Trump's trade policies have rocked broader equities. Though the president has paused much of his tariff agenda, the volatility it has caused left investors at least a bit worried about what will happen next. That's understandable, but it's essential to focus on the long game even in times like these. No matter what happens in the next few months, the stock market should produce competitive returns over many decades.
And to cash in on that, owning shares in companies that can perform well over the long run is essential. Two great examples are Coca-Cola (KO 1.03%) and Costco (COST -0.82%). For those who can spare $5,000 without hurting their emergency fund, here's why investing that money into these two corporations would be a great move.
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1. Coca-Cola
Coca-Cola is handily beating the market so far this year despite the tariff problem. That's not that surprising. The consumer staples industry it belongs to tends to perform better than most during economic downturns. So, if a recession is on the way, which some believe is the case, investors perceive Coca-Cola as a safe haven, a place to put their money while withdrawing it from speculative or unprofitable stocks. And despite its strong performance this year, Coca-Cola's forward price-to-earnings (P/E) of 24.2 looks reasonable compared to the average of 22.2 for the industry.
Moreover, if Trump's trade plans survive his administration, Coca-Cola should handle tariffs just fine. It has a presence in most countries and typically does most of its manufacturing for each market locally; most of what it sells in the U.S. is made in the U.S. That means Coca-Cola will see a relatively minimal impact from tariffs compared to companies with significant manufacturing footprints abroad.
However, that only addresses how the company might perform in the short run, while the effects of the current administration's trade plans continue to be felt on Wall Street. What, exactly, makes it a stock worth owning forever? A critical aspect of Coca-Cola's business is the brand name it has built over many years. Few soft drink brands can measure up to the company's reach and influence. That also means few can battle Coca-Cola for shelf space in grocery stores.
The company's brand name grants it a significant advantage. Another important thing to consider is that Coca-Cola has a deep portfolio of products that has not remained static over time. The company adopts its strategy according to changing demands -- if it didn't, it might have gone out of business already, or at least, it would be far less successful today. Even if some of Coca-Cola's brands start seeing less demand -- which has happened before -- the company can adapt accordingly.
Lastly, Coca-Cola's terrific dividend track record provides strongly suggests its status as a forever stock. The company has increased its payouts for 63 consecutive years. Most businesses don't survive, let alone grow their dividends, for that long. Only those with incredibly robust underlying operations can pull it off. Coca-Cola is in that category. For income or long-term performance, the stock is an excellent pick. Investors can get 69 shares of the company with $5,000.
2. Costco
Let's start with the bad news with Costco. After an incredible performance in the past few years, the stock now looks expensive. The company's forward P/E of 56.7 is well above the average for consumer staples stocks. Costco could see its shares dip if it even mildly fails to live up to the market's high expectations in the next few quarters. Yet for those who plan on holding the stock for a while, that won't matter too much as, in the long run, it should deliver solid returns, largely thanks to its strategy and economic moat. Costco's competitive advantage stems from its brand name and customer loyalty.
The company membership model locks customers in and incentivizes them to return to its stores; otherwise, it's a waste of a membership fee. However, this wouldn't work if these customers didn't see the value of this model. They would not pay the fee and forego shopping at Costco. What they get from it is the ability to buy items in bulk at discounted prices. Costco is one of the best in the business at this game, which has served it well for the past few decades.
The company is also looking at several growth opportunities, especially international expansion. Of the 897 warehouses it operated as of the end of the second quarter of its fiscal year 2025 -- which closed on Feb. 16 -- 617, or almost 69%, were in the U.S. There is a vast opportunity to continue growing its presence worldwide. Some might point to the continued shift to online retail as a risk to Costco. But like many successful companies, it has adapted.
As of 2023, it held a respectable 1.5% share of the U.S. e-commerce market. E-commerce sales have been growing faster for the company -- the expansion of this industry should be a long-term tailwind for Costco, not a headwind. Now, Costco will face some issues. Tariffs could eat into its already thin margins, unless it passes those costs on to customers. A third of its goods sold in the U.S. are imports from other countries.
Still, that means two-thirds of these are not imported to the U.S., and even if Costco has to increase its prices somewhat, so will many other retailers. Costco won't lose its appeal even in this environment, and in the long run, the company's global expansion plans and strategy should continue leading to excellent results. So, Costo remains a solid stock to buy and hold long term, even after its terrific performances in recent years. $5,000 is good for four of the company's shares with plenty of spare change.
