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My 3 Favorite Stocks To Buy Right Now
We're heading into the last few days of the year, and now makes a great time to think about what stocks you would like to own next year -- and beyond. You might want to get a head start on the new investing year by picking up a few quality players with solid long-term prospects. Now, during the quiet trading days around the holidays, is a fantastic time to shop around.
To get you started on shaping your portfolio for 2025 and beyond, I have three stocks in particular in mind. These companies each have a track record of earnings growth, have developed an audience of loyal customers, and generally have what it takes to succeed over the long run. They're consumer goods companies and leaders in their markets. Let's check out my three favorite stocks to buy right now.
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1. Costco
Costco Wholesale (NASDAQ: COST) has steadily grown revenue and profit over time, even through difficult market environments. This is because consumers continue to shop here -- for essentials like grocery and gas -- thanks to the warehouse's rock bottom prices. So, during downturns when other retailers may suffer, Costco remains strong.
One thing I like a lot about Costco is that its main profit driver is one you can count on, and it's high margin. I'm talking about membership fees. With renewal rates above 92% in the U.S. and Canada, it's clear shoppers are sticking with Costco year after year. And issuing memberships doesn't involve much in terms of cost, meaning Costco gains a lot on each membership.
And even though Costco today has nearly 900 warehouses, it continues to grow. It's latest new warehouse posted the highest ever U.S. opening day sales at $2.9 million, and Costco forecasts 29 openings during the current fiscal year.
Costco shares trade for 53x forward earnings estimates, but they're worth this premium price considering the points I mention above -- because these elements should keep Costco's earnings soaring well into the future.
2. Amazon
Amazon (NASDAQ: AMZN) has built two major businesses -- e-commerce and cloud computing -- over time and has become a leader in each. The company now has more than 200 million members in its Prime subscription program, which offers access to fast and free delivery of packages as well as access to entertainment like books and movies. Amazon Web Services (AWS) is the world's No. 1 cloud business and drives the company's profit.
The e-commerce and cloud units have brought in billions of dollars in revenue and profit quarter after quarter, and the company's recent revamp of its cost structure and investment in artificial intelligence (AI) should add to the momentum moving forward. Amazon has increased efficiency across its fulfillment network, bringing inventory closer to customers, and this is reducing its cost to serve.
AI is helping with those efficiency efforts in the e-commerce business, and it's also generating revenue for Amazon in another way. AWS sells a wide range of AI products and services -- from low cost and premium chips to a fully managed platform that allows customers to tailer large language models to their needs. This AI focus helped AWS reach a $110 billion annualized revenue run rate in the recent quarter. So, Amazon could be at the start of a whole new wave of growth, making now a great time to invest.
3. Chewy
Chewy (NYSE: CHWY) sells everything you need for your favorite, dog, cat, goldfish or any other type of pet -- from food to toys and medicine, and even pet insurance. The company generates most of its revenue through this online platform, but it's also recently expanded into another area, and that's vet care.
This is a genius idea because these veterinary clinics offer Chewy another source of revenue and are a great way to introduce the e-commerce platform to those who don't know about it. The total addressable market for vet services is $25 billion, opening up the door to a new growth market for Chewy. The company has launched six clinics and plans to open one to two more during this fiscal year.
Getting back to Chewy's e-commerce platform, what I really like is the fact that loyal customers are driving sales, offering us some visibility on future revenue. We know this because AutoShip -- a service that automatically reorders your favorite products and sends them to you -- represents about 80% of Chewy's total sales.
I also like the fact that Chewy is profitable, has maintained gross margin above 26% over the past three years, and has no debt. All of this makes Chewy a top stock to buy and hold for 2025 and beyond.
Should you invest $1,000 in Costco Wholesale right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Chewy, and Costco Wholesale. The Motley Fool has a disclosure policy.
