3 Best Stocks to Buy for Long-Term Growth
A proven strategy for making money in the stock market is to buy strong companies and hold them for the long term. Investors can capitalize on the secular growth opportunities and time and money multiplier effects when using this tactic.
Companies that have anticipated and benefited from profitable developments like e-commerce, cloud computing, mobile phones and video streaming, including Amazon, Apple and Netflix, have seen their stock prices soar over the past decade. These tech giants have shattered stock market returns over the past decade as they pursued their development opportunities.
Tesla (TSLA -0.95%), Micron Technology (MU 2.38%) and Microsoft (MSFT -0.07%).
So let’s take a look at the benefits of owning these three long-term growth companies and why some investors might consider doing so.
Over the years, Microsoft has become much more than just a distributor of the Windows operating system. The company has expanded into the areas of cloud computing and video games and is also making great strides in office efficiency and collaboration.
The extreme expansion of these consumer segments could propel Microsoft into the next decade. For cloud computing, Microsoft, for its part, has amassed a significant stake. In 2021, Microsoft’s Azure cloud service will account for 22% of the cloud infrastructure market share, up from 13% in 2017.
Microsoft’s growing market share in cloud infrastructure could lead to exceptional long-term growth. An independent forecaster predicts that this industry will bring in more than $1.6 trillion by 2030. Compared to the total of $380 billion in 2017, that’s a considerable gain.
However, that’s not the only reason Microsoft is set for lasting success. Microsoft can expect strong support from the gaming industry. Indeed, experts predict that there will be 4 billion gamers by 2030, up from 3 billion today. Therefore, the $176 billion spent on gaming hardware and software in 2016 is expected to increase in the coming years.
Independent analysts predict that by 2030, the global video game market will reach $583 billion. Microsoft is strategically positioned to take advantage of the booming gaming industry due to its strong presence in hardware (consoles) and software (many popular games). Reasons like these are why analysts predict Microsoft’s annual earnings growth of more than 16% over the next five years.
As we have shown above, the company has the potential to sustain this growth rate for some time. Therefore, given that strong catalysts could propel Microsoft’s growth, investors looking to add a high-tech company to their portfolio may want to buy it now and hold it for a long time. Additionally, investors are getting a great entry point into what could be a long-term winner as the company is selling at 27 times its earnings, which is below its five-year average of 37.
Electric vehicles are the future wave, and Tesla’s second quarter 2022 results, released on July 20, show the company has one of the best chances to capitalize on this emerging industry. For the quarter, Tesla reported sales of $16.9 billion, up 42% year over year, and adjusted earnings of $2.27 per share, up 57% from to the period of the previous year.
It should be noted that Tesla achieved this huge increase while experiencing supply chain delays and production shutdowns in China due to COVID. According to reports, up to 25% of the company’s quarterly auto deliveries were lost due to these challenges. As a result, Tesla increased second-quarter car production by 25% year-on-year to just over 258,000 units. Over the previous year, total deliveries increased by 27%, reaching more than 254,000.
Thus, Tesla now delivers more than a million automobiles each year. Over several years, the company hopes to increase annual car deliveries by an average of 50%. The company’s management has already started pulling the necessary threads to increase production and reach the target date. It turns out that Tesla can produce 2 million electric vehicles a year worldwide, up from 1 million the year before.
This indicates that Tesla is ready to capitalize on the continued secular growth potential of the electric vehicle market. AlixPartners, a business advisory firm, reports that electric vehicles accounted for just 8% of global vehicle sales in 2017. However, electric vehicle sales are expected to grow from their current level of 22% to 33% in 2028 and 54 % in 2035, suggesting that Tesla could experience robust growth for more than a decade.
Tesla is expected to grow earnings by 45% every year for the next five years, but given the explanation above, it’s safe to assume the company will continue to show strong momentum even beyond that point. .
Micron Technology, Inc.
Micron Technology management issued a dire forecast last month due to falling demand for memory chips and weak prices. As a result, the memory company forecast sales of $7.2 billion and adjusted earnings of $1.63 per share for the fourth quarter of fiscal 2022. That would be a significant drop from a year earlier. , when Micron posted earnings per share of $2.42 on sales of $8.27 billion. .
However, Micron, which sells for just seven times its earnings, looks like an attractive bet for investors looking to add a long-term winner to their portfolios. Also, since the need for the type of memory chips Micron provides is expected to increase over time, the stock should do well. According to a third-party valuation, the dynamic random access memory (DRAM) market is expected to grow at a CAGR of 9.2% to reach $221 billion by 2030.
Most of Micron’s revenue (73% in the previous quarter) came from sales of dynamic random-access memory (DRAM). The market is expected to grow by the percentage of mid- to high-enterprise teens every year through 2025. According to Micron, the DRAM industry stands to gain from the growing use of memory in various industries. , including IT and telecommunications, consumer electronics and manufacturing. and transportation.
Additionally, Micron expects its end market potential to grow at a steady pace well beyond 2025. From $161 billion in 2021, the company expects its entire accessible market to grow to $330 billion in 2030. The $31 billion in sales Micron expects to make this fiscal year indicates the company has substantial room for future expansion.
On the bright side, Micron intends to take the memory business by storm. Over the next 10 years, it plans to spend $150 billion on R&D and capital expenditure. This could help Micron’s efforts to increase its share of the memory industry, an area in which it has recently made progress.
Micron is a great investment for long-term growth investors due to its low price, the potential to increase market share, and the huge memory market opportunity it currently enjoys.