Two of my favorite stocks might not look so great if you study last year's performance. Thankfully, investment success is built over the long term, not a single year, and if you examine these players over time, they've delivered. Even better, they have what it takes to recover and deliver more growth to investors in coming years.
And there's more good news. These stocks are screaming buys right now because they are trading at dirt-cheap levels.
What companies am I talking about? E-commerce and cloud computing giant Amazon (AMZN 0.54%) and entertainment powerhouse Disney (DIS -0.15%). Let's take a closer look at why these top stocks should win a spot in your portfolio.
1. Amazon
Rising inflation hasn't been easy on Amazon. The company faces higher costs -- and its customers have less money to spend on merchandise and on its cloud computing services. As a result, Amazon's earnings and share performance suffered last year.
Here's why you shouldn't despair, though -- and, instead, should pick up Amazon shares. Amazon is cutting costs to manage the current environment. This should make the company stronger, especially when the economy picks up. Amazon also increased its investment by $10 billion last year to support its cloud computing business, which is traditionally its biggest profit driver.
It's important to remember that Amazon is a leader in e-commerce and cloud computing. These markets are forecast to grow in the double-digit percentages throughout this decade. And Amazon's revenue continues to climb in spite of today's difficulties. So clearly, customers still are choosing Amazon.
Once shoppers' buying power increases, Amazon should benefit. To prepare for this, the company continues to build its Prime subscription service. Its NFL Thursday Night Football this past fall drove the biggest three hours of Prime sign-ups ever. And Amazon has said Prime members are relying more and more on the service for shopping and entertainment.
Today, Amazon shares are trading at 1.95 times sales -- near their lowest point by that measure since 2016. This represents a huge opportunity to get in on a company that's set to deliver growth over the long term.
2. Disney
Disney is in the middle of a big transition right now. An effort to sign up subscribers to its Disney+ streaming services pushed costs higher over the past couple of years -- and added to streaming service losses. And that hurt the company's earnings.
Now, longtime Chief Executive Officer Bob Iger is back, with the goal of cutting costs and spurring growth. Iger returned to Disney at the start of the most recent quarter, and we're already starting to see some progress. Iger restructured departments and hierarchy so that those responsible for developing creative content could also take responsibility for monetizing it.
Iger also is prioritizing reaching profitability at Disney+ and has said he won't add subscribers at any cost. The company plans to reach cost savings of $5.5 billion through job cuts and other efforts to reduce expenses.
Meanwhile, the parks, experiences, and products business -- traditionally the biggest contributor to revenue -- continues to deliver. It posted double-digit gains in revenue and operating income in the recently ended quarter. And right now, park attendance numbers at Disneyland and Disney World are higher than they were during the same period last year.
Today, Disney trades for 25 times forward earnings. That's down from about 40 a year ago. This makes the stock a steal, and here's why: Disney's parks are going strong. Its streaming business has rapidly gained members over the past few years. The cost-cutting plan should help these elements stand out -- and spur overall growth down the road.
