This year has been a terrible one for investors as the S&P 500 just had its worst first-half performance since 1970. With the market down 21% in the first six months of 2022, investors are certainly being tested right now. The best course of action, as is usually the case, is to remain focused on the long term.
Here are three no-brainer stocks investors should consider even as the rest of the market takes a turn for the worse. These companies are proven winners, and they can strengthen anyone's portfolio.
1. Home Depot
With trailing 12-month sales of $153 billion, leading home-improvement chain Home Depot (HD 0.86%) is first on the list of stocks to consider right now. This company has been an industry leader for a long time, catering to both DIY and professional customers by helping them with whatever tools and supplies they need to get projects done.
What makes Home Depot a sound investment in times of market turmoil is that it has a long operating history of success. Because the business serves the massive housing sector, its importance to the U.S. economy can't be overstated. As the biggest financial transaction in most people's lives, owning a home (and keeping it upgraded) will always be a priority. As home prices keep rising over time, demand for Home Depot's products should be strong.
So far this year, Home Depot shares have dropped 33% (as of July 1). Slower growth compared to the huge gains registered last year is partly to blame. Additionally, investors are worried that higher mortgage rates will cool off the hot housing market, causing many homeowners to hold off undertaking renovation projects. I think this potential near-term headwind is definitely something to keep an eye on, but with a price-to-earnings (P/E) ratio of just 18 today, it's time to buy Home Depot stock.
2. Nike
The top dog in the apparel market, Nike (NKE -0.18%) is a company that possesses a powerful brand associated with a winning mentality. It has long been a business that has connected deeply with consumers who constantly desire its quality clothing and footwear. Sales last fiscal quarter (ended May 31) totaled $12.2 billion, essentially flat year over year.
Nike's intense focus in recent years on building out its digital footprint is already paying off. The business counts more than 300 million members across its digital ecosystem, which provides invaluable data on marketing and product decisions. Thanks to this initiative, management hopes that in the near future, 50% of Nike's revenue comes from digital channels.
Pandemic-related restrictions in China, Nike's fastest-growing market, have hampered sales growth in the country. And supply chain and inventory challenges, factors that have been affecting many other companies across the global economy, are also taking their toll on Nike. Add in the threat of a looming recession, where consumers might hold off on discretionary purchases, and it's no surprise that Nike has seen its stock price fall 39% this year.
Nike's P/E ratio today of 27 is well below the company's trailing five-year average, making the stock an easy investment to make amid the market turmoil.
3. Starbucks
Another giant in its business is none other than Starbucks (SBUX -0.35%). Selling caffeinated beverages and food is a business model that has major durability. Starbucks, with its 34,630 stores worldwide, generated record Q2 revenue of $7.6 billion in the most recent fiscal quarter that ended April 3.
Like Nike, Starbucks has a robust digital presence. Its top-notch loyalty program, now with 26.7 million active members in the U.S., is an important funnel to drive engagement with customers. Because coffee lends itself to repeat purchase behavior, Starbucks' rewards program has been wildly successful, as 54% of sales at U.S. company-operated stores last quarter came from loyalty members.
Starbucks has been dealing with different situations in its two biggest markets. In the U.S., sales are bouncing back strongly as consumer mobility continues to rise. In China, however, where Starbucks has 5,654 stores today, recent COVID-19 lockdowns have hurt the business as same-store sales were down 23% last quarter. On a positive note, however, management believes that these issues will work themselves out.
"We remain very optimistic for our future growth in China," said CFO Rachel Ruggeri on the Q2 earnings call. Down 32% in 2022, theshares are trading hands at a P/E ratio of 21. Now looks like a great time to buy the global leader in coffee.
These three outstanding businesses -- Home Depot, Nike, and Starbucks -- are blue-chip stocks that investors can rely on to build a solid foundation for any portfolio. They possess durable competitive advantages, and because of their long and successful operating histories in slow-moving industries, they are sure to be around decades from now.
