Whether you measure the time until retirement in decades or years, having a portfolio full of outstanding businesses should be a priority. After all, your investment returns will ultimately depend on the underlying success of these competitively advantaged companies with revenue and profit growth as the main drivers of financial success.
If there are three stocks you had to buy and hold between now and the day you call it quits as a member of the workforce, they should be Home Depot (HD -0.29%), Nike (NKE -0.88%), and Starbucks (SBUX -0.79%). Here's why.
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Successful track records
When thinking with a long time horizon in mind, it's worthwhile to look at the histories of these companies. A long and successful track record could point to a future that resembles the past.
Since its initial public offering in 1981, Home Depot's stock has returned a monstrous 1,600,000%. The business has boosted the productivity of its stores tremendously throughout the years -- to an annualized $572 in sales per square foot today -- in order to better serve its do-it-yourself and professional customers. Over the past decade alone, Home Depot has increased revenue by 115% and profit by 321%.
Nike shares have generated a total return of 70,000% since going public in 1980. The business is a global icon in the apparel industry, partnering with some of the biggest names in sports and having an undeniable influence on culture and fashion. From fiscal 2011 through fiscal 2021, Nike's annual sales have more than doubled.
Starbucks pioneered the category of premium coffee stores, creating a thriving business that encourages people to pay up for their favorite caffeinated beverages. The chain counted 34,317 stores worldwide as of Jan. 2, a number the management team thinks can reach 55,000 by 2030. And the stock has followed this major expansion, climbing 26,000% since Starbucks went public in 1992.
Consumer relevance
Owning businesses that stay relevant in customers' minds is absolutely vital when looking at stocks with a buy-and-hold approach. You want top brands in their respective industries, ones that will stay in that position even decades from now because they offer desirable products and services.
Home Depot has become the go-to place for the right tools and supplies to complete renovation projects. And this dependability has allowed the top home-improvement chain to thrive in a competitive retail environment. An incredible 90% of the U.S. population lives within 10 miles of a Home Depot, and this accessibility to its customer base will keep the company flourishing.
Nike and Starbucks are both premium brands, and they have been for quite some time. These consumer discretionary stocks sell goods that buyers identify with, and this is a powerful position to be in. Nike and Starbucks posted gross margins of 46% and 29%, respectively, over their trailing-12-month periods. This signals consumers' willingness to pay up for what they deem are differentiated products.
What's more, both of these businesses have leaned heavily on technology to develop a deeper connection with their customers. As of Nov. 30, Nike had 79 million members across its digital ecosystem. And Starbucks' first-class rewards program counted 26.4 million 90-day active rewards members in the U.S. at the end of the last fiscal quarter (Jan. 2). Driving loyalty and repeat purchases will help maintain brand relevance for Nike and Starbucks far into the future.
Minimal technological disruption
Buying shares in companies that operate in quickly evolving industries and that undergo substantial technological disruption is probably best avoided when we're thinking about investing for retirement with a buy-and-hold approach. While this strategy could produce winners for your portfolio, the constantly changing competitive landscape means a lot more can go wrong than right. Seeking out safety and stability is important.
With this in mind, it's no wonder Home Depot, Nike, and Starbucks make for good retirement investments. None of them undergo major technological change, and this is an advantage for us. We can be certain with a high probability that people will still be living in houses far into the future, resulting in the need to complete renovation projects and shopping at Home Depot stores.
Also, decades from now, customers will be buying high-quality branded apparel and sneakers, especially those associated with having good style and a connection with famous athletes and celebrities, supporting Nike's long-term prospects.
And finally, perhaps no other consumer product exemplifies longevity, durability, and resilience more than coffee. It's probably a sure bet that even 50 years from now, people all over the world will turn to caffeine to help them power through their days. And Starbucks will be there to serve them.
If you're investing for retirement, don't overthink it. Look at Home Depot, Nike, and Starbucks as worthy additions to your portfolio.
