The mantra that is often repeated when it comes to investments is: “Stay invested through thick and thin”. But that can be difficult when the markets around us collapse and there is uncertainty. Companies that may have seemed infallible are now suffering from falling demand and growing losses. However, I believe that some companies can get back on their feet when the economy picks up. These are the companies that face short-term challenges but will still see long-term growth.
Here are two stocks that you can hold for generations.
Nike (WKN: 866993) is undoubtedly one of the world’s strongest sports and clothing brands. Founded in 1964 and listed in 1980, the company has built a reputation for quality and innovation, especially when it comes to sports shoes. The COVID-19 pandemic forced 90% of Nike’s stores to be temporarily closed for a period of around eight weeks in the quarter from March 1 to May 31. These closures resulted in a 38% year-over-year decline in sales. With overheads still high during that period, Nike posted a net loss of $ 790 million for the quarter.
Even if this looks rather bad, investors should keep in mind that the closings were temporary. They were also in line with lockdowns and “stay at home” measures introduced by governments around the world to curb the spread of the coronavirus. At the end of June, around 90% of Nike’s own stores were already open worldwide and all stores in China opened again. Digital sales have offset the lull during the pandemic. They rose 75% year over year this quarter and account for 30% of total sales.
Nike’s innovative strength also shines in the crisis, as the Nike sports research laboratory has developed a new approach to shoe design with the Nike NEXT% program. Groundbreaking research involving designers and engineers led to the prototype of the Nike Air Zoom Vaporfly. This innovation represents a major advance in the design of running shoes. The company also launches a Nike Air Max Up designed for women for their fall collection.
The company’s digital presence will grow even more with the launch of a new store concept called Nike Rise. It should combine the digital and stationary shopping experience with the preferences of the customers. The first Rise store opened in Guangzhou, China on July 9th.
Mastercard (WKN: A0F602) is one of the largest financial payment companies in the world. The company has around 2.2 billion Mastercard-branded credit and debit cards in circulation. It processed gross $ 1.57 trillion transactions in the first quarter of 2020, an 8% increase over the previous year. Mastercard saw healthy 3% year-over-year growth in net sales, while net income grew 1% year-over-year.
However, the results also showed the impact of COVID-19 in April, when payment volumes and the number of switch transactions decreased by around 25% in the week to April 7th. Investors are therefore facing poor earnings for the second quarter as the majority of global lockdowns occurred in April and May. In the week ending June 21, the easing of social distancing measures and the reopening of many economies around the world contributed to the recovery in volumes. The volume and number of switch transactions in the United States increased 5% and 1% year-on-year. However, the volume of cross-border transactions continued to decline, dropping 41% year over year.
These numbers show that Mastercard’s fate is closely linked to the health of different economies. This in turn means that the recovery of the corona situation will bring about an improvement in the company’s financial performance. With the strong franchise and the good reputation of Mastercard, the company should have no problem getting back on its feet after the pandemic.
Consumer habits are also changing and shifting to contactless digital payments. Mastercard research shows that nearly seven out of ten consumers worldwide say their switch to digital payments is likely to be permanent. And almost half are planning to use less cash even after the crisis has subsided. These trends are beneficial developments that favor Mastercard’s long-term growth.
The company is also active on the acquisition front and approved the purchase of Finicity for $ 825 million in late June. Finicity is a leading North American provider of real-time access to financial data and insights. The acquisition is intended to strengthen Mastercard’s existing “Open Banking” platform to enable a wider range of financial services.
The post 2 stocks you can buy and hold forever appeared first on The Motley Fool Germany.
Royston Yang owns shares of Mastercard and Nike. The Motley Fool owns shares of and recommends Mastercard and Nike stocks.
This article was written by Royston Yang in English and was on July 25th, 2020 on Fool.com released. It has been translated so that our German readers can take part in the discussion.
Motley Fool Deutschland 2020