Finding emerging consumer brands when they are relatively unknown can be a very rewarding investment strategy. The stock market continually offers investors these opportunities. You just have to pay attention to which brands people buy more often.
Here are two fast-growing brands that could make investors a small fortune over the next 20 years.
1. Cava group
Investors who jumped on board Chipotle Mexican Grill, McDonald’sor Starbucks are now sitting in the mockingbird’s seat during their first years of growth. Cava Group (NYSE: CAVA) is the latest successful restaurant stock worth betting on for the long term.
There are plenty of burger, steak, pizza, Italian, Chinese and Mexican restaurant chains, but there aren’t many establishments in the U.S. with a Mediterranean-centric menu. The cuisine is seen as a healthy, sophisticated alternative in a sea of ​​the same old options. That’s why Cava has seen impressive customer traffic this year in a challenging consumer spending environment, resulting in double-digit same-store sales growth.
Strong growth has sent shares up 185% in the past year, but it’s not too late to buy. Cava’s 35% year-over-year revenue growth is comparable to Chipotle’s growth in its early years as a public company. A $10,000 investment in Chipotle in 2006 would have grown to $634,000 today, and Cava is on a similar growth path.
Cava has a huge growth runway. Its $231 million in quarterly revenue is a fraction of Chipotle’s $2.9 billion. It took nearly two decades for Chipotle to expand to its current size. Cava now operates in 25 U.S. states and recently opened in Chicago to the strongest customer response the company has seen to date.
Importantly, Cava is growing its store base by about 8% to 9% per year, but management is expanding in a disciplined manner. The company posted net income of $19 million in the most recent quarter. The company will become more profitable as it expands in the U.S., and that should support more new highs for Cava stock.
2. Pending
The sportswear industry is another ripe market for monster winners in the stock market. An investment of $10,000 in Nike 44 years ago, it would now be worth $7.7 million with dividends reinvested. Investors could get a second chance at these kinds of gains because In anticipation (NYSE: ONON) is currently growing at a similar pace as Nike was in the 1980s.
On is one of the most popular apparel brands of the moment. There were 66 On-sponsored athletes at this year’s Olympic Games in Paris. Like Nike, On generates the majority of its revenue from performance footwear, a segment that grew 28% year-over-year in constant currency last quarter.
On is seeing strong growth across the different running shoe styles it offers, but management noted that its all-day comfort Cloudtilt is selling like hotcakes. The brand just launched its new Cloudsurfer Next shoe at a relatively low price point, which management expects will help expand its addressable market.
The popularity of On shoes, especially among athletes, shows that the brand can benefit from partnerships. This is similar to how Nike has built its brand. It has already experienced a significant increase in brand awareness through a partnership with actress and singer Zendaya, who has a huge following on social media.
Nike didn’t have the benefit of social media 40 years ago, so On was able to see his brand grow faster than Nike did. Analysts expect the company to grow its earnings by 34% annually over the next few years, which should provide great returns for investors.
Should You Invest $1,000 In Cava Group Now?
Before buying Cava Group shares, you should consider the following:
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Nike, and Starbucks. The Motley Fool recommends Cava Group and On Holding and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
2 Monster Stocks to Hold for the Next 20 Years was originally published by The Motley Fool
