Over the long term, stocks deliver the highest returns of any asset class - and patient investors who buy and hold quality companies run by efficient management tend to generate handsome returns. A pertinent example of long-term investing would be Warren Buffett, who even at the age of 93 has almost all of his wealth tied up in Berkshire Hathaway (BRK.B) shares, and says his favorite holding period is “forever.”
Accounting for the impact of compound interest, which has been described by some investors as the “eighth wonder of the world," Berkshire Hathaway stock rose 3,787,464% from 1965 through 2022, compared to the 24,708% gains delivered by the S&P 500 ($SPX), after accounting for dividends.
The virtues of long-term investing can’t be overstated, and I believe both Apple (AAPL) and Amazon (AMZN) are two stocks that long-term investors can buy now.
U.S. Tech Stocks Remain an Attractive Asset Class
U.S. tech stocks are an attractive asset class, and over the long term, they have outperformed the wider markets. Apple is the biggest tech company by market cap globally, and the stock is among those names which investors can practically hold for life.
AAPL has delivered market-beating returns consistently over the years, and has risen at a CAGR of more than 27% over the last 10 years – far outstripping the S&P 500’s returns over the period.
The stock has some unique characteristics which make it a mix of growth and value. Investors see it as a safe bet amid periods of economic turmoil, as best exemplified in 2022 when it emerged as the best-performing FAANG stock – and the only one among the pack to outperform the Nasdaq Composite Index ($NASX).
AAPL also does well when growth stocks are the “flavor,” and rose over 80% each in 2019 and 2020 – and was the best-performing FAANG stock in both of those years.
Apple: A Good Buy for Long-Term Investors
Overall, Apple is among the best long-term stocks to buy for the following reasons.
- Apple has a strong brand with global reach - and while those already using Apple products like the iPhone are almost addicted to them, it remains an aspirational product for many others. As Buffett said in an interview with CNBC, "If you're an Apple user and somebody offers you $10,000, but the only proviso is that they'll take away your iPhone and you'll never be able to buy another, you're not gonna take it.”
- Apple has built a strong ecosystem and boasts an installed base of over 2 billion devices, along with the prospect of recurring revenues from 1 billion paid subscriptions. As the company expands in verticals like financial services and healthcare – and launches new products like augmented reality (AR) headsets which are expected in 2024 – its target market should also increase.
- Apple is also expanding into new markets, which will also help it expand its installed base.
While Apple stock has risen from its August lows, it still looks like a good buy for long-term investors, given the company’s strong track record on innovation and efficient capital allocation.
Amazon: An Attractive Long-Term Buy
Amazon is another stock that looks like a good buy for the long term, even as the stock has underperformed since hitting its all-time highs in mid-2021. The company has an enviable ecosystem, and is present in multiple high-growth industries. It is the largest ecommerce company in the U.S. by a fairly wide margin, and similarly leads the cloud infrastructure market with over a third of the market share.
Amazon also has sizeable streaming operations, and has over 200 million Prime subscribers per its most recent update. The service is not only a revenue driver for Amazon, but is part of the overall ecosystem and helps improve customer “stickiness.”
The company’s digital advertising business is growing in the double digits, and revenues rose to almost $10.7 billion in Q2 2023 – which makes it the biggest contributor to growth at a time when the other segments are experiencing a short-term slowdown. Furthermore, the growth potential in artificial intelligence (AI) remains quite underappreciated, even as many other tech stocks have seen a rerating amid the artificial intelligence (AI) euphoria.
Amazon's business-to-business (B2B) platform, Amazon Business, is another potential growth driver to watch, as annualized gross revenues for the division are now at $35 billion.
AMZN Stock Forecast
Wall Street analysts are also quite bullish on Amazon stock, and it has a consensus rating of Strong Buy.
Of the 39 analysts covering AMZN stock, 34 rate it as a Strong Buy, while 4 call it a Moderate Buy. The remaining 1 analyst rates the stock as a Hold. Amazon's mean target price of $166.85 is a premium of roughly 22% over current levels.
While Amazon faces challenges - including the looming sword of an antitrust lawsuit in the U.S., and increased competition in e-commerce and cloud – the company still offers among the best risk-reward propositions for long-term investors.
On the date of publication, Mohit Oberoi had a position in: AMZN , AAPL , BRK.B . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
