While investing in the stock market can seem like a daunting task at first, it's actually not as complicated as it might seem. Those who are looking to put money to work should adopt a long-term time horizon (at least five years), seek out only the highest-quality businesses, and be prepared for market volatility. You'll be on your way to becoming a successful investor.
To help you get started, consider Costco Wholesale (COST 1.01%), Home Depot (HD 0.86%), and Starbucks (SBUX -0.35%). They are great stocks to invest in equally with $5,000.
Image source: Getty Images.
1. Costco
With its global footprint of 829 warehouse clubs, Costco has become a one-stop shopping destination for customers looking for everything from groceries and appliances to electronics and jewelry. Trailing 12-month revenue was $210 billion. And this massive scale leads to favorable terms with suppliers and ultra-low prices for consumers, making the $60-a-year membership a no-brainer.
Costco's business was doing just fine before the pandemic hit, but over the past couple of years, it has been thriving. Same-store sales (or comps) in the fiscal 2022 second quarter (ended Feb. 13) jumped 14.4% year over year -- on top of a 13% increase in Q2 2021. That's impressive growth for a business of this size. With soaring inflation forcing consumers to stretch their dollars lately, Costco easily becomes an essential place to shop, a situation that will support demand.
After opening 20 new warehouses in fiscal 2021, management is planning to add 25 net new locations in the current fiscal year. International expansion is very much on the horizon, with new stores planned in China, France, and even New Zealand. Costco can provide investors with both downside protection and upside potential.
2. Home Depot
Another blue chip stock that should be on your radar is Home Depot. Its 2,317 stores, of which 2,006 are in the U.S., act as local hubs to help get the right merchandise into the hands of both DIY and Pro customers in a timely, efficient manner. Revenue in fiscal 2021 totaled $151 billion, up 14.4% compared to the prior year.
Like Costco, Home Depot's business received a pandemic-fueled boost over the past two years. Thanks to consumers spending more time stuck inside, renovation projects became a priority. Home Depot's comps increased 8.1% in Q4 2021 while diluted earnings per share rose 21.1%. And the company is leaning heavily on technology to create a seamless omnichannel experience; 55% of online orders were fulfilled through a store in the most recent fiscal year.
Because Home Depot serves the gargantuan housing market, there is still lots of growth opportunity left for this business, particularly when it comes to serving professional customers. And with rising housing prices, spurred by Americans wanting to relocate as a result of the popularity of remote work, demand for Home Depot's tools, supplies, and services should remain elevated.
3. Starbucks
Starbucks has one of the most recognized brands out there, selling premium-priced coffee to the masses to create a business valued at $100 billion today. Recent success can be attributed to the company's top-notch digital infrastructure, which allows customers to order their favorite food or beverages in ways most convenient for them. As of Jan. 2, Starbucks counted 26.4 million 90-day active Rewards members in the U.S., a 21% increase from the year-ago period.
Temporary store closures due to the pandemic have impacted Starbucks' different geographies in different ways, and the recoveries have been uneven. In the U.S., Starbucks' largest market, comps grew 18% year over year in the fiscal 2022 first quarter. China, on the other hand, has experienced ongoing lockdowns to curb the spread of the virus, causing comps to decline 14% in the latest period.
Although Starbucks seems to already be ubiquitous today, with its global network of over 34,000 stores, there is actually still a long growth runway in the decade ahead. Management thinks that by 2030, the business will have a whopping 55,000 locations worldwide. Most of the expansion will come in China.
All three of these outstanding business -- Costco, Home Depot, and Starbucks -- have had tremendous success in the past by taking care of their customers, employees, and shareholders. I don't see this changing over the next two decades, which makes them fine long-term investment candidates.
