Having an entire portfolio made up of growth stocks could bring life changing gains that young investors look for, but it is also one of the fastest ways to blow up your brokerage account with major losses. Why not defend your downside with some defensive stocks that can really help keep your account intact if there is a sudden correction or crash like we saw last March. With increasing talk about a potential S&P 500 crash at some point in the near future, let’s take a look at some companies to own if or when the markets head under water.
Costco ($379.27|-1.21%): After its recent quarterly earnings report, Costco could be positioning itself to be the king of the retail industry. As the company heads overseas for rapid international expansion it is still putting up ridiculous numbers for a company as big as it is. Quarterly net sales surged by 21.7% and earnings per share topped Wall Street expectations, bringing in $2.75, good enough for 45% year over year growth. Since last quarter, Costco added nearly 1 million more paid memberships, bringing their total membership pool to nearly 61 million households. What’s more, Costco has a long history of treating both its employees and shareholders well. The wage increase that workers received during the COVID-19 pandemic will stick moving forward, adding an extra $1-2 per hour to every employee’s paycheck.
While Costco hasn’t announced one for this quarter, the company is known to distribute special dividends to shareholders throughout the year. Costco announced it now has over 250 international warehouses, and is still planning on adding another 21 stores in North America over the next year with additional plans for 22 in 2022 and 25 in 2023. Costco’s overseas growth has been massive in Asian markets like Japan and China, so expect their international revenue to continue to increase in the coming years. No matter what happens to the economy, stock market, or society, shareholders can know that Costco will always be a place that families around the world turn to for groceries.
Home Depot ($302.78|-1.20%): If Costco is the future king of the retail industry, Home Depot may be the king right now. With a market cap of over $300 billion, Home Depot proved how valuable the brand is during the COVID-19 pandemic. Along with Costco, Home Depot was named an essential retailer, which funnelled a massive amount of revenues their way. Home Depot trails only WalMart (NYSE:WMT) in terms of retail company value, but given how much lower its revenue numbers are, it shows just how high its margins and operating efficiency is. Big Orange has seen a massive surge as people take the time to make fixes to their homes, and even build new homes as was seen in the surging cost of lumber.
Home Depot also rewards its shareholders with one of the most generous dividends in the industry, paying out a 2.12% yield, or about $6.60 per share every year. Home Depot is trading at a price to earnings ratio of 23, compared to Costco’s ratio of 38, so if you are a long-term investor, you may be getting Home Depot at a bit more of a discount.
Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.