After languishing throughout 2022, the S&P 500 index began to climb higher last year and finally reached a new all-time peak in January. It was only the first of many new highs the index would hit this year and today it sits close to setting a new top.
Yet with the benchmark collection of the 500 largest companies up 15% in 2024, investors might wonder if this is good as it gets. A stock market crash is coming, the only question is when.
Corrections and crashes that lead to bear markets are a part of investing. The best part about them is that they are excellent times to buy stocks. Every single bear market over the past 100 years saw a bull market follow and wipe away all vestiges of the losses that occurred. It is why investors count on S&P 500 stocks for long-term growth. It is a bet on the U.S. economy and American business. The index might fall near-term, but the long-term outlook remains bright.
The following three S&P 500 stocks are ones you can buy today and know that 10, 20, or even 30 or more years down the road they will be worth appreciably more than they are today. They are stocks that can help you make your grandchildren rich.
Netflix (NFLX)
No one knows what the future of the movie industry will look like over the next few decades. Whether we’re streaming videos or watching some holographic projection, in all likelihood Netflix (NASDAQ:NFLX) will be the way most people consume media.
The streaming giant continues to pad its lead over its nearest competitor, Disney (NYSE:DIS). Netflix has 269.6 million subscribers globally after adding 37.1 million new subscribers last quarter, a 9.3 million net increase. Disney, on the other hand, has about 100 million fewer subscribers.
A lot of those new subscribers undoubtedly came as a result of cracking down on password sharing. It does, however, suggest investors should not expect to see the same kind of growth moving forward.
What will grow, however, is the revenue Netflix receives from advertising. The ad-tier plan accounted for 40% of all sign-ups in Q1 with ad-supported subscriptions rising 65% for the quarter. Available for under $7 per month, it is an affordable option in a dicey economy.
While Netflix business is showing robust growth it can’t be argued NFLX stock is cheap. The streamer trades at 47 times trailing earnings, 31 times next year’s estimates, and 42x the free cash flow (FCF) it produces.
If you buy the stock now it will surely be worth much more in 2034, but waiting for a pullback in its price would increase your returns down the road.
Chipotle Mexican Grill (CMG)
If figuring out how we’re going to be watching movies in the future is tough, then knowing where we’re going to eat is even harder. But Chipotle Mexican Grill (NYSE:CMG) will still be there slinging burrito bowls at a handsome profit.
The combination of good, tasty food at a reasonable value will be difficult to beat, no matter when we are looking for a place to eat. Its fresh ingredients will only become more important to our diets. We might be paying $37 a bowl if inflation keeps up the way it has, but Chipotle has figured out how to navigate these impediments to growth.
Sales grew 14% from last year to $2.7 billion driven by a 7% increase in comparable restaurant sales. Operating margins widened to 16.3% from 15.5% a year ago as restaurant-level operating margins expanded by 190 basis points to 27.5%.
Now that Chipotle Mexican Grill completed its 50-for-1 stock split, shares are trading at a more accessible $63 a share. While CMG stock also carries a lofty valuation at the moment, investors can be assured they will be richly rewarded when they pass on the stock to their grandchildren.
Lowe’s (LOW)
Death and taxes will always be with us, but so will fixing up our homes and building new ones. It is why Lowe’s (NYSE:LOW) is the third S&P 500 stock for long-term growth.
The home improvement center generates about three-quarters of its revenue from DIY customers with the balance made up by professional contractors. Although the retailer is growing its pro base, the average homeowner will continue to be the primary driver of future growth.
Both with the current housing boom and those looking to fix up what they’ve got, Lowe’s is positioned to capture greater sales now as well as a decade or two ahead. Certainly, high inflation and interest rates will pressure its business as consumers strapped for cash cut back on projects (have you seen how expensive lumber still is?) but it remains a profitable business. Despite slowing growth, Lowe’s expanded operating profits during the period.
The DIY center also pays a generous dividend that yields 2.1% annually. Lowe’s has raised the payout for more than 50 years and has an equally impressive track record of hiking it. Over the past decade, it increased its dividend at a compounded annual growth rate (CAGR) of 18.3%. With an FCF payout ratio of 41%, your grandkids will love the compounded total returns Lowe’s stock will continue providing them in the future.
On the date of publication, Rich Duprey held a LONG position in LOW stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
