3 stocks to turn $1,000 into $1 million (or more)

The stock market is one of the best ways to build lasting wealth.This is because over time, the broad market S&P 500 Index The average annual return is about 10%.

But if we look back at history, we see that some businesses have crushed the market, turning small investments into seven-figure sums.

This is a closer look apple (NASDAQ:AAPL), Costco (NASDAQ: COST)and The Home Depot (NYSE:HD)three standout consumer stocks that turned $1,000 into more than $1 million.

1. Apple

Number one on this list is the most valuable brand in the world. Apple has long been a leader in selling some of the most popular electronic products.this pushed FAANG stocks That’s 191,000% growth over roughly the past 43 years, turning $1,000 into $1.9 million today, including dividends.

While the iPhone still generates more than half of revenue, the business is also finding success with other devices such as MacBooks, AirPods and Watches. In the first quarter of fiscal 2024, hardware combined accounted for 81% of total sales.

But the software and services segment is quickly emerging as a more important business driver. Products include Apple Card, Pay, music, TV+, iCloud, advertising, etc. Revenue here grew 11%, higher than the company’s total revenue. With a gross profit margin of over 70%, services can increase Apple’s profitability over time.

Investors hoping for similar returns from this business over the next few decades should probably temper their expectations. Apple’s huge revenue base is struggling to grow at a rapid pace. Sales fell 2.8% in fiscal 2023, which shows that Apple is a mature company.

And the current P/E ratio A price-to-earnings ratio of 29.3 is very expensive, at least based on average valuations over the past 10 years, which will also limit forward returns.

2. Costco

With trailing 12-month sales of $241 billion, Costco is the world’s third-largest retailer. It operates hundreds of warehouses around the world, providing shoppers with high-quality merchandise at extremely low prices. This business model has not changed in decades.

While Costco may sound like a boring company, the rewards are exciting. retail inventory Over the past 49 years, including dividends, the share price is up 123,000%. Even in recent years, stocks have crushed the broader market. Earnings were boosted by special one-time payouts, such as the $15 dividend announced in December.

What sets Costco apart from typical retailers is its successful membership model. Consumers must pay an annual fee for the right to shop at the warehouse, providing a high-margin and recurring revenue stream. Member sales increased by 8.2% last quarter, with the global renewal rate exceeding 90%.

Like Apple, Costco is not a cheap stock by any means, trading at a price-to-earnings ratio of 49.4. This is 47% higher than the average over the past 10 years. While there’s plenty of growth potential, management plans to open new stores at a healthy pace, a move that’s sure to push earnings numbers higher, but buying the stock today wouldn’t be a smart idea.

3. Home Depot

Another top retailer who turned $1,000 into over $1 million is The Home Depot (NYSE:HD)The home improvement giant’s stock is a bigger historical winner than Apple or Costco, which you might not have thought. Since 1981, Home Depot stock has turned an initial capital outlay of $1,000 into a whopping $29.9 million today (including dividends).

Like Costco, Home Depot’s business hasn’t changed much over time. Through its large stores, the company sells a variety of tools and supplies to DIY and professional customers who want to decorate their own homes. It’s a boring business, but the financial performance is fantastic.

Home Depot’s operating profit margin and return on invested capital The average growth rates over the past ten years were 14.2% and 34% respectively. These metrics outperform the company’s major competitors, Lowe’sHome Depot’s focus on improving store efficiency by investing in omnichannel capabilities and strengthening its supply chain helped these metrics.

The business is facing some slowdown due to strong demand trends during the pandemic. But industry tailwinds favor stable long-term growth. With the stock trading at a reasonable P/E of 23.3, investors may want to take a look at the stock.

While these three companies are unlikely to repeat their past performance in the future, they are industry leaders that continue to dominate.

Should you invest $1,000 in Home Depot right now?

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Neil Patel The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple, Costco Wholesale and Home Depot. Motley Fool has disclosure policy.

3 stocks to turn $1,000 into $1 million (or more) Originally published by The Motley Fool

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