"Buy and hold" is Warren Buffett's investing cornerstone, and it's a successful strategy for mom-and-pop investors, too. It's essential to avoid the traps of making poor emotional decisions, or trying to time the market. Staying in the market has historically produced the best results.
Finding stocks to confidently stick with during market ups and downs can be challenging. Each company outlined below has a long track record of success, and reasons that success should continue for years to come. And their industries aren't going away anytime soon.
Consumers never want to leave this ecosystem
Apple (AAPL 1.19%), founded in 1976, continues to invent and reinvent, always homing in on consumer wants and needs. The result is an impressive ecosystem of products with seemingly lifetime customer loyalty.
Consumers increasingly own numerous Apple products because of the ease of moving between them. AirDrop makes it possible to instantly move files, MacBook notes can be transferred to an iPhone in seconds, and AirPods connect to your device the minute they're removed from their charging case.
What differentiates Apple from competitors is the ability to produce both hardware and software for its devices, smoothly linking customers' devices and Apple services. Its products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iCloud, Apple Pay, and service and support options. The further consumers go into the ecosystem, the less likely it is they will ever leave it.
The first-quarter 2020 report showed that Apple's active installed base of devices surpassed 1.5 billion, an increase of over 100 million from the previous year. No corner of the Apple ecosystem was a laggard, reaching all-time highs in each of the main product categories and geographic segments.
Image source: Getty Images.
Growth in the installed base of devices in turn leads to growth in services. All-time-high revenue of $12.7 billion was reported in the first quarter of 2020, with double-digit growth in all five geographic segments. Services include Apple Music, cloud services, Apple Pay, the App Store, Apple Care, and others.
Although the stock is up roughly 40% in the last year, I think there's much more growth to come in the Apple ecosystem. This stock is an "own, not trade" story, and I'm never going to sell.
Cloud strength and e-commerce combine to drive growth
Amazon.com's (AMZN 1.08%) methodical growth from bookseller to everything seller has happened over the space of 26 years. And expansion continues at breakneck speed, with Whole Foods in the grocery business, medical prescriptions with PillPack, and the rise of Amazon Web Services.
The company is a titan in e-commerce, logistics, payments, hardware, data storage, and media. There is no other company like it; Amazon thrives in good times and in bad. It grew following 9/11, and it's thriving in the coronavirus crisis, adding tens of thousands of workers to the payroll to meet demand for goods and services.
A major future growth driver is Amazon Web Services (AWS). The cloud computing suite has become one of the leaders in the cloud by offering low-cost and easy-to-use products. AWS produces massive margins and cash flows from infrastructure-as-a-service, software-as-a-service, and other applications. And you can bet Amazon will use the cash flow to fund future growth in ways we haven't even thought of yet.
Amazon has a high P/E above 100, but with the company's ever-increasing growth, investors expect to pay a premium. Diluted earnings per share grew 14% year over year in fiscal 2019, and net sales grew 20% in the same period.
There's a lot more growth coming in the Amazon story as it explores selling health insurance, expanding the usefulness of personal assistant Alexa, and offering online advertising. I sold this stock once early on in its history and missed part of its meteoric rise. This time I'm hanging on to my shares and passing them on to the next generation.
You don't need artificial intelligence to know this is a keeper
When we look into the future, we see artificial intelligence (AI), self-driving cars, and machine learning. NVIDIA (NVDA +3.97%) stands at the forefront of all these exciting developments.
Originally, NVIDIA made its mark by making video games more realistic with its pioneering graphics processing units (GPUs). The video game industry is growing about 7.3% per year, and is projected to generate about $160 billion in sales in 2020. NVIDIA is in a prime position to cash in.
Beyond gaming, NVIDIA's GPU chips enjoy demand in machine learning that is growing exponentially. As the basis for AI, they are powering the next wave of technological growth, including data center acceleration and self-driving cars.
Led by CEO Jensen Huang, NVIDIA is a key player in the deployment of 5G technology, which will speed up wireless internet connections, making virtual-reality technology an everyday convenience. Everything from watching sports to demonstrating new products to meeting with your doctor should be vastly improved.
Quarterly earnings were reported on Feb. 13, and adjusted EPS jumped 136% to $1.89 for the fourth quarter, crushing the $1.67 Wall Street estimate by 13%. Sales jumped 41% to $3.1 billion thanks to record revenue from sales of data=center graphics processors.
NVIDIA is doing its part in fighting the coronavirus challenge. The company has made its Parabricks product available free to researchers, who are sequencing both the coronavirus and the genomes of people afflicted with COVID-19 in an effort to defeat the disease. Use of Parabricks accelerates the analysis of sequence data by as much as 50 times.
The future for NVIDIA is bright because it is diving deeper into areas of strength, while pioneering new technology. I originally invested in this tech stock because of its dominance in gaming, but I'm staying because it is leading execution on a great vision of the future.
