Tech Giants Drive S&P 500 Rally, Focus on Consumer Stocks

The S&P 500 has surged 26% in 2024, led by tech giants like Nvidia and Microsoft. Investors are urged to consider consumer goods stocks like Domino's and Carnival, which show promise despite current market trends, as a potential avenue for substantial returns.

Date: 01-12-2024

AI Rating: 6

The report outlines the significant performance of the S&P 500 index, which has increased by 26% so far in 2024. This rally is primarily attributed to the substantial gains made by major tech companies such as Nvidia and Microsoft. However, the report suggests that investors should also turn their attention to consumer goods and services companies, particularly Domino's Pizza and Carnival, which exhibit strong investment potential.

Domino's Pizza Insights

Domino's has shown a year-to-date stock price increase of approximately 16%, trailing the broader market. Despite this underperformance, the company has demonstrated solid fundamentals with notable profit margins, including a 39.3% gross margin and a 12.7% net income margin for the first three quarters of the year. These figures indicate that Domino's is maintaining robust profitability in a highly competitive sector.

Moreover, the report highlights Domino's growth potential through expanding its global footprint, with investments in technology that could enhance operational efficiencies. The company has also been consistent in generating free cash flow, which supports its ability to reinvest and sustain dividend growth. Over the past five years, Domino's has increased its dividends by 132%, showcasing a commitment to returning capital to shareholders.

Carnival's Recovery

On the flip side, Carnival is experiencing a strong recovery post-pandemic, highlighted by a strong revenue increase of 14% year-over-year to reach $7.9 billion for the fiscal third quarter. Net income surged by 61% to $1.7 billion, reflecting a high demand for cruise vacations.

Despite its impressive performance, Carnival's substantial debt remains a concern. However, the report suggests that potential interest rate cuts could alleviate some of the financial pressure associated with this debt. Investors appear to be optimistic, as Carnival's stock has jumped 61% over the last three months, although it remains significantly below its historical highs.

Stocks: DPZ CCL NVDA MSFT