Investing for the Long Haul: Two Top Picks
If you’re on the lookout for stocks to buy and hold over the next decade, it’s wise to consider companies that have robust business models and significant competitive advantages—often referred to as wide moats—that can sustain growth over time. Luckily, several of these market-leading firms provide essential products and services we encounter every day.
Two standout growth stocks that meet these criteria are Apple and Amazon. Let’s delve into what sets these companies apart and why they might be worth holding onto for years to come.
Apple: A Compounding Machine
Apple has achieved something many electronics firms struggle with: positioning its products as symbols of high status within the consumer tech landscape. Interestingly, Apple often doesn’t rush to be first with new technology; instead, it focuses on design and user experience, ensuring that each product is well-refined before hitting the market.
A prime example is its recent foldable smartphone, the iPhone Duo. Apple waited nearly eight years to release its first foldable after competitors, but it seems to be entering the market with a product that not only looks great but also integrates hardware and software seamlessly, potentially bringing foldable devices into the mainstream.
Apple dominates the premium smartphone segment, especially in the U.S. This dominance helps to create a more predictable pattern for upgrades, providing the company with a stable revenue stream from hardware sales. Additionally, its ecosystem effectively retains a wealthier customer base that offers high-margin service revenue—from advertising revenue shared with Alphabet to cloud storage, app sales, and subscriptions linked to Apple Pay.
This model has positioned Apple as one of the most successful compounding businesses today, with service revenues consistently growing at double-digit rates, contributing to stronger overall earnings. This compounding growth is why Apple stands out as a solid investment for the coming decade.
Amazon: E-Commerce and Cloud Computing Leader
Amazon is a powerhouse in both e-commerce and cloud computing, having established a strong competitive advantage in its online retail sector through extensive investment in its logistics and warehouse operations. But it hasn’t stopped there—Amazon has also positioned itself as the world’s leading operator of robots, utilizing over a million robots in its fulfillment centers, all coordinated through its DeepFleet AI model. It employs AI to optimize delivery drivers’ routes and strategize inventory storage, facilitating quicker delivery times while leveraging its e-commerce operations.
When it comes to profitability, Amazon’s cloud computing division, Amazon Web Services (AWS), is key. It pioneered the infrastructure-as-a-service model and continues to lead the pack among cloud providers. This segment is experiencing rapid growth, with revenue trends on the rise. Amazon is heavily investing in AI to sustain this growth, supported by a robust backlog and collaborations with leading tech labs, such as Anthropic and OpenAI. There’s even talk about AWS possibly becoming a $1 trillion revenue operation down the road.
The financials of Amazon’s cloud business are solid, offering paybacks in just two to three years while locking in long-term contracts. As Amazon progresses with its custom chip production, it’s likely that these economic benefits will improve even further. Recently, the company mentioned that its chips division is currently on a trajectory to generate $20 billion, or $50 billion when including internal usage.
With Alexa at the forefront of e-commerce and AWS dominating cloud services, owning Amazon stock seems like a smart choice for anyone looking to invest over the next decade.
