Stock markets swoon now and then, slightly or severely. We've seen big drops recently, with the Nasdaq down some 20% from its all-time high only a month ago. It has rallied in the past few weeks, as of this writing, but tomorrow may bring a big surge or another plunge. The stock market is simply volatile, more so on some days than others.
What's an investor to do? Well, you should only invest money you won't need for at least five years in the stock market so you can ride out most downturns. (To be more conservative, plan for 10 years to recover, as some recoveries can take a long time.) Beyond that, well -- a stock market crash or correction can be a great time to pick up shares of companies you've always wanted to own -- when their shares are on sale.
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Here are three contenders to consider for your portfolio.
1. Nike
Shares of Nike (NKE -1.53%) were recently down 20% year to date, making them much more attractively priced for those interested in the athletic footwear, apparel, and equipment titan. Nike encompasses not just the Nike brand but also the Converse and Jordan brands, and it's been a great stock performer for a long time, averaging annual growth of 16% over the past 20 years (roughly twice the growth rate of the S&P 500) and nearly 18% over the past five years -- and that's not even including dividends.
Nike has some sustainable competitive advantages that can help it keep growing. These include its strong brand power. Nike recently ranked 13th on Forbes' list of the most powerful brands, with an estimated brand value of $39 billion -- up 6% from its year-ago value. In 13th place, it sits well above other powerful brands, such as Walmart, IBM, General Electric, and Marlboro. A powerful brand gives the company pricing power, allowing it to boost prices. The brand will also draw those who see it as high quality and high in popularity.
In its last reported quarter, revenue was up 5% year over year (8% on a currency-neutral basis), with direct and digital sales growing by double digits. Nike's dividend recently yielded nearly 0.9%, which isn't a lot, but it has been hiking its payout by an annual average of 8.8% over the past five years.
2. Starbucks
You probably suspect that Starbucks (SBUX -1.65%) has a lot of stores, all over the U.S. -- and it does. But you probably didn't realize that it has more than 34,000 stores all over the world. The stock is also down about 33% from its 52-week high as of this writing.
In its last quarter, Starbucks reported net revenue up a whopping 19% year over year, with sales at stores open for at least a year up 13% globally -- and 18% in the U.S. It also noted that its store count in China, a rather populous nation, has surpassed 5,500.
The company clearly has plenty of room for further growth -- such as in China -- but it also faces some challenges. As the pandemic wanes and more people go back to working in offices, Starbucks will benefit as people will resume grabbing a beverage or snack on their way to or from work or on their lunch break. But some forecasts predict many people will work from home (or mostly from home) permanently, which could cut into Starbucks' business. A solution to that might be opening more locations nearer homes.
Another challenge is unionization, which can end up reducing profits and/or leading to higher prices, if the company is pressured to increase pay and/or benefits for workers. It's certainly not a portent of doom, though -- plenty of businesses have long been profitable with unions present.
Finally, Starbucks is also a dividend-paying stock, with a recent yield of 2.2%. Over the past five years, it has hiked its payout by an annual average of 14.4%.
3. Walmart
Walmart (WMT -0.85%) is a dividend payer, too, recently yielding about 1.5%, and having upped its dividend by about 1.9% annually, on average, over the past five years. Its stock is also trading close to its 52-week high. It may not be a big bargain right now, but it should be a steady grower for many more years, and if you can buy into it after a tumble in the stock price, you'll likely get a higher dividend yield.
When a company gets huge -- Walmart's market value recently topped $400 billion -- it can be difficult to grow at a brisk rate. Walmart recently sported some 10,500 stores and clubs in 24 countries -- and a busy e-commerce storefront as well. It employs 2.3 million people and rakes in more than $570 billion annually.
Still, plenty more growth is possible, such as internationally, where scores of nations have no Walmart presence at all. Online growth is another possibility: In its last completed fiscal year, total revenue may only have grown by 2.4% (which the company notes was partly due to $32.7 billion in divestitures), but e-commerce sales grew by 11% -- and 90% "on a two-year stack" (which compares the last year to two years ago, before the pandemic made many companies' results very different from normal). In its last fiscal year, Walmart added around 20,000 new sellers to its U.S. marketplace, too.
Sam's Club, Walmart's discount warehouse chain, is enjoying brisk growth, too, with sales up 9.8% year over year and 21.6% over two-years-ago levels for stores that have been open at least a year.
The company is also broadening its offerings, such as with mortgages, and has ambitions to grow in the fintech world, too, in part via acquisitions.
These are just three of many solid companies you might add to your watch list, waiting for a lower price at which to nab some shares. Note, though, that if you think they're valued attractively now, you might just buy now -- or compromise and buy a partial position now and more shares later.
