Investing in the stock market doesn't have to be complicated. By focusing on industry-leading businesses that have strong financials, economic moats, and attractive valuations, investors can do well over the long term. And it doesn't take a lot of initial capital to get started.
If you have $1,000 ready to invest, take a look at American Express (AXP -0.62%), Amazon (AMZN 3.43%), and Home Depot (HD 0.94%) as three of the best stocks to buy right now. At current prices, investors can use that dollar amount to purchase two shares of Amex, three shares of Amazon, and one share of Home Depot.
American Express
American Express has one of the strongest brands in the world, especially in financial services, attracting higher-income clients compared to other card issuers. This should limit default risk in uncertain economies, like what we're in now.
This business continues to post strong results, with revenue net of interest expense in the third quarter (ended Sept. 30) up 13% to $15.4 billion, and diluted earnings per share (EPS) jumping 34%. Travel and entertainment volume remains a key business driver these days. And CEO Steve Squeri said on the earnings call that cardmember spending remained strong.
Management expects revenue to jump 16% at the midpoint in the current year, before climbing more than 10% in 2024.
As of this writing, shares of Amex trade at a trailing price-to-earnings (P/E) ratio of just 13.4. That's below the five-year historical average, making now a smart time to buy this leading financial stock.
Amazon
Amazon benefits from multiple growth drivers. It has a huge lead in the U.S. in online shopping, a sector of the economy that still accounts for only 15% of overall retail spending. The company's massive logistics footprint has created a well-oiled machine that other e-commerce businesses struggle to compete with.
The cloud segment, Amazon Web Services (AWS), is likely what investors are most drawn to. In the three-month period that ended Sept. 30, AWS saw sales rise by 12%. This marks an ongoing slowdown, to be sure, but the fact that the operating margin came in at 30% is a positive sign.
Digital advertising is an under-the-radar business line. Ad sales totaled $12.1 billion in the last quarter, up 25% year over year. Amazon is behind only Alphabet and Meta Platforms in the U.S. when it comes to digital advertising revenue, according to Statista.
Amazon shares have been on a tear in 2023, up 42% as of Oct. 26, a gain that crushes the broader Nasdaq Composite Index. But even so, the stock doesn't appear to be expensive. The current price-to-sales multiple of 2.3 represents a notable discount to the five-year average.
Home Depot
With trailing-12-month revenue of $155 billion, Home Depot is the clear leader in the gargantuan $950 billion home improvement industry. Its store base of nearly 3,000 puts the company within 10 miles of 90% of the U.S. population. It's hard to understate this tremendous scale and reach. In particular, the business has a strong standing with professional customers, a key segment that has led to impressive store-level sales figures.
It's true that while Home Depot has been dealing with a notable slowdown, due to consumer spending shifting away from expensive renovation projects, industry tailwinds favor the business over the long term. The average age of homes in the U.S. is 39 years, a situation that drives demand for Home Depot. Moreover, pressured new-housing inventory means that existing homeowners will turn to renovations. The rising popularity of remote work also helps.
It's been a difficult time to be a Home Depot investor, as shares are down 12% in 2023. That's really discouraging for shareholders, especially since the S&P 500 has climbed 8% this year. But this is still a competitively advantaged business that is a clear leader in its industry, making the current P/E ratio of 17.4 look like a good deal.
