After beginning a recovery in late 2022, stocks are officially in a bull market. This has become more difficult to ignore amid the highly publicized gains for some stocks and an economy that has largely moved on from the pandemic's doldrums.
Still, some stocks in the consumer sector have continued to struggle despite notable improvements. While this may disappoint current shareholders, it also represents an opportunity for new investors. Following are three stocks worth considering now with a $1,000 investing budget.
Roku
Streaming platform Roku (ROKU -10.29%) continues to frustrate its stockholders. A disappointing outlook for 2024 left investors selling the stock, and worries have worsened as its partner Walmart announced plans to buy its competitor Vizio, casting doubt on the future of one of its key partnerships.
Additionally, with losses seeming to worsen, some might wonder if it will ever turn profitable again. Average revenue per user fell 4% yearly, and ad spending remains sluggish as activity among entertainment giants has slowed.
Nonetheless, Roku's platform continues to attract more active members and increased viewership. Its user base reached 80 million for the first time in its history at the end of 2023, 14% more than year-ago levels. Also, streaming hours rose 21% over the same time frame to 29 billion, meaning viewers spend more time on the platform.
These increases have occurred in the face of heavyweight competition from Google parent Alphabet, Amazon, and now Walmart. Furthermore, it has become the No. 1 selling platform in the U.S., Canada, and Mexico amid a continuing international expansion.
Moreover, with the stock trading at an 85% discount to its all-time high and a price-to-sales (P/S) ratio of less than 3, it looks increasingly like a bargain. That low valuation and the platform's growing popularity position the stock to take off once ad spending recovers.
Realty Income
Realty Income (O -0.17%) stock is a bargain income stock investors should not want to miss. Investors are not only drawn to the real estate investment trust's (REIT) monthly dividend, but also its real estate portfolio of around 13,500 single-tenant commercial properties.
It owns the spaces that Dollar Tree, Walmart, CVS Health, and numerous other companies use. Such tenants tend to be stable, helping to bolster its near 99% occupancy. Additionally, its agreements are net leases, meaning the tenant covers maintenance, insurance, and taxes, increasing the company's profits.
Admittedly, rising interest rates have weighed on the company, and the stock fell about 20% over the last year. But this hasn't stopped the payout from rising four times over the previous year. And thanks to the discounted stock price, the $3.08 annual payout, a dividend yield of about 5.9%, is more than quadruple the 1.4% S&P 500 average return on dividends.
Moreover, its funds from operations (FFO), a measure of a REIT's free cash flow, came to $4.04 per share, more than enough to support a rising dividend. With Realty Income stock selling at around 13 times its FFO, its low valuation may make the stock too cheap for income investors to ignore.
Dutch Bros
At first glance, a coffee shop like Dutch Bros (BROS -1.04%) might seem to be struggling. As a company that must compete with countless independent shops, industry leader Starbucks, and a possible emerging threat from McDonald's, the competition might appear too intense for the company to deliver market-beating returns.
However, Dutch Bros is in the middle of a regional to national expansion. To that end, it opened 159 shops in 2023, taking the year-end total to over 830 shops spread across 16 states.
Also, despite the intense competition, same-shop sales increased by 3% in 2023, including a 5% rise in the fourth quarter. In total, 2023 revenue rose to $966 million, a 31% yearly increase. Additionally, the company reported its first annual profit since going public, earning a net income of $10 million.
Such results may incentivize shareholders to overlook some of the concerns about competition that may have weighed on its stock, which fell 25% over the last year.
Since it is newly profitable, the P/E ratio may not accurately reflect its valuation. But its P/S ratio of less than 2 makes it a bargain compared to Starbucks, which trades at almost 3 times sales. Also, with a smaller size and more growth to pursue at home, Dutch Bros should look increasingly attractive to long-term investors.
