This seems to be a frustrating year for many investors. Many tech stocks have been hammered, from megacaps like Platform Meta (META -1.57%) and Amazon.com to work-from-home growing stock darlings like Zoom Video Communication and Interactive Platoon. Very little industry has avoided whacking the market, and retail, real estate, and financial receive beatdowns this year as well. Picking up stocks lately hasn’t been easy, to say the least.
But lessons can be learned from two stocks that beat the market this year by significant margins — and both stocks are in very different industries. Those two stocks are nothing but boring and decades old Waste Management (Wm 0.64%) and McDonald’s (MCD 0.31%). While that S&P 500 The index is down about 17% this year, Waste Management shares are down just 5% and McDonald’s shares are up 2% at this writing. The two stocks are outperformers on both five and 10-year time horizons as well. While there are many reasons for the market’s bullishness for the shares of these two companies, they both have one thing in common: Their businesses seem unsettled or disrupted by a weak macroeconomic environment or new competition.
Predictable businesses deserve high valuations
If there’s anything 2022 has taught us, it’s that the market’s appetite for stocks can wane quickly if a company’s future becomes less certain. Consider the sharp decline of Meta Platforms, the parent company of Facebook, Instagram, and WhatsApp this year. Shares are likely to fall due to year-to-date earnings per share declining nearly 33% compared to the same period last year. Meta is grappling with a combination of reducing advertiser budgets amid macroeconomic uncertainty and the impact of changes in advertising tracking and ad measurement in applesour mobile operating system. Such a sharp decline has investors reevaluating the company’s long-term revenue growth potential and the possibility of several scenarios at play.
It is at this point that McDonald’s and Waste Management stand out. It not only stands to reason that the world’s largest fast-food burger chain and the nation’s largest waste management service will likely still be serving customers 10, 20, or even 30 years from now, but the two companies also have a long history. steady growth to prove their staying power. McDonald’s was founded in 1955 and Waste Management was founded in 1968. Compare this with Meta Platforms short history of less than 20 years. Even more, Meta didn’t even go public until 2012; This means the company didn’t have to survive the dot-com bubble and wasn’t publicly traded during the Great Recession.
All this said that the sudden disruption in revenue and earnings for some technology nests in 2022 is a clear reminder that it is very important for companies to prove to investors that they can grow stably over the next few years if they want their shares to command high. valuations in the market. Waste Management and McDonald’s have been doing this for decades, and they will continue to do this during the COVID-19 shutdown of 2020 and 2021, and the current inflationary environment. Even in the third quarter of 2022, McDonald’s and Waste Management revenue exceeded analyst expectations.
The strength of both companies, even in difficult times, is also proven by their long history of consistent dividend growth. McDonald’s has raised its dividend for 45 consecutive years, with the most recent 10% increase announced last month. Waste Management’s most recent dividend increase occurred last December, when it raised its dividend by 13%. This marks the company’s 19th consecutive year of dividend increases.
While growing dividends is not enough reason for a stock to command a premium valuation, even in challenging times, they suggest that a company is likely to do the right thing. In the case of McDonald’s and Waste Management, dividend growth over the years reflects a resilient business growing steadily in all environments. The consistent growth of these two companies and the market’s appreciation for hard-to-disrupt businesses are likely to be some of the key factors that will make these two stocks stand out in 2022.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Daniel Sparks do not have a position in any of the stocks mentioned. The client may own shares of the said company. The Motley Fool has positions and recommends Amazon, Apple, Meta Platforms, Inc., Peloton Interactive, and Zoom Video Communications. The Motley Fool recommends Waste Management and recommends these options: long the March 2023 $120 call on Apple and short the March 2023 $130 call on Apple. The Motley Fool has disclosure policy.