- These growth stocks can help keep your portfolio stable over the long term.
- Amazon (AMZN): The e-commerce giant has provided investors with consistent long-term gains.
- Advanced Micro Devices (AMD): The semiconductor and microchip company is growing leaps and bounds, and is backed up by stellar earnings.
- Tesla (TSLA):Elon Musk has turned Tesla into the world’s leading electric vehicle manufacturer, accounting for 60% of global sales.
Growth stocks are a critical part of any portfolio. While many retail investors constantly buy and sell stocks, often holding them for less than a week or even a day, history suggests that a long-term buy and hold strategy is more advantageous in terms of achieving big gains in a portfolio.
Holding growth stocks allows investors to ride out the short-term ups and downs of the market and achieve larger gains. It also helps stocks to recover from major downturns such as the Black Monday crash of 1987, the tech bubble bursting in 2000, the 2008 financial crisis, and the pandemic-induced downturn of 2020.
Plus, holding growth stocks for the long term enables investors to benefit from compounding dividend payments, as well as share buybacks and stock splits.
A study conducted by JPMorgan Chase (NYSE:JPM) that analyzed the benchmark S&P 500 index between 1993 and 2013 found that people who remained invested all 20 years had a 483% return during that period.
However, investors who sold in and out of the market and missed the 10 biggest moves up in that timespan saw their return reduced to 191%. Missing the 30 best rises in the market over that 20-year period. The return amounted to less than 20%.
The conclusion was that investors who move in and out of the market might avoid some losses, but they also miss out on big gains. With that lesson in mind, here are three of the best growth stocks to buy and hold over the next 10 years.
|AMD||Advanced Micro Devices||$87.06|
A sobering headline appeared on the main page of CNBC’s website arecently: “Amazon stock has lost all of its gains from the pandemic.”
A combination of slowing online sales, supply chain difficulties, and rampant inflation have conspired to push AMZN stock down 37% year to date. That’s where the stock was trading at in February 2020 before the global pandemic. The e-commerce giant’s share price is now 42% below its $3,773.08 all-time high.
To be sure, Amazon has issued some disappointing earnings in recent quarters, which has added to the negative sentiment surrounding the company and its stock.
However, there is a reason for investors to remain bullish on Amazon’s long-term prospects among growth stocks.
The company is increasingly diversified and today has its tentacles in everything from film production and grocery retailing to artificial intelligence and flying drones. A 20-for-1 stock split coming in June should make the share price more palatable to retail investors and lead to increased buying.
Plus, you probably wouldn’t want to bet against AMZN stock’s long-term track record. Over the last 10 years, the company’s share price has gained 866%. Since going public in 1997, the stock is up 127,255%.
Looking ahead, the median price target on the stock among 46 analysts who cover the company is $3,700 a share, implying 68% upside from current levels.
Advanced Micro Devices (AMD)
Chipmaker Advanced Micro Devices showed investors a lot with its first quarter results.
The company reported that its sales grew 71% in Q1 from a year earlier to $5.89 billion. That was well ahead of the $5.52 billion expected on Wall Street.
Earnings per share (EPS) were even better at $1.13, up 117% year-over-year and far ahead of the $0.91 forecast by analysts. Every one of AMD’s lines of business grew by double digits during the quarter.
In terms of forward guidance, AMD said it expects $6.5 billion in sales in the current second quarter, which was also better than the $6.38 billion forecast by analysts. But despite the impressive growth and strong outlook, AMD stock is still down more than 42% year-to-date.
Rather than sweat the decline, investors should see the current pullback as a huge buying opportunity to buy one of the best growth stocks out there.
At its current level, AMD stock is well below its 52-week high of $164.46. Analysts see big things ahead for the company and its stock, especially after the exceptional Q1 print.
The median price target on AMD shares is currently $140, suggesting that the stock could rise 58% over the coming year. That share price appreciation will be fueled by strong demand for the company’s chips that are used in cloud computing servers and other high-end servers.
In terms of its track record, AMD stock has grown 1,383% in the last decade. Back in May 2012, AMD’s share price sat at $6. Since going public in 1982, the stock has gained nearly 2,000%. Its current outlook suggests more growth ahead for the company and its shareholders.
Recent history shows that it’s a mistake to bet against Tesla’s CEO Elon Musk.
Since going public 12 years ago, TSLA stock has returned 20,882% to shareholders.
In 2012, TSLA stock was trading at $5 a share. Today, the electric vehicle maker’s share price sits at $728. That’s after a decline that has seen the stock fall from its November 2021 all-time high of $1,243.49.
While many analysts quibble about Tesla’s valuation and price-to-earnings (P/E) ratio of 108, there’s no denying that it is among the growth stocks that have been winners for shareholders.
Looking into the future, there’s reason to believe that Tesla can maintain its momentum and position as the world’s dominant electric vehicle maker.
The company recently opened a new manufacturing plant outside Berlin, Germany to help grow its footprint in Europe. It also announced that it delivered 310,048 electric vehicles in the first quarter. That accounts for nearly 60% of all EV sales in the world during the first three months of this year.
The company also reported record automotive margins of 32.9% in Q1 and sales approaching $20 billion. Despite its status as the world’s leading EV manufacturer, Tesla remains in hyper-growth mode.
The 35 analysts who cover Tesla have a median price target on the stock of $1,125.00, implying a 39% gain from where the shares currently trade.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com