Day: October 11, 2024

It’s amazing how much things can change in just 20 years. Two decades ago, industrial and energy stalwarts General Electric and ExxonMobil were the most valuable companies when measured by market cap, worth $319 billion and $283 billion, respectively. Jump ahead to 2024, and technology concerns are leading the way.

Topping the list are three of the world’s most recognizable tech companies. Apple leads the pack at $3.4 trillion (as of this writing). Nvidia and Microsoft are trailing close behind, with market caps of $3.1 trillion and $3 trillion, respectively.

With a market cap of just $1.9 trillion, it might seem premature to suggest that Amazon (NASDAQ: AMZN) has all the attributes necessary for membership in the $3 trillion club. However, the stock has gained 42% over the past year and 109% over the past five years, and its rebound appears poised to continue.

Recent improvements in the economy, the company’s strong market position, and its measured adoption of artificial intelligence (AI) could be the drivers needed to fuel Amazon’s membership in this elite fraternity.

Improving performance

The past several years have been rife with challenges, not the least of which was an economic downturn fueled by decades-high inflation. There’s been a vast improvement in recent months, however, as consumer sentiment in September reached its highest point in five months and the Federal Reserve Bank began its long-awaited campaign of interest rate cuts.

The improving economic conditions are favorably impacting Amazon’s results. In the second quarter, net sales of $148 billion climbed 10% year over year, while diluted earnings per share (EPS) of $1.26 nearly doubled.

Helping fuel the robust results were improvements from each of the company’s major operating segments. Online sales in the U.S. increased 9%, while international sales climbed 7%. Perhaps most important was a reacceleration from Amazon Web Services (AWS) — the company’s cloud computing business — which jumped 19%, its highest rate of growth since late 2022.

Equally important is advertising — the company’s fastest-growing business — which increased 20%, as Amazon is working to become a major player in the ad world.

An industry leader — in more ways than one

Amazon is the undisputed leader in the realm of e-commerce, which is an area it pioneered. The company accounted for 38% of U.S. digital retail sales last year, more than its next 15 largest rivals combined, according to data compiled by eMarketer. That dominance is expected to continue in 2024, with the company expected to nab 40% of online sales in the U.S. this year.

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The company has long employed AI to maintain a competitive advantage over its rivals. Amazon uses AI to make product recommendations to customers and predict and maintain adequate inventory levels at its distribution centers and warehouses. The company also uses AI-powered robots to stock shelves and gather merchandise for shipping, and deploys these advanced algorithms to determine the most efficient delivery routes.

Amazon is also the leader in cloud computing, another business it pioneered. Amazon Web Services (AWS) is the top provider of cloud infrastructure services, with 33% of the market in the second quarter, with Microsoft Azure at No. 2 and Alphabet‘s Google Cloud at No. 3, with 20% and 10% of the market respectively, according to research firm Canalys. Amazon offers one of the largest repositories of AI models for its cloud customers, which has helped reaccelerate its cloud growth.

Last but certainly not least is Amazon’s digital advertising business. The company displays ads on its e-commerce website, Prime Video, Freevee, Amazon Music streaming services, its Twitch video game streaming platform, and more. The company uses AI to help ensure the advertising reaches its target market. The results are undeniable, as advertising has been Amazon’s fastest-growing business for several years running.

The path to $3 trillion

Amazon currently boasts a market cap of roughly $1.9 trillion, which means it will take stock price gains of roughly 57% to drive its value to $3 trillion. According to Wall Street, Amazon is expected to generate revenue of $635 billion in 2024, giving it a forward price-to-sales (P/S) ratio of roughly 3. Assuming its P/S remains constant, Amazon would have to grow its revenue to roughly $998 billion annually to support a $3 trillion market cap.

Wall Street is currently forecasting revenue growth for Amazon of 11% annually over the next five years. If the company achieves that benchmark, it could achieve a $3 trillion market cap as soon as 2029. It’s worth noting that Amazon has grown its annual revenue by nearly 400% over the past decade, so those expectations could well be conservative.

Furthermore, Amazon is currently selling for roughly 3.2 times sales, a slight discount compared to its average multiple of more than 3.3 over the past five years. That’s a pretty attractive price to pay for a company with so many ways to win.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,855!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,423!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $392,297!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Meet the Unstoppable Growth Stock That Could Join Apple, Nvidia, and Microsoft in the $3 Trillion Club by 2029 was originally published by The Motley Fool

No one financial goal applies to everyone. Financial situations vary so much that what one person strives for could completely differ from someone else’s priorities.

That said, $1 million has long been a recognized mark of financial success. I must admit, there’s something about seeing a second comma in a number that feels validating and comforting.

