The buy-and-hold strategy is popular for many reasons. A long-term approach takes far less work than monitoring short-term fluctuations within the stock market and staying on top of the latest news. The strategy can also produce solid returns if you pick reliable companies.
Investors can choose from thousands of stocks, but not all of them are long-term picks. Some stocks have the potential to ride up to the moon and comfortably outperform the major indices. However, investors looking for long-term stocks without much work may want to stick with established names. These are some of the top picks to consider for investors with lengthy time horizons.
Alphabet (GOOG)(GOOGL)
Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) is an underrated member of the Magnificent Seven. The stock trades at a reasonable valuation, has healthy financial growth and is receiving negative press that won’t impact the company’s financials.
Gemini is the company’s latest artificial intelligence (AI) debacle. The generative AI tool did not have settings to display white people in images which resulted in inaccurate historical images. The built-in racial bias prompted a strong reaction among investors and consumers. The response was a strong enough reaction for Alphabet to move Gemini offline as it works to fix the issues. It can take several weeks before Gemini’s image generation tool is back.
It was only about a month ago when Alphabet reported strong financials. The company’s advertising network and cloud platform are largely responsible for the company’s 13% year-over-year revenue growth and 52% year-over-year net income growth in Q4 2023.
Cost-cutting has been working for shareholders. The company resembles Meta Platforms (NASDAQ:META) in 2022. Facebook’s parent company saw its value plunge after the company had bad quarter after bad quarter. However, shares swiftly recovered in 2023.
Alphabet doesn’t have the bad quarters, but it has been the center of bad PR around its AI tools. When earnings come out, investors will once again focus on the tech conglomerate’s financial strength. Shares offer a good margin of safety at current levels.
Microsoft (MSFT)
If you have a mutual fund or an exchange-traded fund (ETF), you probably have exposure to Microsoft (NASDAQ:MSFT) stock. The tech titan is the most valuable company in the stock market with a market cap above $3 trillion.
The company operates in several growth verticals, such as artificial intelligence, cloud computing, advertising, business software, gaming, social media and others.
Exposure to those industries helped the company report 18% year-over-year revenue growth and a 33% year-over-year increase in net income. Those figures come from Microsoft’s Q2 FY24 results where CEO Satya Nadella emphasized the company’s transition from talking about AI to applying it at scale.
Net profit margins exceed 35% in most quarters. Shares are up by 68% over the past year and have gained 269% over the past five years. The stock trades at a 37.5 P/E ratio and offers a 0.72% dividend yield. While Microsoft’s yield is low, the company hikes its dividend by more than 10% each year.
Nvidia (NVDA)
The artificial intelligence boom still has steam. While some AI stocks have lofty valuations, Nvidia’s price-to-earnings (P/E) ratio still makes sense. The $2 trillion company trades at a 33 forward P/E ratio and is achieving exceptional top and bottom-line growth.
Revenue increased by 265% year-over-year while net income was up by 491% year-over-year in the fourth quarter of fiscal 2024. Data center revenue jumped by 409% year-over-year which is where the company gets its artificial intelligence revenue.
Success in this segment suggests Nvidia can rally higher. 27% quarter-over-quarter growth in this segment isn’t as high as before, but Nvidia doesn’t need to repeat its 2023 performance to justify the current valuation. Still, Nvidia looks poised to deliver many quarters of 50%+ year-over-year revenue growth before it meaningfully slows down. By the time that takes place, Nvidia can surpass Microsoft as the most valuable publicly traded corporation.
It’s been a great ride for investors so far. Shares are up by 261% over the past year and have gained roughly 2,000% over the past five years.
On this date of publication, Marc Guberti held long positions in GOOG, MSFT, and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
