in operating income despite a 1% increase in sales. There's also uncertainty surrounding the decision to launch a stand-alone streaming service for its film content, but, if any entertainment company is in position to benefit from leaving Netflix to launch its own dedicated platform, it's Disney.
The impact of cord-cutting and weakness at ESPN are important risk factors for investors to be familiar with, but Disney stock still looks cheap trading at roughly 15 times forward earnings estimates, and I think time will recast it as a ""no-brainer"" buy at these prices.
