Another year is coming to an end. Major market indexes hit new all-time highs in 2024, and some market watchers may be struggling to find investment ideas in this sea of premium valuations. But there are still reasonably priced stocks that can boost your portfolio in 2025 and beyond.
To help you in your search, three Motley Fool contributors are here to provide you with timely investment ideas for the final weeks of 2024. Here’s why they’d like Amazon (NASDAQ: AMZN), Williams Sonoma (NYSE: WSM)And Ultimate beauty (NASDAQ: ULTA).
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John Ballard (Amazon): Amazon has been the most disruptive force in retail over the past two decades. And emerging artificial intelligence (AI) capabilities play to Amazon’s strengths as a technology-focused company.
Amazon has invested heavily in AI for its cloud computing business, which has seen accelerated growth over the past year and remains a strong catalyst for the stock as Amazon Web Services generates the bulk of the company’s operating profit. But AI has also been quietly running behind the scenes for years, making recommendations to online store shoppers. Amazon knows how to engage and retain customers, and its latest innovation shows how it will continue to find ways to generate more sales.
Amazon recently launched the Rufus AI-powered shopping assistant in time for the busy holiday season. It also just reported another record-breaking Black Friday week. With new tools like Rufus, AI Shopping Guides and Amazon Lens that allow customers to identify a product from a photo or screenshot, Amazon continues to innovate in ways that ensure the company remains the driving force behind growing global e-commerce worth $4 trillion. possibility.
The company’s revenue has doubled over the past five years to $620 billion, growing 11% year over year in the third quarter. This is solid growth in the context of macroeconomic uncertainty currently hurting retail spending. The combination of AI tools and the continued expansion of same-day delivery ensures that Amazon can continue to enjoy solid growth in the long term. Add in other opportunities in advertising and cloud services, which are currently growing at about 20%, and investors can expect the stock to extend its winning track record.
Jeremy Bowman (Williams-Sonoma): If you’re looking to grace the halls of your portfolio, there are few companies that can help you do that better than Williams-Sonoma. The home furnishings empire, which also owns West Elm and Pottery Barn, is synonymous with tasteful home furnishings, furniture and kitchenware.
While much of the home furnishings and home construction industry has struggled due to the housing market slump, Williams-Sonoma continues to thrive in this difficult environment. The stock is up 87% year to date, driven by strong margin improvement, operational execution and market share gains.
In the third quarter earnings report, comparable brand sales fell 2.9%, reflecting broader industry headwinds, but profitability rose in the quarter as gross margin rose 230 basis points to 46.7%, driven by higher product margins and supply chain efficiency. That increased operating margin by 80 basis points to 17.8%, leading to adjusted earnings per share rising from $1.83 to $1.96.
That’s impressive in today’s market environment, and it’s no coincidence. The company has focused on controlling inventory and engaging customers with new offerings in its product line, helping it avoid price cuts. Management argued that the full-price strategy helps build trust with customers because they don’t have to feel like they have to wait for a sale. The company has also found growth in its B2B and trade businesses serving design professionals, providing it with renewed growth opportunities.
Last month, management announced a $1 billion addition to its stock buyback program, and it has been steadily returning capital to shareholders through buybacks. Looking ahead, management sees more room to expand operating margins, and sales should rebound once the housing market turns. That’s a good reason to expect the stock to continue moving higher and to buy it now.
Jennifer Saibil (Ulta): Ulta shareholders were probably disappointed to hear that Warren Buffett and… Berkshire Hathaway had sold most of their holdings in the retailer in the third quarter, just months after establishing the position. But investors should keep in mind that billionaire money managers have different goals and priorities than individual investors.
Ulta continues to be an established leader in cosmetics and skin care retailing, with more than 1,400 stores and a store-within-store presence of 500 stores. Goal locations. It’s still opening new stores at a steady pace, and its differentiated model offers 600 brands ranging from budget, mass-market names to luxury labels.
Ulta focuses on the beauty lover who wants to choose from all kinds of brands, and is the initiator and the most important company with this design. It also offers services to provide customers with a one-stop-shop experience, inviting them to spend more with the company.
The beauty industry is expected to grow at a compound annual growth rate in the low to mid-single digits in the coming years. However, there are some higher growth categories where Ulta excels. The wellness category is growing faster than cosmetics, for example, and management believes this combination will create a $400 billion market. As consumers turn away from the traditional makeup channels of pharmacies and department stores and purchase through specialty stores and e-commerce, that’s an opportunity for Ulta.
The company has also developed a top loyalty program, with 44 million members and growing, and members account for 95% of revenue. The company estimates that there are 140 million beauty enthusiasts, and that number has doubled in the past three years.
Although the industry is currently experiencing headwinds as consumers scale back their purchases, the company is well positioned to benefit from organic growth and capture market share as industry conditions improve.
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Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $369,349!*
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See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has positions in Amazon and Target. John Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, Berkshire Hathaway, Target, Ulta Beauty and Williams-Sonoma. The Motley Fool has a disclosure policy.
3 Top Stocks to Buy This Holiday Season was originally published by The Motley Fool
