After people buy the essentials, some of their money goes toward discretionary spending. These extra purchases fuel the economy and create many jobs, but the best consumer stocks to buy can also lead to long-term wealth.
Businesses have been jostling for market share and trying to attract higher percentages of consumer spending. Some corporations have established themselves as industry leaders and regularly generate additional revenue and profits.
Some consumer stocks have outperformed the stock market for several years. These are some of the picks investors may want to consider.
Walmart (WMT)
Walmart (NYSE:WMT) combines low prices with an array of products. The retailer is the world’s leading grocer, which makes it resilient to economic downturns. The company’s affordability can make it more attractive to consumers as the costs of goods and services continue to rise.
The company reported 5.7% year-over-year revenue growth in Q4 FY24. Advertising and e-commerce exhibited impressive growth rates, and recent investments suggest Walmart is emphasizing these segments. The recent acquisition of Vizio Holdings demonstrates Walmart’s desire to expand in advertising. Ads have higher profit margins than retail sales but currently make up a sliver of Walmart’s total sales.
Walmart is up by 13% year-to-date and has gained 76% over the past five years. It has a 31 P/E ratio and offers a 1.39% yield. Analysts have rated the stock a “Strong Buy” and believe it can gain an additional 10% from current levels.
Chipotle (CMG)
Chipotle (NYSE:CMG) has pricing power due to its focus on healthy food and ingredients. While most fast-food restaurant giants are losing consumers, Chipotle didn’t have that issue in the first quarter of 2024. During that quarter, revenue increased by 14.1% year-over-year, while diluted EPS jumped by 23.9% year-over-year.
Chipotle opened 47 new restaurants in the quarter and remains on pace to open 285-315 restaurants in 2024. The fast food restaurant chain included a Chipotlane in 43 of the 47 new restaurants. Chipotlanes has been effective at generating digital sales and increasing restaurant efficiency.
Shares are up by 43% year-to-date and have soared by 353% over the past five years. Chipotle recently announced a 50-for-1 stock split that will make shares more affordable. The bid can increase employee retention, and it should also stimulate options trading activity. Options traders don’t have a way to trade fractional contracts, so reducing the share price will make options contracts more affordable.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the world’s most recognizable online marketplace. The company continues to post record sales and delivers impressive results for its investors.
The tech conglomerate reported 13% year-over-year net sales growth in Q1 2024. The online marketplace was a decisive component of the company’s $143.3 billion quarter. However, that wasn’t the only proponent that drove the stock higher. Amazon Web Services revenue reached $25.0 billion, which was 17% higher than in the same period last year. Advertising, grocery sales, subscriptions and artificial intelligence also contributed to the company’s net sales.
Net income more than tripled year-over-year to reach $10.4 billion. With other tech giants offering dividends, it may only be a matter of time before Amazon offers a dividend for its investors. However, analysts aren’t waiting for the corporation to issue a dividend to get on board the rally train. The average price target suggests a 16% gain from current levels. Amazon is currently rated as a “Strong Buy” among 41 analysts.
On this date of publication, Marc Guberti held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
