The stock market can be a great way for individuals to build long-term wealth. Still, the stock market consists of many stocks, and some perform better than others due to a multitude of factors.
Three Motley Fool contributors have surveyed the market and come up with three stocks that investors can be grateful for. Netflix (NASDAQ:NFLX), Lululemon Athletica (NASDAQ:LULU), and Nike (NYSE:NKE) have done wonders for shareholders. Let’s take a closer look at each.
A rising star in sportswear
John Ballard (Lululemon Athletica): The athletic apparel industry has been a consistent growth market for many years, and Lululemon is one of the up-and-coming brands to keep an eye on. Revenue has more than doubled over the last five years, while growth in digital sales has fueled even faster gains on the bottom line.
Shareholders certainly have a lot to be grateful for, since they have earned an incredible return of 747% on their investment over the last five years, but new investors can also feel fortunate to discover this stock, because Lululemon’s best days are still ahead.
At $5.5 billion in trailing-12-month revenue, Lululemon is still tiny compared to the estimated total size of athletic apparel sales, which ranges from about $200 billion to $300 billion worldwide. The good news is that Lululemon’s brand has resonated across Europe and Asia, where it has experienced its fastest growth in recent years. Revenue from outside of North America made up only 16% of the business in the most recent quarter.
Lululemon also continues to execute well to offer customers something new and exciting to keep brand heat high, including an expanding apparel assortment, home fitness products through its 2020 acquisition of Mirror, and future opportunities in footwear.
Even with the disastrous Luon pant recall in 2013 that pressured sales for a few years, Lululemon has continued to move forward and deliver exceptional returns to investors. It has unparalleled customer loyalty, and with so much opportunity for global expansion, investors can still expect market-beating returns from this one over the next decade and beyond.
Consistently at the top
Jennifer Saibil (Nike): If you’re looking for a stable stock with loads of more growth ahead, Nike might be just up your alley. It’s the world’s biggest athletic wear brand, with more than $44 billion in fiscal 2021 sales, a 19% year-over-year increase.
Nike’s trifecta of innovation, brand ambassadors, and digital strategy has created a compelling brand that is consistently at the top of the apparel world. It once again took the top spot in Piper Sandler‘s annual Taking Stock With Teens survey, with 27% citing it as their top clothing brand (second-place American Eagle outfitters had 7%), and a whopping 57% saying it’s their favorite shoe brand.
For innovation, Nike recently opened a new research and development complex five times the size of its previous one. It regularly launches new products that are lighter, more advanced, and better designed, reaching customers who care about technological excellence as well as those who are looking for style. For brand ambassadors, it has relationships with most of the top U.S. athletes as well as many international celebrities, often developing a line of products with an athlete’s input, such as the recently released Zoom Freak sneakers based on a deal with basketball star Giannis Antetokounmpo. As for digital strategy, it has a comprehensive omnichannel program with a focus on direct-to-consumer (DTC) sales. It’s been ramping up investment in this strategy, which creates a strong relationship between the brand and its customers and generates loyalty and sales. Some features include new product drop events exclusively on member apps and a digital experience for customers in-store. The company has gradually been cutting out third parties from its program as it deepens its DTC approach.
In the first-quarter earnings release in September, management cited expected supply chain issues in the near future, sending its stock price down and setting off a chain reaction as other companies began to acknowledge similar issues. Management lowered its fiscal 2022 outlook, which was a blow to investors, but it also said it expects the issues to resolve by 2023. As the issues look to be easing, investors have had more confidence in Nike and its stock. Leaving aside the current climate, Nike is a powerhouse stock that should keep on giving to investors for a long time.
The streaming pioneer has made many shareholders wealthy
Parkev Tatevosian (Netflix): Netflix has been a shareholder’s dream over the last five years. The stock is up 464% over that time. Consumer viewing behavior is changing in favor of streaming, and Netflix benefits from the trend it helped create. Streaming subscriptions can be used on phones, tablets, computers, and TV screens, a feature traditional cable TV subscriptions cannot duplicate. Moreover, streaming costs are often much lower than the cable bundle that forces you to pay for channels you may never watch.
For less than $20 per month, consumers can stream all the content they want. The customer value proposition has fueled millions of new signups, and as of its third quarter, Netflix boasted 214 million paying subscribers, up from 195 million at the same time last year. Of course, Netflix has thrived since the onset of the pandemic, when hundreds of millions of folks were constrained in their homes to entertain themselves.
What’s more, Netflix has grown revenue at a compound annual rate of 27.7% over the last 10 years. Netflix’s business model delivers excellent efficiencies of scale. It does not cost the company much more to show films and series to 200 million people than 100 million people. Therefore, additional subscribers boost profitability. Indeed, from 2016 to 2020, Netflix’s operating profit margin expanded from 4.3% to 18.3%.
The company’s scale gives it another advantage as well: It can spend massive amounts on content. That, in turn, will lead to higher customer satisfaction and perhaps attract even more subscribers. Netflix is undoubtedly a stock that investors can be grateful for, not only for what it has done for shareholders over its history, but also for its potential to continue delivering excellent returns.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.