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The stock market can be a fantastic tool for building wealth given time and patience. How you put that tool to use can vary greatly depending on needs and circumstances. Thus, your investment portfolio (and the returns it delivers) will be very personal to you.
The types of companies you focus on, your risk tolerance, and your long-term financial goals all end up being important factors in how your portfolio performs. There’s also the important factor that no investor or investment is perfect. If you focus on consistently investing in wonderful businesses, trimming your losers, and rebalancing your portfolio from time to time, you can generate solid returns that stand up through the years.
If you’re shopping for more great companies to add to your portfolio, here are two unstoppable stocks to consider adding to your buy list this month.
1. Amazon
Amazon (NASDAQ: AMZN) has become a household name most often associated with e-commerce. But it is a high-level player in multiple lucrative markets. The two most significant sources of revenue for Amazon are its flagship e-commerce platform and its cloud computing platform Amazon Web Services (AWS).
In 2023, research firm PYMNTS reported that Amazon accounts for about 48% of all retail spending in the U.S. Compare that to well-known retail giant Walmart, whose business accounts for roughly 7% of U.S. retail spending. In cloud computing, Amazon controls a whopping 32% share of the entire global cloud infrastructure market. That market is valued at around $247 billion annually. AWS is the business that brings in most of Amazon’s actual profits, and it is one of the most asset-light of the tech giant’s segments.
The third-largest driver of financial growth for Amazon, and one that may surprise some investors, is its advertising business. While the ad market overall has been somewhat volatile over the past three years, online advertising has been a growing segment of that industry throughout and should continue that trend for years to come.
In the full year 2023, total net sales hit $575 billion, a 12% increase. Net income for 2023 improved from a $2.7 billion net loss the prior year to a $30 billion profit in 2023.
Amazon has experienced plenty of bumps in the road over the last few years along with other growth-oriented businesses with broad exposure to various forms of discretionary spending. However, this company still looks like a smart way to play the future of multiple lucrative industries, including tech, advertising, and e-commerce, moving forward over the next five to 10 years. The company’s strides in artificial intelligence (AI), from generative AI integrations with AWS to the expansion of its own family of AI-driven chips, also bear close watching from investors.
Amazon’s stock price is up nearly 62% over the past year, but its price-to-sales ratio remains a reasonable 3.1, roughly equal to its 10-year average. Amazon looks like a good choice for investors to buy using a dollar-cost averaging investment play.
2. Microsoft
Microsoft (NASDAQ: MSFT) grabbed a lot of attention this past year for its billions of dollars of investment in AI. The company is integrating AI capabilities and tools across its family of brands, from its cloud infrastructure platform Azure to automation improvements in its flagship productivity platform Microsoft 365 to its Bing search engine.
One example is the new AI-powered chatbot Copilot, which Microsoft launched in 2023. Copilot is built on a large language model (LLM) and has been integrated into various tools and services in both free and paid forms including Bing, Microsoft Edge, Outlook, Teams, and more. This is all an effort to propel its business segments forward and stay competitive, and the impact of Microsoft’s AI investments will take time to manifest in its financials.
Microsoft’s AI integrations to its cloud platform Azure include updates like conversational AI and machine translation. The changes are having a significant impact on Microsoft’s enterprise customers, helping them streamline business operations. In the company’s most recent earnings call last month (for fiscal 2024’s Q2), CEO Satya Nadella noted:
Azure again took share this quarter with our AI Advantage. … We now have 53,000 Azure AI customers. Over one-third are new to Azure over the past 12 months. Our new models-as-a-service offering makes it easy for developers to use LLMs from our partners, like Cohere, Meta, and Mistral, on Azure without having to manage underlying infrastructure.
AI appears to be having an impact. Fiscal 2024 second-quarter revenue was $62 billion, an 18% jump from one year ago. The company also reported operating income of $27 billion, and net income of $22 billion, both 33% increases year over year. Of that revenue total, $19 billion was derived from its productivity and business process segment (which includes its Office products and LinkedIn), while $26 billion came from its Intelligent Cloud segment (which includes its server products and cloud services). These two segments saw revenue increase year over year by respective amounts of 13% and 20% in the quarter.
Microsoft’s business may be maturing, but its long-term growth potential and the continued strides it’s making in a competitive operating environment remain untarnished. The icing on the cake for some investors might be its dividend. Although it yields less than 1% (mainly because of stock price appreciation), it has increased 170% over the last decade.
Microsoft’s stock price is up 61% over the past year, so it does sell at a bit of a premium. However, the continued potential for further growth justifies the expense. Now looks like a great time to add to or build a position in this top tech stock.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Rachel Warren has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Walmart. The Motley Fool has a disclosure policy.
These 2 Unstoppable Growth Stocks Can Make You Richer in 2024 was originally published by The Motley Fool
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