Should Pepsi buy Starbucks

3 stocks to hold forever

Even strong companies lost much of their stock value in the March crash. But investors who kept their shares are now benefiting: the broader market has skyrocketed. Investing for the long term means sitting out the volatility that can arise from time to time. But this requires stocks from great companies. Target, PepsiCo and Starbucks are companies that should do well over the long term and that can be held forever.

Innovative solutions for basic needs

Target was one of the pandemic's biggest winners, with the highest visitor growth ever recorded. The company was on the road to success with its wide range of services. The numbers for the second quarter, when the lockdown was most severe, were 24%, while the numbers for the third quarter were slightly lower at 20%. Much of the US stores were open in the third quarter. Customers were happy to finally be able to shop in the store again. Digital services grew 155% and same-day services grew 217%.

Target has also managed to remain profitable despite its ever-growing list of new shopping opportunities. More than half of the orders were sent from stores rather than major shipping centers. This saved costs.

Why do customers like to shop at Target so much? Sure, because of the low prices. But Target also markets its own brands. The company is also experimenting with different ideas to provide the right experience for each location.

The stock recently hit new highs and is now up 172%. But it is only traded at 22.7 times past earnings. As the economy continues to recover and customers switch from buying essentials to spending on experiences or luxuries, Target's phenomenal performance is likely to slow. But Target's ease of innovation and customer service means there is still a lot of growth to be expected here.

The right products at the right time

PepsiCo is much more than just sweet drinks. They also offer breakfast products and snacks. They were able to maintain the momentum in the pandemic.

The company's Frito-Lay division grew 7% in the second quarter (lockdown!), While Quaker Oats grew 23%. This was enough to keep company-wide sales almost constant, despite the decline in take-away beverages, with sales falling by 3% compared to the previous year. The third quarter was already positive, with growth of more than 5% compared to 2019 and increasing revenues.

But the success takes place independently of Corona. PepsiCo has been growing faster than rival Coca-Cola for many years, and its diversified product line has been a major contributor to overall success. That means the company is agile and can react faster to changing consumer behavior than competitors like Coca-Cola. In the second quarter, they in particular had to record a decline in sales of 28% and if sales continue to decline, they will have to try to restructure. It also means that the company is well positioned for future profits.

PepsiCo shares are up 5% since the beginning of the year and generate a dividend yield of 2.8%. That's well above the S&P 500 average of 1.8%.

Coffee all over the world

Given that Starbucks is just a coffee chain, it was amazing that it was able to generate more sales than restaurant chains like McDonald’s and Wendy's. But Starbucks has opened over 32,000 restaurants around the world and there is still a long way to go.

The company, of course, struggled with the lockdown. Revenue was down as much as 65% in April and improved to a 9% decrease in the fourth quarter that ended September 30th. Sales are still declining, but the company expects to turn positive in 2021.

Starbucks has questioned a lot to meet consumer demand. The company also plans to open new stores in the suburbs as many people continue to work from home. It also plans to open over 2,000 new locations in 2021, a tremendous achievement for a company that is already ubiquitous. While the pandemic has certainly slowed growth, Starbucks still has a lot to do. Persevering investors will benefit from this.

The post 3 Stocks You Can Hold Forever appeared first on The Motley Fool Germany.

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The Motley Fool owns shares of and recommends Starbucks. Jennifer Saibil has no position in any of the stocks mentioned. This article was published on November 27, 2020 on Fool.com and has been translated for our German readers.

Motley Fool Germany 2020

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