The stock market has had a series of momentous days to kick off 2024, and the year is still young. Regardless of what happens with the stock market in the coming weeks or months, if you’re consistently putting cash to work in great businesses, you can build a winning portfolio in all market environments.
One popular method many long-term investors prefer is dollar-cost averaging, which means you are investing a set dollar amount of cash into stocks on a habitual basis, no matter what is happening with the stock market. That consistency can pay off over time, not only because you won’t be trying to time the market, but because you can reap rewards from both good and bad market days.
If you have $1,500 to distribute across a few stocks right now, here are two names to consider for at least part of that investment sum.
1. Teladoc
Teladoc Health (NYSE: TDOC) hasn’t given investors the performance many had hoped for the last few years, myself included. Through this period, I have continued to believe in the potential of this business and the industry in which it operates and remains a clear market leader.
Slowly but surely, Teladoc looks to be reversing a series of negative quarters following its above-average surge of growth during the pandemic. Also note that most of its losses through this period have only been on paper and not operational ones. For example, the more than $13 billion in impairment charges Teladoc took on to write down the value of pandemic acquisitions — while inordinately painful to witness as an investor — were non-cash losses.
Fast-forward to 2023. The first nine months of last year saw Teladoc report revenue just shy of $2 billion. That was a solid 10% increase from the same nine-month period in 2022. Of that total, about $1.7 billion consisted of access fees revenue, up 10% year over year, while other revenue totaled $233 million, a 7% increase from the comparable period the prior year.
Access fees are generally paid by Teladoc’s clients, such as companies or insurance carriers, on behalf of employees or insureds, but individuals can pay one-time visit fees to use various platform services as well.
Broken down by region, U.S. revenue (which still accounts for the lion’s share of Teladoc’s business) totaled $1.7 billion in the nine months, up 8% from one year ago. Over the same period, international revenue totaled $269 million, up 21% from the same time frame in 2022. Teladoc also brought in operating cash flow of about $220 million in the first nine months of 2023, about 77% more than a year ago.
Teladoc is not yet profitable on the basis of generally accepted accounting principles (GAAP). However, gross profits for the first nine months of 2023 totaled $1.3 billion, with a gross margin of 68%.
Adoption of Teladoc’s chronic care and primary care services is spurring growth forward, as is a widening footprint in international markets. There’s still room for this stock to run, and the broader trajectory of the telehealth space could bode very well for this business over the next five to 10 years.
2. Costco
Costco Wholesale (NASDAQ: COST) may be operating in a difficult macro environment, but this retail stock continues to deliver strong performance that demonstrates the resilience of its powerhouse business model. While users can shop on Costco.com for a variety of goods and services without a membership, its warehouse locations are the bread and butter of its business.
And unless you have a membership with Costco, you can’t get into one of these warehouses to shop. That membership-based model accomplishes several goals, both for Costco and its consumer base. For Costco, it generates most of its profits from membership fees, an important point considering that actual product sales generate relatively low gross margins. And by requiring shoppers to be a member before entering the store, Costco ensures that most of the time, foot traffic in its warehouses will equal sales.
For consumers, the ability to access a variety of items in bulk at lower-than-average prices is a huge draw. And considering the cost of an annual membership starts at just $60, that creates a significant value proposition for consumers to keep coming back for more.
As of the first quarter of Costco’s fiscal 2024, membership fee income totaled $1.1 billion, up 8% year over year. For reference, total net income for the three-month period came to $1.6 billion. Costco’s membership renewal rates are incredibly high. Renewal rates in the U.S. and Canada, where most of Costco’s warehouses are located, totaled 92.8% as of the latest quarter.
Executive members, who pay $120 a year and get a range of perks above and beyond the basic membership, now account for 46% of Costco’s paid members. Over 73% of worldwide sales reported by…
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