Finding good buy-and-hold stocks to invest in for the long term can be a bit of a challenge. This is especially true in the tech industry, where what's popular today may become tomorrow's fad. However, the three tech stocks below are household names that investors should feel safe holding on to for the next decade, perhaps even longer.
1. Alphabet
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has grown tremendously over the years. Since starting out as just a search engine to being an email provider and now even offering web-based office apps and cloud storage, Google and its parent company have changed significantly over the years. The tech giant is even getting involved with developing self-driving technologies through Waymo.
If there's one thing that tech companies need to do to be good long-term investments, it's to be able to stay relevant and keep on innovating. That also means not being afraid to fail, like when Google stopped selling Glass to consumers or its attempt at creating a social media site, Google+. Google Wave is likely a distant memory for many Google fans.
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One of the company's strengths has been in finding key areas to focus on while knowing when to abandon those projects that haven't been working, like Wave and Google+. The Google Play store on Android has been enjoying growth, with gross revenue in the first half of 2019 increasing 19.6% to $14.2 billion.
It's still nowhere near the $25.5 billion that the iOS App Store brought in over the same period, but the gap is shrinking as Google Play's growth rate has been stronger (19.6% vs 13.2% for iOS). Google Nest smart home devices are promising opportunity for the company. The company's market share of smart speakers in Q2 was 16.7%. And although that's down from 32.3% from the prior-year quarter, it's still good enough to make it one of the top three companies in the space.
Most recently, the company announced it would be acquiring Fitbit as it looks to focus more on wearable technologies. These are just a few examples of how Google will continue to grow for many years.
In 2018, Alphabet posted a net income of more than $30 billion on revenue of $137 billion. In each of the past five years, the company's bottom line has been north of $12 billion. And with gross margins north of 55%, the company's financials will continue to improve as its sales climb higher.
Alphabet has also been generating significant free cash flow of $28 billion over the trailing 12 months, which is arguably more important, especially as the company needs to spend cash in order to invest into more projects. With strong financials and many growth opportunities, Alphabet is one of the safer tech stocks to invest in today.
2. Apple
Apple (NASDAQ:AAPL) is another solid tech stock that would look good in any portfolio. The company's greatest asset is the cult following that it has from consumers who stay loyal to the company's ecosystem and on the lookout for the latest Apple products. This gives Apple greater pricing power, with new iPhones costing $1,000, while allowing the company to count on regular upgrades from users. That can create a lot of recurring revenue for Apple.
But it's more than just devices, as Apple has been focusing heavily on services of late, including Apple Music, iCloud, and Apple Pay. Some estimates see Apple generating $100 billion per year by 2023, just on its services.
However, the company is a bit more of a follower than an innovator these days, with its augmented reality (AR) headsets expected to arrive well after its competitors have products available. But that may not matter for Apple, as the company knows by now that it doesn't have to be first to market anymore and that its customers are willing to wait for a more polished Apple product in the meantime. However, the company is already involved in AR as its ARKit does give users the ability to use AR in apps and games.
Analysts from Morgan Stanley expect the company's latest service, Apple TV+, to be worth $9 billion per year by 2025. Last year, Apple generated $58 billion in free cash flow, giving it plenty of resources to be able to compete head-on with other companies. Free cash flow has always been a strong point for the company and as impressive as last year's tally was, Apple accumulated even more of it in 2018 -- $64 billion.
Like Alphabet, Apple has had no problem posting a strong profit with the company's net income hitting $55 billion in its most recent fiscal year, and that's up 21% from the $46 billion it generated just three years ago. Its impressive financials have made Apple a safe investment for value, growth, and dividend investors as well. Currently yielding 1.2%, Apple's stock even offers a little icing on the cake for investors who want some recurring income from their investments.
3. Amazon
Amazon (NASDAQ:AMZN) is perhaps the easiest of the three stocks to justify as a long-term investment. As long as you expect online shopping to continue rising in popularity, then Amazon's stock is the one to buy. During Black Friday and Cyber Monday, the company recorded record numbers with a combined 25 million products sold. Amazon's Echo Dot and Fire TV Stick were among the best-selling Amazon devices as the company sold millions more than it did in the prior year. In total, Amazon's sales reached an estimated $9.2 billion on Cyber Monday and $7.4 billion on Black Friday.
And Amazon's focus on shipping items as quickly as possible will only strengthen the company's position as the go-to online vendor. While individual retailers may offer shipping from their own websites, they often have large minimum orders or won't be able to offer the same turnaround times as Amazon. Walmart is perhaps the one big exception, as the company does offer next-day delivery in select areas. However, with Amazon's sales totaling $70 billion in its most recent quarter, which is 24% more than the $57 billion in revenue it did in the prior-year quarter, it's clear that despite the rising competition, Amazon continues to dominate online.
Amazon has also been looking at ways to diversify its business as well, with grocery stores potentially being a much bigger part of the company's future in the years to come. While they're not likely to become a major source of revenue or profit for the company anytime soon, they could help offer some more balance and give Amazon another solid growth opportunity.
Instead, it's been Amazon's cloud business, Amazon Web Services, that has been the real bright spot for the company with sales growth of 35% in its most recent quarter. It's also been a significant source of income for the company, accounting for 71% of its operating income in Q3 despite only making up 13% of its top line.
Overall, Amazon is another great example of a company that has many different growth avenues that can make it a terrific growth stock to hold on to for many years.
You can't go wrong with any of these stocks
Which stock you choose of these three tech giants may just come down to personal preference.
Amazon may be the best fit for aggressive growth investors rather than value-oriented ones as its price-to-earnings multiple of 77 will keep many price-conscious buyers away. Apple is a more modest buy at 22 times earnings which makes it a better fit for risk-averse investors. Alphabet falls between the two stocks, trading at 29 times its earnings. But with no dividend, it'll appeal more to investors who are more keen on growth rather than stability. However, all three tech stocks look to have bright futures for a long time, and they could all make terrific long-term investments for many years.
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December 07, 2019 at 07:00PM
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3 Tech Stocks You Can Buy and Hold for the Next Decade - Motley Fool
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