Looking for a stock you can rely on for decades to come?
It’s hard to look that far into the future, but there are some key characteristics you should focus on for very long-term investments.
The ideal stock for this role will combine growth potential with stability. Industry leaders with a broad economic base and exposure to long-term macro growth trends are attractive in this regard. These trends may include cloud computing, data analytics, cybersecurity, the internet of things and breakthrough financial technologies.
If you are looking for great stocks for long-term investments, take a look at the three companies we will discuss below.
Listing this company as a long-term investment stock may seem too simple and obvious, but Amazon (AMZN) is too well suited to the role to be ignored. Consumers are well aware of the company’s dominance in e-commerce. Amazon has almost 50% of the US e-commerce market, which is far greater than the market share of its nearest competitor.
Online retailing has grown rapidly over the past decade, and the pandemic has accelerated this trend considerably. Meanwhile, Amazon has gained an impressive competitive advantage through unparalleled logistics, network effects, an enviable brand and enormous scale. E-commerce is not going anywhere, and it will take years to displace Amazon, even as more competitors enter the market.
In addition, Amazon has managed to take the top spots in other growth verticals. AWS dominates the global cloud services market with quarterly revenues of nearly $13 billion. The company’s cloud revenue is only growing at 30% per year, but there will be strong catalysts in this segment for the foreseeable future due to digital transformation and connectivity from anywhere.
Amazon is also a major player in the entertainment industry of the future. Prime is a streaming service for movies, shows, music events and live sports events with over 150 million active users. It is hard to find another company with this level of dominance across multiple growth areas. The company’s enterprise value to EBITDA ratio is 31.2. This is a very appropriate value, especially in the context of today’s high valuations.
2. Veeva Systems
Veeva (VEEV) provides cloud-based software products and services used by more than 900 customers in the life sciences industry. The company’s services support many critical functions for pharmaceutical and biotechnology companies, including clinical trials, data management, regulatory compliance, quality control and customer relationship management. Veeva dominates the cloud-based CRM market for the life sciences industry, so the prospects for future growth are enormous.
Veeva has grown by more than 25% over the past three years, and there is no reason to think that this trend will stop. The expansion of the pharmaceutical and biotech sectors is expected to continue, and technology will play an increasingly important role in development and commercialisation.
Data analytics and artificial intelligence will help companies in the sector to minimise costs and improve patient outcomes, and the technology providers they need will continue to thrive. Veeva’s size will allow it to deliver breakthrough software solutions through internal R&D or acquisition of smaller companies, and its dominant share of the specialty market will be difficult to shake. These are good signs for shareholders in the long term.
Salesforce.com (CRM) offers a wide range of cloud-based customer relationship management (CRM) tools for customers of all sizes in a variety of industries. The company has a 20% global market share in customer relationship management, exceeding that of its four main competitors combined. These include major players such as Adobe (ADBE), Oracle (ORCL) and SAP (SAP).
Salesforce has also posted average annual revenue growth of more than 25%. The stock trades at a high premium to fundamentals (e.g. earnings, free cash flow, EBITDA), but it is a story with fairly strong long-term growth potential.
Salesforce will grow to its aggressive valuation, even if it takes time. Sure, the stock can exhibit a fairly high level of volatility, but that’s not so relevant when your time horizon is several decades.