Millennials and Gen Z have shown active interest in risky financial instruments in recent years. Although there are a variety of stocks currently available at discounted prices for them to pick, the potential market fluctuations on concerns over the Fed’s continued policy tightening to fight the elevated inflation could lead to many of them witnessing a further decline.

As it is difficult to predict how a stock can survive the economic and market uncertainties, it could be wise for beginner investors to invest in shares of established companies that have the potential to generate solid long-term returns.

Given their broad market reach and sound financials, Microsoft Corporation (MSFT), Costco Wholesale Corporation (COST), and The Coca-Cola Company (KO) appear wise additions to beginners’ portfolios now.

Microsoft Corporation (MSFT)

MSFT develops, supports, licenses, and sells software products, services, and solutions worldwide. The company also manufactures and sells PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories through OEMs, distributors, resellers, digital marketplaces, and retail stores.

On August 9, 2022, British multinational universal bank Barclays Bank PLC announced the deployment of MSFT’s Microsoft Teams as its preferred collaboration platform.

This will enable Barclays to better connect its employees and enhance the data retention, search, and retrieval capabilities available within Microsoft Purview to meet its needs. This should help MSFT nurture a long-term partnership with Barclays in the long run.

For its fiscal 2022 second quarter ended May 1, 2022, MSFT’s total revenue increased 12.4% year-over-year to $51.87 billion. The company’s gross profit came in at $35.44 billion, up 10.2% from the prior-year period. Its operating income came in at $20.53 billion for the quarter, representing a 7.5% rise from the prior-year period.

While its net income increased 1.7% year-over-year to $16.74 billion, its EPS increased 2.8% to $2.23. As of June 30, 2022, the company had $13.93 billion in cash and cash equivalents. 

The consensus EPS estimate of $10.12 for fiscal 2023 ending June 30, 2022, indicates a 9.9% increase from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.

The consensus revenue estimate of $220.79 billion for the same fiscal year represents an 11.4% year-over-year improvement. Its EPS is expected to grow at a rate of 15.4% per annum over the next five years.

MSFT’s 47.2% trailing-12-month ROE is 575.9% higher than the 7% industry average. The company’s trailing-12-month ROA of 19.9% is 621.4% higher than the industry average of 2.8%. Over the past month, the stock has gained 14% to close the last trading session at $292.71.

MSFT’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Quality and Stability. Click here to see the additional ratings for MSFT’s Growth, Sentiment, Value, and Momentum.

MSFT is ranked #10 of 54 stocks in the Software – Business industry.

Costco Wholesale Corporation (COST)

COST operates wholesale membership warehouses and e-commerce sites that offer branded and private-label products in a range of merchandise categories worldwide. It sells food, automotive supplies, hardware, sporting goods, jewelry, electronics, apparel, and health and beauty aids.

On June 30, 2022, COST acquired a 45% minority interest in Costco-Taiwan, a joint venture, from our long-time joint venture partners, for $1.05 billion. The purchase is expected to be one to one and one-half percent accretive to earnings per share.

COST’s total revenue for its fiscal 2022 third quarter ended May 8, 2022, increased 16.2% year-over-year to $52.60 billion. The company’s operating income came in at $1.79 billion, representing a 7.7% rise from the year-ago period.

Its net income came in at $1.35 billion for the quarter, representing a 10.9% rise from the prior-year period. COST’s EPS grew 10.6% to $3.04. As of May 8, 2022, the company had $11.19 billion in cash and equivalents.

Analysts expect the company’s EPS to come in at $13.09 for its fiscal 2022 ending August 31, 2022, representing an 18% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.

The consensus revenue estimate of $226.39 billion for the same fiscal year represents a 15.5% year-over-year improvement. Its EPS is expected to grow at a rate of 13.7% per annum over the next five years.

Its 31% trailing-12-month ROE is 153.8% higher than the 12.2% industry average. The company’s trailing-12-month ROA of 8.8% is 85.5% higher than the industry average of 4.8%. Over the past month, the stock has gained 5.8% to close the last trading session at $553.02.

COST’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.

It has a B grade for Growth and Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see COST’s Value, Quality, Stability, and Momentum ratings here.

COST is ranked #22 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.

The Coca-Cola Company (KO)

KO owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, energy drinks, dairy, and syrups to fountain retailers such as restaurants and convenience stores. It operates through independent bottling partners, distributors, wholesalers, retailers, and bottling and distribution operators.

For the fiscal 2022 second quarter ended July 1, 2022, KO’s net operating revenues increased 11.6% year-over-year to $11.30 billion. The company’s non-GAAP gross profit came in at $6.67 billion, representing a 7.2% rise from the year-ago period. Its non-GAAP operating income came in at $3.47 billion for the quarter, representing an 8% rise from the prior-year period.

While its non-GAAP net income increased 4.4% year-over-year to $3.06 billion, its non-GAAP EPS rose 2.9% to $0.70. As of July 1, 2022, the company had $8.98 billion in cash and cash equivalents.

The consensus EPS estimate of $2.46 for fiscal 2022 ending December 31, 2022, indicates a 6% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.

Analysts expect KO’s revenue to be $42.13 billion for the same fiscal year, representing a 9% rise from the prior-year period. Its EPS is expected to grow at a 5.5% rate per annum over the next five years.

Its 42.3% trailing-12-month ROE is 246.5% higher than the 12.2% industry average. The company’s trailing-12-month ROA of 10.3% is 115.5% higher than the industry average of 4.8%. Over the past month, the stock has gained 4.1% to close the last trading session at $65.05.

KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

It has a B grade for Stability, Quality, and Sentiment. Click here to see the additional ratings for KO (Growth, Value, and Momentum).

KO is ranked #20 of 35 stocks in the A-rated Beverages industry.

MSFT shares were trading at $292.49 per share on Wednesday afternoon, down $0.22 (-0.08%). Year-to-date, MSFT has declined -12.65%, versus a -9.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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