The Market Takes an Upswing: Two Intelligent Stocks Suffering 16% and 65% Losses, Worth Purchasing Immediately
In the bustling world of stocks, three tech titans - Nvidia, Microsoft, and various mega-cap tech giants - have led the charge in 2024, propelling the S&P 500 index to a jaw-dropping 26% rally. The technology-focused Nasdaq Composite index outperformed, breaking the 28% growth mark. But whilst tech-centric headlines and soaring valuations steal the show, it's worth considering some lesser-known sectors with strong potential for market-beating returns.
A few Our Website contributors believe that a shrewd investment in two consumer goods and services giants could reap substantial rewards. Let's explore their picks, starting with Warren Buffett's latest picks, Domino's Pizza (DPZ) and Pool Corp.
Domino's Pizza: A Tasty Opportunity
Keith Noonan, one of our contributors, suggests considering Domino's Pizza for its attractive risk-reward profile in today’s market. Berkshire Hathaway, the multinational conglomerate orchestrated by Warren Buffett, invested in two consumer goods stocks during the last quarter, but Domino's Pizza emerged as the standout choice.
While the pizza giant boasts a 16% climb this year and solid business performance, Domino's shares are still markedly lower compared to the S&P 500's gains. Furthermore, the stock's price still trails its 2021 high. So, what makes Domino's an enticing opportunity?
Strong Fundamentals
Domino's profitability levels, with a 39.3% gross margin and a 12.7% net income margin across three quarters in 2023, outshine those of other cost-intensive and ultra-competitive restaurant companies. This bodes well for long-term earnings growth as the company expands its global footprint and continually increases same-store sales.
Tech-Enabled Transformation
Technology and automation innovations have the potential to significantly boost Domino's margin potential in the future. With the steady progression of AI and robotics, store operations, deliveries, and supply chain processes can become more streamlined, leading to improved profitability in the long term.
Dividend Growth
Domino's Pizza offers an attractive dividend growth proposition. Although the current dividend yield appears modest (about 1.2%), the company has grown its dividends by 132% over the last five years and an impressive 504% since 2011. With solid cash generation on tap, further dividend growth appears likely, providing an opportunity for passive income generation in addition to long-term stock gains.
Carnival: Where the Fun Comes With a Return
Our second contributor, Jennifer Saibil, takes a closer look at Carnival, the leading global cruise operator. After a brutal pandemic-induced slowdown, Carnival has staged a remarkable comeback, logging a steady recovery complete with increasing bookings and soaring ticket prices.
In Q3 of 2024, revenue increased 14% from the previous year to reach $7.9 billion, while net income surged 61% to $1.7 billion. However, one notable challenge remains: Carnival's substantial debt accumulated during its downturn still weighs heavily on its balance sheet.
Despite the debt burden, Carnival's strong recovery is attracting attention, and its stock price has appreciated by 61% over the previous three months, even as it trails its pre-pandemic highs by 65%.
Carnival's growth is primarily driven by its loyal cruise fans and soaring demand, which shows no signs of abating. With a record booked position heading into 2026, investors can expect substantial profitability to continue.
In conclusion, both Domino's Pizza and Carnival offer compelling investment opportunities. Both companies are poised for future growth stemming from their strong fundamentals and strategic positioning within their respective industries. However, investors must weigh the risks involved with these opportunities and assess their risk tolerance before making any investments.
In the context of investing wisely and looking beyond tech-centric headlines, some of Our Website's contributors suggest considering Domino's Pizza and Carnival as lesser-known sectors with strong potential. Domino's Pizza, with its attractive risk-reward profile and strong fundamental performance, has potential for substantial returns, even though its shares are still lower compared to the S&P 500's gains. On the other hand, Carnival, the leading global cruise operator, is showing a remarkable comeback from its pandemic-induced slowdown, offering investors the chance to profit from its record booked position heading into 2026, despite its substantial debt.
Investing in finance, whether it's tech giants like Microsoft or lesser-known sectors like Domino's Pizza and Carnival, requires careful consideration, including evaluating risks and assessing risk tolerance before making any investments.
