Mastercard, Ulta and Alphabet: High Return Stocks to Watch News ad

When investors are looking for the next big opportunity to invest their capital, they often focus on what is popular at the moment or what has the best price action in the so-called “popularity contest” that Warren Buffett and Keynes mentioned in their writings. They also mentioned that the market becomes a scale over time, turning into facts and moving away from these popularity metrics.

Speaking of Warren Buffett, there is one important thing he considers when choosing his next investment. In addition to deep qualitative analysis of management and product quality, Warren Buffett likes to see high return on invested capital (ROIC) accompanied by relatively low valuation metrics such as price-to-earnings (P/E) ratio or price discount. book.

Today’s list includes three stocks that will allow investors to take advantage of companies with high ROICs, making them long-term holdings in any portfolio for the coming years. Type names Mastercard Inc. New York Stock Exchange: Massachusetts for the financial sector, Ulta Beauty Inc. NASDAQ: ULTA for the consumer goods sector and even Alphabet Inc. NASDAQ: GOOGLE for one of the best names in the technology sector.

Unlocking the long-term potential of Mastercard shares

As long as there is a financial system that includes consumer finance or some closely related derivative, stocks like Mastercard will continue to see increased activity and success. Mastercard’s optimistic outlook is based on the understanding that today, more than ever, consumers are reliant on access to credit.

This is all for the qualitative end of the analysis; From a quantitative perspective, these are stocks that ended up in Buffett’s portfolio for a reason. The company’s financials show a massive ROI of 55% over the last 12 months, a level of profitability driven by the brand’s market share and pricing power among suppliers and customers.

This high return on investment has driven Mastercard shares up 3,500% since the 2008 financial crisis. Meanwhile, the broader S&P 500 index is up only 524%, even as it recovered shortly after the crisis. Investors now understand the importance of having companies with high ROIC to grow wealth.

Wall Street analysts such as Keefe, Bruyette & Woods believe Mastercard stock deserves an outperform rating and a $618 price target today. To prove these estimates correct, the stock would have to rise 17% from where it trades today, and that momentum is likely to continue in the coming years.

Ulta Customer Loyalty Drives Stock Growth

Most people think of cosmetics and skin care products as discretionary items. However, Ulta’s financial statement data shows that it is more suitable for use as a core product, as Ulta has never had a net loss on its income statement, even during the 2008 financial crisis. Providing such a strong earnings moat is one metric that investors should always consider for this company.

More than 90% of sales come from Ulta’s customer loyalty programs, which are not available at retail. This allows management to improve sales forecasts as well as manage inventory accordingly since they have data on all the purchasing habits of most of their customers. Effectively managing these metrics is the best part of Ulta’s business.

That’s a 28% ROI over the last 12 months. Whether the economy is booming or down, Ulta customers will likely always find room in their budgets for skin care and color cosmetics, making this level of profitability practically a given for years to come.

When it comes to price action, investors see the benefits of such a high ROIC. Since the financial crisis, Ulta’s stock has risen 4,100%, outperforming the S&P 500’s return of 524% by nearly tenfold. Assuming ROIC remains at current levels, the next few decades could look the same as the past, if not better.

Alphabet Promotion: An Opportunity You Can’t Miss

Google, owned by parent company Alphabet, is not only the largest search engine and video streaming platform in the world, but also accounts for the majority of online advertising budgets and is now a leader in the development of quantum computing with its latest computer, Willow. chip.

All of these moats act as a predictable model for Alphabet, in which management can allocate capital more efficiently and manage projects more intensively. This theme is reflected in the company’s financial performance today. Alphabet has delivered a return on equity investment of up to 27.8% over the past 12 months, an incredible achievement for a company that today trades at a valuation of $2.4 trillion.

Unsurprisingly, Alphabet stock has risen 1,600% since the financial crisis, outperforming the S&P 500, another great example for investors to consider the critical importance of businesses with strong ROI. This metric should be a top priority for growing their wealth, as annual stock prices tend to follow this metric over the long term.

Before you consider Mastercard, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated and best-performing analysts daily and the stocks they recommend to their clients. MarketBeat identified five stocks that top analysts were quietly telling their clients to buy now, before the broader market caught on… and Mastercard wasn’t on the list.

While Mastercard currently has a Moderate Buy rating among analysts, the top-rated analysts think these five stocks are Strong Buys.

View five stocks here

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