This year has certainly been one for the record books. The coronavirus pandemic created a heightened level of uncertainty in nearly all aspects of our lives. The U.S. economy was essentially shut down for nearly two months during March and April. And with many businesses closed without any idea of when they would reopen, stocks of publicly traded companies decreased significantly.
Financial markets have since stabilized following financial stimulus from the government. And with positive vaccine developments in recent weeks, there is at least some level of visibility into a return to normalcy. Despite all the volatility, there are investments that you can make today that will likely increase your wealth over the long run. If you have $3,000 to invest right now, here are three stocks that would be perfect for long-term investors.
Starbucks (NASDAQ:SBUX) is guiding for revenue to increase by 21% in fiscal 2021 (which began Sept. 28). The growth is going to be fueled by more than 19 million Starbucks Rewards members. The company recently adjusted the program, making it easier to earn rewards, which is likely to attract even more future members.
Starbucks is focusing on expanding its international reach, as its stores abroad are more profitable for the company to operate. This fiscal year, Starbucks plans to open 1,100 new locations, 1,050 of them outside of the U.S. In fiscal 2020, the company opened a net 80% of locations internationally. Store operating profits as a percentage of revenue were 52% internationally compared with 47% at U.S. stores in the most recent quarter. Shareholders could be rewarded with higher profit margins as the company opens new locations internationally.
The hot drinks market is forecast to grow by a compounded annual rate of 10.3% between 2020 and 2025, and coffee is the largest component of the hot drink market. With over 30,000 locations worldwide, Starbucks may capture a sizable portion of that growth.
Coca-Cola (NYSE:KO) is one of the unfortunate companies that were hurt by the coronavirus pandemic. People drink more of its products out in public than at home, and with so many businesses closed, sales were down significantly. That being said, positive news on several coronavirus vaccines makes it more likely that there will be a return to normalcy by the end of 2021.
Moreover, Coca-Cola is a leading player in the non-alcoholic drinks market, which is forecast to have a compounded annual growth rate of 6.8% over the next five years.
Its competitor PepsiCo is doing much better during the pandemic, in part because it has a snack segment that is thriving as people are staying home more often. That burst may be short-lived and could reverse when the pandemic fades away. Meanwhile, the divergence in paths has created an opportunity for investors to acquire shares of Coca-Cola — historically, the more profitable company — at a small forward price to earnings premium to PepsiCo.
When it’s all said and done, 2020 is going to be a remarkable year for Amazon (NASDAQ:AMZN). The e-commerce retailer stepped up in a big way when people needed it most, bringing packages to people’s homes safely and reliably even when demand for its services surged to extraordinary levels.
Amazon started the year with 150 million Prime members, and subscription revenue is up 53% in each of the last two quarters. Prime members create the ultimate network effect. More members attract more third-party sellers to Amazon’s platform, which increases product assortment and competition among sellers. Then more shoppers are attracted because of the increasing assortment. This virtuous cycle greatly benefits shareholders.
The increasing scale has led Amazon’s gross profit margin to expand rapidly, growing from 12.9% in 2011 to 26.6% in 2019. The current year has been unique, to say the least. While Amazon is experiencing a surge in demand for its services, the costs to fulfill that demand are also increasing. However, when there is a return to normalcy, many newly acquired customers will remain with Amazon, while the temporary costs associated with the pandemic will retreat.
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