I don't need to run stock screens to unearth some of my favorite stock ideas right now. I can crack open by own portfolio. Costco Wholesale (COST +1.67%), Walt Disney (DIS 0.85%), and Roku (ROKU +2.49%) are some of my largest personal investments.
I wouldn't own substantial stakes in them if I didn't believe in them, but this doesn't mean that you can't start small. Even if you have just $1,500 to put to work, I believe that you can confidently put your money to work in these three well-known but perhaps underappreciated names.
NASDAQ: COST
Key Data Points
Costco
There aren't too many all-weather retail stocks as resilient as Costco. The stock is up 10% over the past year, 50% over the past three years, and is trading nearly 150% higher than it was five years ago. The stock has hit a new all-time high every year for more than a decade.
The leading warehouse club operator is obviously going to thrive when the going is good and folks are just flat-out spending more, especially for its big-ticket items. Costco also shines when the going is not so good, as customers flock to its bulk-sized savings. They know that Costco's bare-boned approach to overhead delivers thin margins, giving shoppers more value for their money.
Image source: Getty Images.
Revenue and earnings per share rose 7% and 8% in its fiscal year that ended in late August. Single-digit growth at both ends of the income statement may not seem impressive, and it's even worse when you consider that there was an extra week in fiscal 2023. However, the past year is also a testament to Costco's consistency. A lot of value-oriented companies saw their margins contract in this iffy climate. Costco found a way to stick to its knitting.
There are some near-term catalysts that make this a good time to consider starting a position in Costco. It hasn't boosted its annual membership prices since 2017, but it has been suggesting that an increase is coming soon. You would think that charging customers to enter a store would be a a recipe for churn, but nearly 93% of its members renew their annual subscriptions. They won't flinch at a $5 or $10 increase, but the stock should pop on the move when it becomes official.
There's also a new CEO coming to Costco in January, but that is more an opportunity than a challenge. Incoming CEO Ron Vachris is a Costco lifer, starting out as a forklift driver four decades ago. He has earned his way to the top. Vachris knows what has made Costco great since the 1980s, but new leadership can also bring new ideas to make things even better.
NYSE: DIS
Key Data Points
Walt Disney
The stock chart at Disney isn't the steady incline that Costco shareholders have experienced in recent years. It's more like the Space Mountain roller-coaster ride that follows the initial incline. Shares of the media giant have been cut by more than half since peaking in early 2021, recently hitting a nine-year low. It's been a wild ride, but things should get better from here.
Disney is getting serious about shedding non-core assets and getting its content creation back on track. Its theme parks are cranking out record financial results. Disney+ is expected to be profitable by the end of next year. It will start paying dividends for the first time in four years within the next two months.
The price is right. You can buy Disney for less than 18 times this new fiscal year's projected earnings. Results can be better -- and the multiple lower -- if the ad market starts to recover and it regains its golden touch at the local multiplex. There's still time for another storybook ending for the media stock that has made a living out of being a master storyteller.
NASDAQ: ROKU
Key Data Points
Roku
Shares of Roku are actually beating Costco in 2023, but the stock has corrected sharply since peaking near $100 just two months ago. This is a compelling entry point for a company that dominates the market when it comes to operating systems for TV streaming. Roku serves 73.5 million active accounts, a 16% increase over the past year. Usage is growing even faster.
The success of the platform isn't streaming onto its financial statements. Revenue growth per subscriber is sliding, largely on a decline in what advertisers are paying to get in front of Roku's audience. Investing in content and subsidizing its hardware components are leading to steep losses on the bottom line. This is still a top name among the digital streaming service stocks, and as long as its viewer base keeps climbing, the money and stock gains should inevitably follow.
