Most investors are likely familiar with the S&P 500. This index includes around 500 publicly traded stocks, representing the largest companies in the U.S. It also gives a glimpse into the general state of U.S. business, the economy, and markets -- which is why it's so closely followed.
So far this year, the index is up around 10%. You can buy a mutual fund or exchange-traded fund (ETF) that tracks the index as a convenient way to gain exposure to the broader market, but individual stocks are worth considering as well to help you maximize your investment opportunities.
Carnival (CCL +3.39%), Chipotle Mexican Grill (CMG +0.29%), and Home Depot (HD +0.74%) are three top choices to look at right now. Here's why.
The leading cruise operator
Carnival is the world's largest cruise company, but it's still struggling with the fallout of closing early in the pandemic. Revenue is back up, and record first-quarter sales of $5.4 billion exceeded pre-pandemic figures. Demand is strong, with record Q1 deposits of $7 billion in fiscal 2024's first quarter (ended Feb. 29). Carnival entered the year in its best-ever booked positions, and it's been booking out a longer curve at higher prices.
But profitability is still down. Carnival was once reliable for profit generation, and it's working to get back there. Its net loss, based on generally accepted accounting principles (GAAP), declined by more than $500 million to $214 million in Q1, and the adjusted net loss came in better than expected at $180 million.
NYSE: CCL
Key Data Points
The main problem hanging over its head right now is its heavy debt load. It piled on debt to stay open when it wasn't taking in revenue, and even though it's been rigorous about managing to pay back efficiently, it still has more than $28 billion in long-term debt. In Q1, it redeemed $1 billion of its highest-interest notes while upsizing a $400 credit facility to maintain a healthy financial position. But investors are going to be cautious about Carnival stock until the debt is at a safer level.
Carnival stock made a big comeback last year as its business rebounded, but it's down 21% this year. At the current price, it trades at a dirt-cheap price-to-sales ratio (P/S) of 0.9. It may go sideways before it heads back up, but long term, it should return to being a market-beating stock. This is an excellent entry point that you don't want to miss.
The favorite fast-casual chain
Chipotle continues to dazzle eaters with its healthy, fresh fare even as it pleases investors with its sales growth and profit generation. It consistently reports increasing revenue, comparable sales, and earnings per share (EPS) -- all despite economic volatility -- and management still sees huge expansion opportunities.
In the most recent update, for Q1 2024, revenue increased 14% year over year, driven by a 7% increase in comparable sales. Earnings were up from $10.50 to $13.01 per share. The restaurant chain opened 47 new stores in the quarter and plans to open about 300 in total for the full year.
NYSE: CMG
Key Data Points
Chipotle is the only stock on this list that's beating the market so far this year, and it's up 37%. There are several reasons: overall growth and resilience; quarterly performance; and a third element that's unique to this time -- a 50-for-1 stock split that's one of the biggest-ever stock splits on the market. That got a lot of attention and buoyed the stock price even higher.
So why is it a screaming buy right now? Because it's likely to keep climbing, and the sooner you get in, the longer your money can work for you. Chipotle stock isn't cheap, trading at a price-to-earnings ratio (P/E) of 67. But believe it or not, that's below its 5-year average of 77. The shares trade at a premium because the company is so reliable for growth.
The largest home-improvement chain
Home Depot is the largest home-improvement chain in the world, with more than 2,300 stores in North America. It has a robust omnichannel structure, it has invested heavily in creating a strong digital network, and it has recently made some key acquisitions that generate new opportunities.
However, it's struggling in the inflationary environment. There are several ways it's been impacted. The real estate market is pressured due to sky-high mortgage rates, and homeowners aren't moving. That means fewer home-improvement projects. Even people who are buying are holding off on large purchases, and some shoppers are pushing off non-essential repairs and purchases altogether.
NYSE: HD
Key Data Points
Sales decreased 2.3% year over year in fiscal 2024's first quarter (ended April 28) with comps sliding 2.8% and EPS down from $3.92 to $3.83. Some good news was that digital sales increased 3.3% over last year.
Comparable sales fell 1.5% from last year; the average ticket was down 1.3%; and comparable transactions over $1,000 slid 6.5%. This indicates that the comps' decrease was more about price than traffic.
Home Depot stock has fallen 6% this year. This brings its P/E ratio down to its 5-year average of 21.8. When sales get back to growth, expect Home Depot stock to get back to growth, too, and deliver market-beating results.
