It doesn't require thousands of dollars to begin investing. What's important is adding money to a portfolio of stocks every month. Even if you have only $100 or less to start, it can add up to thousands over several years due to compound growth. The key is to focus on buying shares of quality businesses that have good growth prospects.
Now is a good time to get started because last year's market sell-off sent great companies down to bargain prices. Here's why Walt Disney (DIS -0.04%) and Lovesac (LOVE -0.05%) are great investment opportunities right now.
1. Walt Disney
The market is offering investors a rare opportunity to buy Disney stock at bargain prices. Disney's brands have been entertaining families for a century and will likely still be doing so 100 years from now. However, the stock has fallen sharply from its all-time high of $203 a few years ago. The slide follows weak financial results at the company's media networks (ABC and ESPN) and worsening operating losses at Disney+.
Through the first nine months of Disney's fiscal year ending in September, revenue grew a respectable 8% over the year-ago period, but pre-tax profit from continuing operations declined 23%. Disney's cable TV networks have seen revenue slump 6% this year due to a weak advertising market, which compounds the company's problems in the direct-to-consumer segment, including results from Disney+, which reported an operating loss of $2.2 billion.
CEO Bob Iger returned to the helm last year to right the ship. Management is leaving no stone unturned in its bid to strengthen Disney's finances. Iger has already made significant progress, with the direct-to-consumer segment's profitability improving by about $1 billion over the last three quarters.
Disney is also borrowing a page out of Netflix's playbook and cracking down on password sharing in Disney+, which could be a revenue opportunity. Executives believe the number of people sharing passwords is "significant," and some of these users will likely convert to paying subs.
Investors would likely value Disney more if the media and entertainment segments traded as separate companies. This would allow the market to put more focus on the growth in its parks, experiences, and products segment, which reported a revenue increase of 17% in the current fiscal year, with operating profit up 20%. Disney hasn't shown any interest in splitting itself up, but this is always a possibility that could unlock more shareholder returns.
Disney has a lot of options to improve financially, but the market is looking backward. Iger has a long record of making capital allocation decisions that deliver market-beating returns to investors, as he did from 2006 through 2019. With a timeless catalog of entertainment brands, Disney is a no-brainer stock to buy right now with $100.
2. Lovesac
Lovesac has a unique concept that is showing relatively strong sales in a tough environment. The brand is known for "the world's most adaptable couch," or Sactionals, which have proven to be very marketable even in a difficult economy. While other home goods stores have seen declining sales, Lovesac reported a 9% increase in revenue last quarter, with comparable-store sales up 15%.
Lovesac, however, is still feeling the headwinds from inflation and lower consumer spending. It is having to resort to promotions to drive some sales, which impacts top-line growth. While its recent sales trends are relatively strong, top-line growth is off the 30%-plus annual sales increases the company reported in recent years. Decelerating growth and downward pressure on margins is why the stock has fallen during the last year.
Over the long term, Lovesac has great prospects. It has a unique product that is continuing to drive word-of-mouth sales. The company has an effective strategy that balances sales through physical locations and e-commerce. Online sales grew 28% last quarter.
Moreover, the upgradeable nature of Sactionals lays the foundation for a sound business model. In fiscal 2023, nearly half of sales were from repeat customers, which is an excellent balance. The company also continues to innovate with new products to incentivize upgrades. Management believes its new angled side addition can drive sales from existing and new customers.
Selling a modular product should provide many ways for Lovesac to drive incremental sales over the long term. It is operating in a $41 billion upholstery category. While Lovesac is gaining market share, it still has a very tiny share of this market opportunity, with $663 million in trailing-12-month sales.
To top it off, the stock is selling at a ridiculously low forward price-to-earnings ratio of 10.7. If your broker allows fractional share trading, you could split the $100 equally between Disney and Lovesac and have two quality bargain stocks to jump-start your portfolio over the next few years.
