During a market downturn, there will still be plenty of investors worried about buying stocks after the market hits its bottom and starts to trend back up. However, that can be a flawed mentality. The best buying opportunities are at the bottom of a downturn. If you missed the bottom, what is the second-best time to buy? On the way up while stock prices are still relatively depressed.
It's OK to worry about buying near the bottom of a market downturn. When prices seemingly only to go down, it can be mentally difficult to overcome that pain and double down on high-quality stocks. That being said, buying companies at compressed levels can be the best returns you see as an investor.
If you want to take advantage of those low prices but invest in safer companies, then Chipotle Mexican Grill (CMG 0.62%), Waste Management (WM 0.25%), and Domino's Pizza (DPZ 1.15%) are great choices.
Since first opening in 1993, Chipotle has demonstrated its leadership in the fast-casual restaurant space, becoming a staple across the U.S. The company has almost 3,000 locations, and its popularity is increasing. In 2021, the company opened 215 restaurants and closed just 10, which shows the demand for Chipotle isn't slowing down at all. Of course, this can also be seen in the company's impressive top-line growth; 2021 revenue jumped 26% year over year to $7.5 billion.
Where Chipotle stands out is in its digital success. Throughout 2021, digital sales jumped 25% year over year and represented 46% of total sales. An online order is cheaper for Chipotle, because it doesn't require staff to take it. It also results in faster service for in-store sales, which increases customer satisfaction. This digital success allowed Chipotle to more than double its operating margin from 4.8% in 2020 to 10.7% in 2021. The company's 2021 free cash flow was also impressive at nearly $840 million.
Chipotle wants to reach 7,000 stores in North America, expanding its store count by 8% to 10% annually. More importantly, it wants over 80% of new restaurants to have Chipotlanes -- its version of a drive-through where customers order online and pick it up without getting out of their cars. This will likely keep improving profitability margins going forward, which makes for an appealing investment today.
2. Waste Management
If there is one thing that likely won't change between today and 2042, it's the fact that humans will keep throwing things away. For better or worse, trash disposal and recycling have become cornerstones of North American society, and a world where we don't throw anything away is highly unlikely. This leaves the leader in trash collection and disposal in the U.S. -- Waste Management -- to benefit.
Waste Management accounts for the largest share of landfill volume in the U.S., even beating out all town and city municipalities combined. The only other individual company remotely close to Waste Management is Republic Services (RSG 0.74%) at 19% market share, but even that pales in comparison to Waste Management's 29%.
There's a reason why nobody can keep up with Waste Management. The company has 250 landfills, 300 transfer stations, and 26,000 vehicles collecting trash. This helps it serve its 20 million customers, and a competitor would have to spend an egregious amount of money to develop the assets that Waste Management has.
This leadership has allowed the company to sport impressive net income and free cash flow, which reached $1.8 billion and $2.4 billion in 2021, respectively. With such lucrative profitability and dominance that is unlikely to fade, Waste Management could be a strong bellwether in your portfolio for decades.
3. Domino's Pizza
Like Chipotle, Domino's has been extremely successful in the digital game. More than half of its global retail sales and 75% of its U.S. retail sales came from digital channels in 2021. Pizza is a space with heavy competition, both from large chains and mom-and-pop shops, but Domino's has been able to overcome this challenge. It posted steady 10% global sales growth in its 2021 fiscal year (which ended Jan. 2, 2022). This came on top of a 12.5% fiscal 2020 top-line expansion.
The digital-first approach is what sets Domino's apart from competitors. Management has prioritized a fast and reliable experience, and online ordering has been the main driver. Additionally, the company is pushing carryout sales, rather than delivery orders, because of the financial advantages. Not only do carryout orders result in 25% higher ticker prices than phone orders, but it also helps the company maneuver the labor shortages that have pressured restaurant businesses. After all, if the customer orders online, Domino's does not have to pay an employee to take the order.
These efforts have been effective: The company's net income reached $510.5 million and its free cash flow topped $560 million in fiscal 2021. Domino's is a profitable, industry-leading, innovative company that can provide balance to your portfolio during market turmoil.