1 Pandemic-Proof Stock to Buy for the Long Term
August 2, 2021
For long-term investors, the Covid-19 pandemic has been a game changer in terms of the types of businesses that will flourish in future.
The huge market sell-off in March 2020, and subsequent extraordinary recovery for specific sectors, was a reminder that not all companies are created equal in investors’ eyes.
One great example was cruise ship operators, which saw their investment thesis become almost toxic as they turned into floating petri-dishes for the spread of Covid-19.
Yet, there were many companies that saw their stock prices soar. The examples that everyone are aware of include the likes of Zoom Video Communications Inc (NASDAQ: ZM) as work-from-home orders benefitted certain services.
One less-discussed sector was food & beverage (F&B), where the winners and losers were separated by the strength of their online offerings.
With that, here’s one pandemic-proof stock in the sector that has continued to grow during the pandemic and looks like it will continue to thrive long after it.
Pizza for all occasions
When you think of reliable pizza (delivered on time) you tend to think of Domino’s Pizza Inc (NYSE: DPZ).
Operating as a franchise, with a smattering of company-owned stores, it has been a stalwart of the pizza delivery business for decades. Since the beginning of 2020, its shares are up over 75%.
There’s been good reason for that. Domino’s has been front and centre of a growing pizza market globally.
In addition, the lockdowns were a massive growth driver for the company as individuals ordered food online for delivery at home.
In 2020, same store sales growth (SSSG) – a key metric for the restaurant business – in the US jumped 11.5%. Internationally, it grew by 4.4%.
Overall, net income in 2020 expanded by an extraordinary 25% year-on-year to US$491 million. For consumers, Domino’s has been the personification of reliability and quality during the pandemic.
While clearly not the “best pizza” out there, it’s also guaranteed to be something that everyone is happy to eat and, crucially, is easy to order.
Continuing to win
Domino’s latest earnings were affirmation for investors that the company is unlikely to see its winning streak end any time soon.
The company’s innovative and easy-to-use app, along with pick-up and delivery optionality, have been a key growth driver for Domino’s over the past few years.
The Covid-19 pandemic just accelerated these trends. Domino’s truly global presence – it has over 18,000 stores in 90 markets – means it’s benefitting from the growth in pizza consumption.
In its latest quarter, Domino’s recorded an incredible 115th consecutive quarter of SSSG in international markets.
That has been indicative of a formidable growth trajectory for its overall business, both in international markets and domestically in the US (see below).
Source: Domino’s Pizza Q2 2021 earnings presentation
Focused on growth
Domino’s has been a formidable long-term performer in the US stock market. Over the past decade, its shares have delivered a total return of over 1,700% to investors.
Still sporting a market cap of just shy of US$20 billion, Domino’s continued dominance in the fast-delivery pizza market doesn’t look to be in any danger.
With ongoing international expansion and a track record of consistent growth that is close to flawless, Domino’s looks like one stock that will continue to have long-term investors hungry for more.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Zoom Video Communications Inc.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.