With a bull market in full swing, these industry leaders look like smart investment opportunities.
Powered by big gains for Nvidia, Microsoft, and other mega-cap tech giants, the S&P 500 index has staged an incredible 26% rally so far in 2024. Meanwhile, the technology-heavy Nasdaq Composite index is up an even better 28% across the stretch.
But while high-profile tech companies have been dominating the headlines and rocketing to new valuation highs, investors shouldn’t overlook the potential for wins in other sectors. If you’re looking for stocks with strong market-beating potential, read on to see why two Motley Fool contributors think that investing in these two big-name consumer goods and services companies would be a smart move right now.
One of Warren Buffett’s latest buys
Keith Noonan: If you’re looking for stocks that offer an attractive risk-reward profile in today’s market, it could pay to take some inspiration from Berkshire Hathaway CEO Warren Buffett. Notably, Berkshire sold shares in big names, including Apple and Bank of America, last quarter — and it was a net seller of stocks overall in the period. But Buffett’s company did invest in two consumer goods stocks: Domino’s Pizza (DPZ 0.81%) and Pool Corp. Of these two stocks, I think that Domino’s looks like a particularly good investment right now.
Domino’s stock has climbed roughly 16% this year, lagging significantly behind the S&P 500’s gains across the stretch despite solid business performance and signs that the company’s long-term growth strategies are on track. The pizza specialist’s share price is still down roughly 15% from the high that it reached at the end of 2021, and there are good reasons to think that the stock can continue bouncing back and go on to reach new highs in the not-too-distant future.
Between its company-owned stores, franchising, and supply chain businesses, Domino’s has managed to post a 39.3% gross margin and a 12.7% net income margin across this year’s first three quarters. Those profitability levels stand out in the cost-intensive and highly competitive restaurant industry, and they can continue to support strong earnings growth as the company increases its global store count and makes moves to increase same-store sales.
The business is already posting encouraging margins and free cash flow, but its long-term growth potential and ability to benefit from tech trends could be significantly underappreciated. As a pizza chain, it’s understandable that Domino’s isn’t getting much attention as an artificial intelligence (AI) stock — but the technology has the potential to be a major performance catalyst.
With advances in AI and robotics paving the way for increased automation of store operations and deliveries, the company has positive long-term margin catalysts on the horizon. These innovations will take time to perfect and roll out, but they’re not far-off, sci-fi hypotheticals at this point. Technology in these categories will see major progression in capabilities and deployment over the next decade, and Domino’s position as an industry leader in the restaurant and food delivery and supply chain businesses has the company poised to enjoy underappreciated tech tailwinds.
In addition to its solid fundamentals and long-term expansion opportunities, Domino’s Pizza also has appeal as a dividend growth stock. While the current yield of roughly 1.2% might not look like much, the company has raised its payout by 132% over the last five years and 504% over the last decade. The company’s strong cash generation should support more payout growth, opening the door to substantial passive income generation in addition to long-term stock gains.
This industry leader is back on track
Jennifer Saibil: Carnival (CCL 1.15%) is still the leading global cruise operator despite going to zero in sales at the beginning of the pandemic. It has slowly made its way back, and it’s now firmly stable and growing.
The results just keep getting better, with quarterly reports sounding like a broken record of records. In the 2024 fiscal third quarter (ended Aug. 31), revenue increased 14% year over year to $7.9 billion, and net income was up 61% to $1.7 billion.
The smashing performance is coming from soaring demand, which has been ongoing for several years already. It’s more than pent-up demand from pandemic lockdowns. People love Carnival’s cruises, and it has loyal cruise enthusiasts and new customers. It’s all converging and leading to a record booked position already heading into 2026, at high ticket prices. That’s trickling down to the bottom line, and operating income was a record $2.2 billion in the third quarter.
So far, demand isn’t slowing, and Carnival is ordering new ships and changing some routes to meet demand. It’s preparing for continued growth, and profitability is finally starting to come back.
The only problem that remains for Carnival is its high debt. Most of the billions of dollars in debt it accumulated when it wasn’t in operation is still on its books, although it’s off its peak debt by nearly 19%. That has kept its stock from getting back to prepandemic highs, and even though it’s paying it off at a steady rate, it will be several years before it can lower the debt to reasonable levels.
In its favor, interest rate cuts will make it easier to pay that debt off. Investors got excited when the Federal Reserve said it would cut interest rates, and Carnival stock is up 61% over the past three months. However, it’s still trading 65% off its all-time highs set in 2018. That spells opportunity for forward-thinking and long-term investors.
Bank of America is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in Apple. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Domino’s Pizza, Microsoft, and Nvidia. The Motley Fool recommends Carnival Corp. and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
