Deciding to invest some of your hard-earned savings is a critical first step toward reaching your financial goals. But with the seemingly complex nature of the stock market, trying to pick winning investments can seem like a daunting task for beginners. To be clear, it doesn't have to be difficult. In fact, some of the best stocks are companies that most likely everyone has heard of already.
With that in mind, here are three wealth-building stocks that every investor should know about now.
Home Depot
With a stock price that has risen roughly 1,400,000% since the business went public in 1981, Home Depot (HD 0.34%) has easily been one of the single best investments anyone could've made to generate life-changing wealth.
NYSE: HD
Key Data Points
The world's largest home-improvement retailer has produced these returns thanks to its strong fundamentals. Over the past decade, revenue increased 115% and net income grew 321%. And because of a long history of consistent share repurchases, earnings per share (EPS) have jumped 529% during that time.
Catering to both DIYers and professional customers has its benefits for Home Depot, especially over the past couple of years. At the onset of the pandemic when people spent more time than ever at home, they turned to smaller renovation projects to occupy themselves. And as restrictions eased and people became comfortable letting others into their homes, Pro sales growth started outpacing the DIY segment.
Professional customers, like contractors, plumbers, and electricians, visit stores frequently and spend more per visit, which is a boon for the company. Home Depot's return on invested capital during first-quarter 2022 was 45.3%, a clear sign of efficiency and profitability.
Despite rising mortgage rates, Home Depot is positioned to continue thriving as we look ahead. U.S. home prices increased 15.3% year over year in April. This situation encourages consumers to keep investing in sprucing up their living quarters.
Nike
Since the company's initial public offering in 1980, shares of Nike (NKE +0.51%) have soared about 60,000%, easily crushing the S&P 500's gains during the same time period. The leading athletic apparel business, with revenue of $44.5 billion in fiscal 2021, has a brand that is known and loved all across the world, a feature that should help keep Nike on top of its industry for decades to come.
NYSE: NKE
Key Data Points
The business has no doubt been going through a rough patch since the coronavirus pandemic started. Various restrictions placed on in-person shopping adversely affected revenue. And with those restrictions easing at different times, Nike's performance in its two biggest markets, the U.S. and China, has been uneven. In the most recent quarter, the Greater China segment posted a 5% drop in sales, while North America registered a 9% gain.
Luckily for Nike, it has a robust digital foundation to lean on in order to drive deeper connections and engagement with its customers. The company's Consumer Direct Acceleration initiative, part of an ongoing investment to create a seamless shopping experience, has a goal of bringing new products to market faster. The main objective is to one day generate half of all sales from digital channels.
Looking ahead, management is still committed to their long-term financial outlook despite the current macroeconomic situation. By fiscal 2025, Nike is forecast to increase EPS in the mid-to-high teens per year. Investors still have a lot to be excited about.
Starbucks
Another extremely well-known consumer discretionary brand is none other than Starbucks (SBUX 0.35%). The massive coffeehouse chain, boasting 34,630 stores, has long been the go-to destination for people to get their favorite caffeinated beverage or snack. And the stock has been a huge wealth generator, rising 22,000% over the past 30 years.
NASDAQ: SBUX
Key Data Points
A business that relies on consumer mobility like Starbucks was unsurprisingly negatively affected by the pandemic. Same-store sales (or comps) declined sharply during the middle of 2020. But in the latest quarter (ended April 3), Starbucks posted same-store sales growth of 12% in its largest market, the U.S. China, another important region for the business, is facing a different reality. Its comps declined 23% in the most recent quarter due to rigid lockdown measures to curb the spread of the coronavirus.
However, Starbucks has a top-notch digital infrastructure it can use to continue serving customers. Here in the U.S., the rewards program has 26.7 million members who generated 54% of sales at U.S. company-owned stores during second quarter of 2022. These loyal customers provide Starbucks with an invaluable resource that can inform product and marketing decisions.
The coffee leader still has a massive runway for expansion throughout the rest of the decade. Management sees the potential for 55,000 total stores by 2030, which would make Starbucks the largest (by number of locations) restaurant chain in the world.
