When conditions in the market are uncertain, it can be difficult to look ahead to better times. The two current significant headwinds are inflation and Russia's invasion of Ukraine. The inflation rate is pushing 8% -- a 40-year high. Gas prices have soared worldwide as demand exceeds supply and geopolitical issues abound.
Yet another concern for investors is that, with inflation running rampant, the Federal Reserve will have to raise interest rates drastically from their current rock-bottom lows in its effort to bring it back under control. If the central bank can't do that with the right degree of finesse, it could plunge the country into a recession. The war in Ukraine is a tremendous tragedy on a human level. From an investing perspective, it represents uncertainly, which the market loathes.
However, to be successful, investors must keep their eyes focused on the longer term. Conditions in the market now are not the way they will always be. Wall Street will turn bullish again at some point -- and when it does, these stocks could be huge winners for buy-and-hold investors.
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Amazon
Amazon (AMZN 1.30%) grabbed the attention of the market on March 9 with the announcement that it will perform a 20-for-1 stock split in June. Such events usually generate headlines even though they do nothing to alter the underlying value of a company. Still, several positives can come from a split.
First, this will make shares available to a more extensive base of investors, including Amazon's employees. A stock price near $3,000 per share can hinder some individual investors -- and not everyone might take advantage of fractional shares.
Next, and more importantly, lowering the share price could make Amazon eligible for inclusion in the Dow Jones Industrial Average. Because of the way that index's value is calculated, a stock trading for thousands of dollars a share really can't be included. But after the split, Amazon will be (pardon the pun) a prime candidate.
Somewhat lost in the news of the split, Amazon also announced it was authorizing another $10 billion in stock buybacks. Companies repurchase their own shares both to return capital to shareholders and to show confidence to investors. They also do it when management feels the stock is undervalued. That $10 billion represents less than 1% of Amazon's current market cap. However, the signal from management is clear.
On a technical front, there are several reasons for optimism. Amazon Web Services (AWS) is absolutely on fire. Revenues from the unit grew by 37% in 2021 to $62 billion, and it produced an operating margin of 30%. Advertising sales skyrocketed by 58% in 2021 to $31 billion.
The e-commerce business faced severe headwinds in 2021 as costs for labor and logistics rose. But don't write off the segment just yet. Sales continue to grow, and profits could return in spades when the headwinds subside.
Red Rock Resorts
From one of the biggest corporate names on the planet, let's shift to one that is far less widely known: Red Rock Resorts (RRR 0.98%). 2020 was obviously unkind to casino and entertainment companies. Casinos in Nevada were shuttered for months, and conventions and vacationers come back slowly when they did reopen.
With its focus on catering to the Las Vegas locals market, Red Rock recovered more quickly than some casinos that rely on travel. Many people are not aware that the Las Vegas locals market is the second-largest gaming market in the country after the Las Vegas Strip. Red Rock Resorts operates 19 properties throughout the Las Vegas Valley.
This market is also compelling as the city continues to boom in population. Red Rock notes that Las Vegas is the third-fastest-growing metro statistical area in the country. Retirees are flocking to the city for reasons that include a lack of state income tax in Nevada and its sunny climate. They now make up nearly 20% of the metro area's population.
Red Rock's 2021 results showed encouraging signs despite the challenging market for ancillary services like food and beverage sales due to COVID-19 restrictions. Casino revenues easily surpassed 2019's results and crushed 2020's. Total revenues still came in lower than they did in 2019, but still rose by 37% year over year. The best sign, however, was operating income. In 2021, the company achieved operating profit $402 million, representing a 25% margin. This easily surpassed the operating profits in 2020 and 2019 of $89 million and $186 million, respectively.
Red Rock rewarded shareholders with a special dividend of $3 per share in late 2021, a yield of nearly 6% when it was announced. With the most impactful stages of the COVID-19 pandemic now apparently in the rearview mirror, the future looks bright for Red Rock.
