The tech-heavy Nasdaq 100 index has outperformed both the S&P 500 and the Dow Jones Industrial Average by about two-to-one over the past decade. That holds true even if you go as far back as 2000 despite the dot-com implosion, 9-11, and the so-called “lost decade.” Having said that, there are some Nasdaq 100 stocks you should buy and hold for a rainy day.
Technology growth stocks have carried the market and immeasurably benefited the economy. It’s why investors love to buy Nasdaq 100 stocks. Last year the index enjoyed a massive run-up exceeding 55%. Although you might expect 2024 to be a substantially worse showing, that’s not always the case. In fact, it’s rarely so. Over the past four decades, the year following a recovery year after a downturn has enjoyed 31.8% returns on average.
Past performance is no guarantee of future results, of course, but the odds are on your side. That makes buying these three no-nonsense Nasdaq 100 stocks a smart choice for the long-term portion of your portfolio.
Texas Instruments (TXN)
All anyone seems to talk about these days are artificial intelligence (AI) chips. What gets lost in the mania is the analog chips that still form the foundation of our technology and most of the gadgets we use. They are used to upload and download audio, video, and image files, and the chips are in everything from automobiles and smartphones to appliances and digital cameras. Texas Instruments (NYSE:TXN) is the leading manufacturer of analog chips with a 20% share of the market.
As the global chip shortage dissipated last year, Texas Instruments saw sales decline and margins narrow. This year is expected to be a slow-growth year as customers work through the oversupply they ordered. Analysts anticipate business will pick up again in 2025. The semiconductor industry is cyclical but over the long run it rises. The same goes for TXN stock. The analog chipmaker has a total return of 440% over the past decade compared to the 176% return by the S&P 500.
What makes TXN stock attractive as a buy-and-hold forever investment is it makes out-of-the-limelight chips. With most investors focusing on high-profile chipmakers, the chipmaker offers better valuations. Texas Instruments goes for a reasonable 23 times trailing earnings. As analysts forecast it will grow profits over the next five years at twice the rate it did the past five years, this no-nonsense stock is one to pick up now.
Netflix (NFLX)
Streaming video leader Netflix (NASDAQ:NFLX) isn’t exactly a wallflower stock but has proven itself a winner. It made the streaming business look so effortless that almost every movie studio thought they could replicate Netflix’s success. However, the past two years showed them it’s not so easy to be profitable.
The pandemic, of course, saw numerous new streaming services explode onto the scene. Many wrote off Netflix as an also-ran and its stock cratered. The studios had a library of content they could show plus they were making new movies. In contrast, Netflix had to buy new content at a high cost. What we’re seeing now is the start of a streaming video shakeout coming.
Disney (NYSE:DIS) is losing billions of dollars on Disney+ while Paramount Global (NASDAQ:PARA) and Warner Bros Discovery (NASDAQ:WBD) are considering merging. All are losing subscribers while Neflix is gaining them.
NFLX stock is exploding in response. From its 2022 low point, shares have more than tripled in value. It is clear to many that whatever industry consolidation happens, Netflix will be one of the last men standing.
Lam Research (LRCX)
Lam Research (NASDAQ:LRCX) is even flashier than Netflix. It makes specialized semiconductor equipment that allow for denser, more sophisticated chips and advanced packaging techniques that AI requires. Next-generation technology for emerging markets such as etching could catapult this leading equipment manufacturer into the stratosphere as analysts see it as a $38 billion market opportunity.
LRCX stock is already a rocket ship. Over the last 10 years it has returned over 1,950% compared to the 442% return by the Nasdaq. Now there is a memory chip recovery occurring that should further bolster Lam’s business and bottom line. The chip shortage reversal currently hurting Texas Instruments is actually a inflection point for memory chips as prices recover. And demand for AI chips will lead to more equipment orders.
Lam Research is a picks-and-shovels play on the industry. As chipmakers rebound expect to see equipment makers follow in their wake. This is another set-and-forget stock for your portfolio.
On the date of publication, Rich Duprey held a LONG position in WBD stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
