Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
Right Before Your Very Eyes
Some of the most successful investments over the past four years, a period during which the U.S. faced the worst economic contraction since the Great Depression, have been from companies that are a part of everyday lives. The use of smartphones has increased dramatically and the iPhone has become a must-have device for millions of Americans. Owning the iPhone also meant that smartphone apps were being purchased. Regardless of the state of the economy, many people rely on their cellphone as their primary source of communication. Unsurprisingly, Apple (Nasdaq:AAPL) has been one of the most successful investments over the past four years. Since 2009, Apple shares have climbed from around $150 to $570 today.
The recession caused U.S. consumers to become more frugal. Consumers are keeping their cars longer or replacing old vehicles with newer, used vehicles. As cars age, they need more parts. Retailers of auto parts, namely AutoZone (NYSE:AZO), a company familiar to anyone with a car, was one a handful of stocks that posted a positive gain in 2008. Since 2008, shares have advanced from $107 to nearly $400.
SEE: Invest In What You Know
Looking ahead, frugality has become a part of life for many well-off working Americans, not just the unemployed. This is verified by the strong growth numbers coming from discount retailers like Dollar General (NYSE:DG) and TJX Companies (NYSE:TJX). Dollar General has become a popular destination for household essentials and other basic personal items. With more convenient locations and prices that are often lower than Wal-Mart, Dollar General has found its stride in this economy. TJ Maxx has become a shopping destination for shoppers looking for designer fashions and other home furnishings. EPS estimates for TJX are about $2.42 for the current year and around $2.70 for next year, respectively. Dollar General is expected to earn $2.80 this year and $3.28 next year. Odds look good that both of these businesses will do reasonably well in a strong or weak economy.
The Bottom Line
Investing is simple but not easy. Investors who stick to making investments in industries they understand are likely to make more sensible investment decisions. More importantly, the likelihood of making poor investment decisions is greatly reduced.
At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.