3 Sensational Summer Stock Picks

Savvy investors are always looking for the next great stock opportunity. Often, we can find good ideas by looking no further than the products and services right under our noses. In fact, investing greats like Warren Buffett have made billions in the market by buying what they know.

Let's take a look at three stock picks that are fitting for the summer season.

Chevron

Source: Wikimedia Commons

Since many of us will pack up our cars and head out on the open road this summer, oil and gas companies spark investment inspiration. Chevron is the most profitable major oil and gas company. For year-end 2011, the company posted record profit. Chevron boasts a very healthy financial position, evidenced by $17 billion in balance sheet cash, which remains greater than its $12 billion in long-term debt. Chevron plans to boost its oil and gas volumes by roughly 20%, to 3.3 million barrels per day, by 2017, primarily by increasing liquefied natural gas plants, developing deepwater oil fields, and boosting shale production.

Costco

Source: Wikimedia Commons

For any party you might host this summer, Costco can stock your fridge, freezer, and pantry with every item on your list (and probably a few that aren't!). Costco enjoys a healthy growth outlook, supported by robust industry growth. Warehouse club stores ring up nearly $150 billion in annual revenues, representing a 7% increase each year since 2001. Warehouse clubs have been gobbling up supermarkets' market share, evidenced by a 2% decline in market share for these traditional retailing formats during the past three years. And with roughly 72% of Costco's warehouse stores located in the U.S. and Puerto Rico, the company houses plenty of opportunity to expand internationally. Despite membership fee increases, the company maintains high customer loyalty. In fact, renewal rates are at 86%, and the rate stands at an even greater 94% for the higher-spending small business customers.

Diageo

Source: Wikimedia Commons

Regardless of your adult beverage of choice, Diageo likely makes, markets, and sells it. The company boasts two of the largest global premium spirits brands in Smirnoff and Johnnie Walker. Its other key brands include Guinness, Tanqueray, Ciroc, and Captain Morgan. This product mix helps diversify revenues. No individual spirit category makes up more than scotch's 29% of sales. Beer, vodka, and ready-to-drink categories bring in 12%, 12%, and 7% of sales, respectively. The spirits maker also boasts impressive geographic diversity. Diageo derives roughly 60% of sales from developed markets, and 40% of sales from emerging markets, including Africa, Turkey, Russia, and Eastern Europe. Emerging markets are a huge growth driver for Diageo. In fact, net sales in these markets grew an impressive 33% between 2010 and 2012. This geographic diversity, coupled with Diageo's size, is a huge advantage for distribution, which is the critically important lifeblood for any beverage manufacturer.

Foolish bottom line
Familiarity can spark inspiration and serve as a viable starting point when searching for stock picks. Yet, buying a stock solely because you use its company's products isn't wise. Be sure to evaluate many important company metrics and traits -- like the health of the industry, company sales trends, margin expansion, and management trustworthiness -- before investing.

Warren Buffett has become one of the world's richest men by buying what he knows. But the price of becoming the world's greatest investor is that the Oracle of Omaha can no longer make many of types of investments that made him a billionaire in the first place. Find out about one such opportunity in "The Stock Buffett Wishes He Could Buy." The free report details a sector of the economy Buffett's heavily invested in right now and exactly why he can't buy one attractive company in that sector. Click here to keep reading.

The article 3 Sensational Summer Stock Picks originally appeared on Fool.com.

Fool contributor Nicole Seghetti owns shares of Costco Wholesale. Follow her on Twitter @NicoleSeghetti. The Motley Fool recommends Chevron, Costco Wholesale, and Diageo plc (ADR). The Motley Fool owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.