With the market seemingly dropping every day and the S&P 500 index recently hitting new lows for the year, many investors are wondering whether to jump in now or wait for lower lows. But timing the market waiting for a bottom is a fool's errand, and there's a proven way to hedge your bets, too.
Spreading out investments over time can ensure all your money doesn't go in at what turns out to be a bad time. It also means you'll be invested if the market surges quickly, meaning you won't miss out on what could be a fast-moving market recovery. Best of all is to put those investments into quality companies that have withstood plenty of poor economic environments. Here are five that are good investments in any market.
Winning against inflation
Big-box retailer Costco (COST -2.97%) has been a proven winner through many economic cycles. Costco has had a stable business with annual revenue growing steadily by 433% since 2002. Its total stock returns have quadrupled that of the S&P 500 index over the last five years and more than doubled them over 10 years. Even as inflation has gripped many nations globally, Costco just reported a 15.2% year-over-year increase in its fiscal 2022 fourth quarter ended Aug. 8.
That jump probably didn't come despite an inflationary environment, but perhaps because of it. People looking to save money where they can continue to boost Costco's membership subscriptions. Membership fee revenue increased by 9% for the full fiscal year compared to fiscal 2021. The stock has dropped 15% since mid-August, representing most of its 2022 decline. That gives investors a great opportunity to get into this proven winner with its business still firing on all cylinders.
Just follow Warren Buffett
Investors always like to see what famous successful investors are doing with their money, and there is no one more transparent with investments than Warren Buffett. Buffett has been an owner of Coca-Cola (KO -0.95%) stock for decades without selling, and he has also been buying one stock more than any other in the last several years. That stock is his own company, Berkshire Hathaway (BRK.A -2.47%) (BRK.B -2.63%).
Buffett owns more than 9% of Coca-Cola, with shares that were recently worth nearly $22 billion. It's one of his "forever" stocks. And why not? The iconic drink maker has a global presence, a growing portfolio of products, and a constantly increasing dividend payout that recently yielded about 3.2%.
That yield is as high as it's been all year, with the stock dropping nearly 15% in the last six months. Coca-Cola reported that net operating revenue jumped 14% year over year for the first half of 2022. Investors are worried that economic problems worldwide could hurt the business, but that would be a short-term problem if it comes to fruition. Investors get a good chance to join Buffett in this longtime holding right now.
Buffett has been buying his own stock more than any other, though. Berkshire has spent more than $51 billion to repurchase about 9% of its own shares in 2020 and 2021. Buffett has said that price-to-book value is the metric he uses to gauge when share buybacks make good sense. That metric is at one of the lower levels of the year, and it wouldn't be surprising to see that Buffett is buying back more shares himself when the company next reports its quarterly update.
BRK.B Price to Book Value data by YCharts
Consumers haven't disappeared
People may visit these companies' businesses for very different reasons, but Home Depot (HD -2.09%) and Walt Disney (DIS -2.88%) both have loyal followings that have helped make both stocks winners over the long run. Each has handily beat the total returns, including dividends, from the S&P 500 index over the last 20 years.
Home Depot has spent years investing in its business to help ensure that it can succeed in various types of markets. It announced a multi-year investment strategy called One Home Depot in 2017. The company has increased its annual revenue by 50% since that time, to more than $150 billion in fiscal 2021 ending Jan. 30, 2022. Even with a slowing housing sector, management expects to grow that number again in fiscal 2022.
Home Depot's investments have worked to grow both residential consumer and professional business. That has it positioned to navigate a growing or declining housing market, where consumers focus on maintaining existing homes. With the stock down more than 30% year to date, investors are getting a chance to become more than just customers of Home Depot.
Meanwhile, Disney stock is similarly down 37% this year. While its streaming business isn't profitable yet, Disney's parks, experiences, and products segment almost doubled revenue year over year over the latest nine-month reporting period ended July 2, 2022. Revenue from the parks segment was also 9% higher compared to the same nine-month period prior to the pandemic in 2019. Disney is another iconic brand whose stock investors should be happy to buy and put away for years or decades to come.
Howard Smith has positions in Berkshire Hathaway (B shares), Home Depot, and Walt Disney. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), Costco Wholesale, Home Depot, and Walt Disney. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, long January 2024 $47.50 calls on Coca-Cola, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
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Stock Market Sell-Off: 5 Top Stocks to Buy Now - The Motley Fool
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