The good news is that it doesn’t take “hitting it big” or generational returns to make a million-dollar portfolio a reality. In many cases, all it takes is consistent investments in an exchange-traded fund (ETF) like the Vanguard S&P 500 ETF (NYSEMKT: VOO).

If there’s one ETF to lean on en route to a million-dollar portfolio, it would be this one. Here’s why.

A history of impressive and encouraging returns

This ETF was created in Sept. 2010, and since then it has been on an impressive run, averaging over a 12.4% annual return and over 14.5% annual total returns.

It’s been repeated plenty of times that “past results don’t guarantee future performance.” However, if this trend continues, here’s how long it would take you to hit the million-dollar mark, averaging 12% annual returns at different monthly contributions.

Calculations by author. Years rounded to the nearest whole year.

You don’t need a lump sum of money to invest to get to a million-dollar portfolio; you need consistent investments over time.

Getting exposure to some of the world’s best companies

I always like to say that investing in an S&P 500 ETF is akin to investing in the U.S. economy. Of course, the U.S. economy runs off more than just 500 companies, but their influence is undeniable considering the size and scope of the companies in the S&P 500 index. Here are the top 10 holdings in this ETF (as of Aug. 31):

• Apple: 6.97%

• Microsoft: 6.54%

• Nvidia: 6.20%

• Amazon: 3.45%

• Meta Platforms: 2.41%

• Alphabet (Class A): 2.03%

• Berkshire Hathaway (Class B): 1.82%

• Alphabet (Class C): 1.70%

• Eli Lilly: 1.62%

• Broadcom: 1.50%

When you’re trying to build a million-dollar portfolio, the one thing you need is consistency. There will inevitably be ups and downs along the way (no stock or ETF is exempt from volatility), but you want companies with a history of long-term growth leading the way — and that’s what these have proven.

Don’t overlook how much money you can save in fees

An underrated part of this ETF is the low expense ratio of 0.03%. That works out to $0.30 per $1,000 invested annually, and it’s one of the cheapest you’ll find from any ETF on the stock market, regardless of type. Even another S&P 500 ETF, the SPDR S&P 500 Trust ETF, is more than three times more expensive at 0.0945%.

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To give you some perspective, here’s how much you’d pay in fees over 20 years by investing different amounts and averaging 10% annual returns in both ETFs.

Calculations by author. Fees rounded down to the nearest 10.

The seemingly slightest difference on paper could save you thousands in fees over time. Don’t overlook it.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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*Stock Advisor returns as of October 7, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Apple, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

History Says This Vanguard ETF Could Be Your Ticket to a Million-Dollar Portfolio was originally published by The Motley Fool

Investors know what Warren Buffett’s favorite stocks are. He often talks about Coca-Cola and American Express, his two longest-held stocks, and he recently added Apple as a stock he’d never (fully) sell.

But Berkshire Hathaway has a full list of about 45 stocks, and some of them don’t get enough attention. Consider Ulta Beauty (NASDAQ: ULTA). This is a new Buffett stock, and he and his team were likely drawn to it right now because of its cheap price. But obviously, there’s a lot more to the investing thesis than that.

Let’s take a closer look.

A huge market opportunity

Ulta isn’t a surprising Buffett stock. It fits most of the typical Buffett criteria: excellent management, a dominant position in its industry, a competitive edge, and a cheap price.

It operates a national chain of beauty stores, but it’s differentiated in its model, and customers love it. Ulta bridges the gap between mass brands, traditionally sold in pharmacies and discount stores, and luxury brands, typically sold in upscale department stores. It caters to the beauty enthusiast by housing 600 brands under one roof and on its website.

It also offers beauty services, making it a complete, one-stop beauty shop. The full range of products and services increases overall engagement and loyalty, and Ulta has skyrocketed to the top of the industry.

Beauty is a fast-growing industry with sales increasing 10% year over year globally in 2023, according to McKinsey. Sales surpassed expectations and as well as other industries like apparel. In the U.S., Ulta’s domain, sales were up 9%. McKinsey expects sales to increase at a compound annual growth rate (CAGR) of 6% through 2028.

Beauty enthusiasts account for 83% of beauty product dollars spent, putting Ulta squarely in the middle of growing trends. Ulta believes there are 70 million such enthusiasts in the U.S., and it continues to attract them to its loyalty program, which reached 43 million last year. They represent 95% of Ulta sales, and this gives the company a huge data pool to meet demand as it grows and changes.

With nearly 1,400 stores and more to come, Ulta should benefit from industry growth. But it also continues to stretch its position with new products, brands, and collaborations, such as Target “stores within stores.”

