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Finding emerging consumer brands while they are relatively unknown can be a very rewarding investment strategy. The stock market offers these opportunities to investors all the time. You just have to pay attention to which brands people shop for more often.
Here are two fast-growing brands that could make investors a small fortune over the next twenty years.
1. Cava group
Investors who jumped on board Chipotle Mexican Grill, McDonald’sor Starbucks in their early growing years they sit in the catbird seat today. Cava group (NYSE: CAVA) is the latest high-flying restaurant stock to bet on for the long term.
There are plenty of hamburger, steak, pizza, Italian, Chinese and Mexican restaurant chains, but there aren’t many restaurants in the US with a Mediterranean menu. The cuisine is seen as a healthy and sophisticated alternative in a sea of the same old options. This is why Cava has experienced impressive customer traffic this year in a challenging consumer spending environment, leading to double-digit revenue growth. sales in the same store.
Strong growth has sent the stock up 185% in the past year, but it’s not too late to buy. Cava’s 35% annualized revenue growth is comparable to Chipotle’s growth in its early years as a publicly traded company. A $10,000 investment in Chipotle in 2006 would have grown to $634,000 today, and Cava is on a similar growth path.
Cava has an enormous growth margin. Quarterly revenue of $231 million is a fraction of Chipotle’s $2.9 billion. It took Chipotle almost twenty years to expand to its current size. Cava is currently available in 25 US states and just opened in Chicago to the strongest customer response the company has seen to date.
Importantly, Cava is growing its store base at about 8% to 9% per year, but management is expanding in a disciplined manner. It posted a net profit of $19 million last quarter. The company will become more profitable as it expands in the US, and that should drive more new highs Cava stock.
2. When holding
The sportswear industry is another ripe market for monster winners in the stock market. An investment of $10,000 in Nike 44 years ago it would now be worth $7.7 million with dividends reinvested. Investors might take a second chance on gains like these because When holding (NYSE:ONON) is currently growing at a similar pace to Nike in the 1980s.
On is one of the most popular clothing brands of the moment. There were 66 Unsponsored athletes at the Paris Olympics this year. Like Nike, On generates the majority of its revenue from performance footwear, a segment that grew 28% year over year on a constant currency basis last quarter.
On is seeing strong growth in all the different running shoe styles it offers, but management noted that its all-day comfort shoe Cloudtilt is flying off the shelves. The brand just launched its new Cloudsurfer Next shoe at a relatively low price point that management expects will expand the addressable market.
The popularity of On shoes, especially among athletes, shows the brand’s potential to capitalize on partnerships. This is similar to how Nike built its brand. It has already experienced a significant increase in brand awareness through a partnership with actress and singer Zendaya, who has a huge following on social media.
Nike didn’t have the benefit of social media 40 years ago, so On was able to see his brand grow faster than Nike. On that note, analysts expect the company to deliver 34% annualized earnings growth over the next few years, which should support excellent returns for investors.
Should you invest $1,000 in Cava Group now?
Before buying shares in Cava Group, consider the following:
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Johannes Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Chipotle Mexican Grill, Nike and Starbucks. The Motley Fool recommends Cava Group and On Holding and recommends the following options: Short September 2024 put $52 on Chipotle Mexican Grill. The Motley Fool has one disclosure policy.
Two monster stocks that we should hold on to for the next twenty years was originally published by The Motley Fool