Why Should We Consider Tech Stocks For Long-Term Investments?
We know it’s not easy to time the stock market. Some would say that’s impossible. As such, individual investors are frequently looking for the best tech stocks to buy for the long term. The easiest and most effortless way to build wealth is to invest in companies that will be growing throughout our lifetime. Warren Buffett once wrote to his shareholders in Berkshire Hathaway- “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”. One reason why the legendary value investor likes the long holding period is due to the power of compounding interest. That’s understandable, though, as compound interest is the invisible force that stimulates the wild proliferation of an investment when it’s left alone for long enough. As time goes by, reinvested returns lead to more money, over and over again. Sounds easy right?
So, how do we pick stocks that can grow in the long term? Covid-19 is still very much affecting us, and doesn’t seem to be going away anytime soon. The future appears to be more uncertain than ever. We all know there’s no such thing as a sure win in the stock market today. However, investors can increase their chances of success by looking for stocks that have proven to be resilient and adaptable to change over time. That said, finding companies that will still be very much alive a few decades from now requires more scrutiny. The question here is, “which stocks are worth holding forever”. Let’s look at a few tech stocks that fit the criteria of long-term investments.
Best Tech Stocks To Buy (Or Sell) #1 Amazon
Shares of Amazon (AMZN Stock Report) have gone up more than 28% year-to-date while the S&P 500 dropped more than 9%. The largest e-commerce company traded near its 52-week high, despite prices taking a bit of a dip after it reported first-quarter earnings. That’s due to earnings missing expectations. Yet, net sales rose by 26% to $75.5 billion. This came as there were many one-time costs resulting from the coronavirus pandemic, significantly putting a dent on its profit margin. Amazon stock managed to jump 45% from its low in March and is currently trading at $2,436.88 per share. At such a high price, why is it still worth a look?
Amazon Stock To Benefit From E-Commerce & Public Cloud Growth?
The pandemic has created a huge opportunity for Amazon in the e-commerce space when many are forced to stay at home. This is reflected in the higher sales we have seen in the quarter results. And it’s fair to assume that this trend will continue to grow substantially over time as we move towards the ‘new normal’ economy. Another revenue driver is Amazon Web Services (AWS). AWS is already a $41 billion annual revenue run-rate business and is currently growing at an impressive rate of 33%. The global IT market stood at a massive $3.7 trillion. Only a small portion of digital business operations has migrated to cloud so far. This implies massive long-term opportunities ahead for Amazon.
If we need more validation, the Gates Foundation has recently increased its position in Amazon. That shows the foundation has confidence in Amazon stock despite the current steep valuation.
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Best Tech Stocks To Buy (Or Sell) #2 Tencent
Tencent Holdings (TCEHY Stock Report) is a leading internet company in China with businesses across online games, social network and communications, mobile payments, digital entertainment, and more. If the company name doesn’t ring a bell, then the super-app Wechat or PUBG mobile game should be familiar. The Chinese tech giant recently reported a 26% growth in its first-quarter results, a solid revenue that came in at $15.2 billion. Such an impressive result was commendable, considering that most companies have seen significant disruptions in their operations amid the coronavirus pandemic.
Investment In Gaming Company Signals Higher Future Gaming Revenue
Today, Tencent is reportedly spending around $65 million to acquire a 20% stake in Japanese gaming company Marvelous Inc. Marvelous will use the funds raised from Tencent to launch game franchises and for overseas expansion of current game titles. Tencent’s operations have benefitted from the lockdown as many people are glued to their screens. For instance, online games revenue jumped more than 31% in the first quarter. Could this acquisition further enhance the company’s gaming revenue in the coming quarters? Possibly.
The company has been one of China’s most aggressive investors in foreign businesses. Tencent has taken stakes in Epic Games, the North Carolina-based company behind Fortnite, and South Korean studio Bluehole, which fostered PlayerUnknown’s Battlegrounds. It seems to me like Tencent is quite a compelling stock to buy right now. The company’s diversified revenue streams suggest that it can weather the Covid-19 crisis. Furthermore, it has shown itself capable of sustaining high revenue and earnings growth.