Still waiting out the economy

The pitfall to offering the kitchen sink of beauty brands is that with inflation and tight pockets, customers are switching down to cheaper brands. However, since Ulta sells both, it’s still getting those dollars. It’s retaining its loyal customers and it’s well-positioned to rebound as inflation cools.

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Total sales increased 4% year over year in the fiscal second quarter (ended Aug. 3), but comparable sales were down 1.2%. Gross margin fell from 39.3% to 38.3%, and operating margin fell from 15.5% to 12.9%. These were continuing trends, but they were worse than expected. Management revised guidance lower across the board.

It’s not surprising that Ulta stock is down 25% this year. However, savvy investors should look at the bigger picture. Every company goes through ups and downs, and Ulta is dealing with strong headwinds right now.

The good news is, it looks like these external factors are starting to lift. Inflation seems to be moderating, interest rates are going down, and the economy might pick up soon. Whenever it does, Ulta could make a quick rebound.

Low price, high potential

Ulta stock trades at an attractively low P/E ratio of 15. Buffett is known to like a good bargain, or at least what he thinks is an undervalued stock. And Ulta is a lot cheaper than some of his favorite ones.

Buffett knows how to spot a great deal, and Ulta fits the bill. If you buy Ulta stock today, you could benefit from years of long-term gains.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,022!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,329!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $393,839!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

American Express is an advertising partner of The Ascent, a Motley Fool company. Jennifer Saibil has positions in American Express and Apple. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Target, and Ulta Beauty. The Motley Fool has a disclosure policy.

This Ridiculously Cheap Warren Buffett Stock Could Make You Richer was originally published by The Motley Fool

While large-scale insider sales don’t necessarily mean a publicly traded company’s management is abandoning ship, they generally don’t inspire investor confidence. News of such a divestment hit Medical Properties Trust (NYSE: MPW) on Thursday, and the resulting sell-off saw the shares lose slightly more than 4% of their value.

A director sold a chunk of stock

A regulatory document filed after market close on Wednesday revealed that Medical Properties Trust director Michael Stewart sold 32,780 shares of its common stock. The price was $5.46 per share, and the sale left Stewart with 221,245 shares remaining in his portfolio.

That isn’t a massive chunk of the company’s more than 600 million shares currently outstanding, but for any individual it’s a meaningful stake. That goes double for Stewart, as he’s a director at the specialty real estate investment trust (REIT).

Medical Properties Trust has had quite a see-saw year. Its largest and most troubled tenant, Steward Health Care, declared Chapter 11 bankruptcy earlier this year. In September, the REIT and Steward reached agreement to transfer tenancy to 15 hospitals it had formerly operated.

Previous to that, Steward’s difficulties badly affected its landlord’s fundamentals, leading the REIT to aggressively cut its dividend twice in the space of less than two years.

Timing matters

Although the outlook for Medical Properties Trust is now brighter after the Steward deal, investors still have painful memories of the recent struggles stemming from the relationship of the two companies. In other words, investors are still in need of morale-boosting news, and a 32,000-plus share sale doesn’t seem to be fitting the bill.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,855!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,423!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $392,297!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Story continues

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why Medical Properties Trust Stock Got Socked Today was originally published by The Motley Fool

Summary

BJ’s Wholesale Club Holdings owns BJ’s Wholesale Club, which operates a chain of warehouse clubs in the Eastern U.S. BJ’s positions itself between traditional grocery stores and warehouses like Sam’s Club and Costco, and offers a wider range of items and smaller pack sizes than Costco and Sam’s. The company posted total revenue of $20 billion in FY24, which ended on February 3, 2024. Income from membership fees represented 2.2% of total revenue and 53% of operating income. The company sells name-brand merchandise and food to members, who are small business owners and consumers. Based in Westborough, Massachusetts, the company also offers specialty services, including tire installation, optical services, and photo developing.

At the end of FY24, the company operated 244 BJ’s clubs and 175 gas stations in 20 states. More than half of the clubs are in four states: New York, Florida, Massachusetts, and New Jersey. About 23% of FY24 sales were generated in the New York City metro area (down from 25% in FY21 and FY20). Clubs range from 44,000 to 177,000 square feet. BJ’s sells a relatively narrow assortment of approximately 7,000 SKUs, which it plans to trim to about 6,000 to improve inventory turnover. Groceries represented 70% of the company’s FY24 net sales (67% in FY23, 71% in FY22); general merchandise and services accounted for 11% in FY24, and 12% in FY23 and 14% in FY22 and gasoline rose to 21% in FY23 from 15% in FY22 and 9% in FY21. Gas was 19% of sales in FY24.

A predecessor company, BJ’s Wholesale Club, traded as a public company until it was acquired on September 30, 2011 by an investor group led by Leonard Green & Partne