Investing in stocks doesn’t have to be complicated or dependent on chasing the latest technological trends. Sometimes, the best investment opportunities can be found in established companies that consistently prove their worth over the years. In this article, we’ll highlight three straightforward investment options that deserve a spot in your portfolio: McDonald’s, Electronic Arts, and Ulta Beauty.
McDonald’s Dominance Continues to Grow
McDonald’s (MCD -0.93%) has long been a stalwart in the fast-food industry, and its recent performance underscores its enduring appeal. During the third quarter, comparable-store sales surged by an impressive 9%, nearly double the growth rate of its competitor, Chipotle. Notably, these two giants are increasingly competing as Chipotle expands into the drive-thru market. However, McDonald’s remains firmly committed to maintaining its market leadership.
What makes McDonald’s even more attractive is its solid financial performance. The company’s profit margin is steadily approaching a remarkable 45% of sales, surpassing its peers in the fast-food sector. A substantial portion of McDonald’s earnings derives from high-margin sources such as royalties, rent, and franchise fees.
Electronic Arts – A Pinnacle in the Gaming Industry
Electronic Arts (EA 0.06%) is another enticing option, particularly for those interested in investing in the video game sector. While EA may have lagged behind the market last year and trailed Take-Two Interactive by a small margin, it remains a top contender in the industry.
Despite Wall Street’s stronger enthusiasm for Take-Two’s potential sales growth, EA still has a clear path to achieve approximately $8 billion in revenue for the fiscal year. Importantly, it does so without the uncertainties associated with launching multiple new franchises. EA not only maintains profitability but also generates positive cash flow—a feat that its competitor Take-Two currently cannot claim. Moreover, EA’s stock is reasonably priced, trading at just 5 times annual sales.
Ulta Beauty’s Promising Outlook
Ulta Beauty (ULTA 0.19%) may seem to be grappling with short-term growth challenges, resulting in an attractive valuation. The stock currently trades at only 2 times annual sales, down from its pandemic-induced peak valuation of 3 times sales. While its stock returns have been negative over the past year, the S&P 500 index surged by 22%.
Despite industry-wide challenges that prompted competitors to slash prices to move inventory, Ulta continues to enjoy strong customer foot traffic, healthy cash flow, and profitability that surpasses its pre-pandemic levels. In late November, Ulta’s executives revised their 2023 growth projections, now anticipating comparable-store sales to increase by up to 6%.
Investors are advised to exercise caution and closely monitor Ulta Beauty’s upcoming earnings report to confirm that the company remains on track to boost sales in 2024. Effective inventory management will be pivotal in maintaining Ulta’s operating profit margin of approximately 15%.
A Robust Investment Foundation
For investors in search of reliable and promising opportunities, these three straightforward stocks offer compelling choices. McDonald’s leadership in the fast-food industry, Electronic Arts’ dominance in gaming, and Ulta Beauty’s growth potential in the cosmetics and fragrance sector make them worthy additions to a diversified portfolio. While all investments involve some level of risk, the demonstrated strengths of these companies suggest they are well-prepared for long-term success.