The S&P 500 index is down 20.3% year-to-date, but that doesn't tell the whole story of how brutal this bear market has been for many investors. Several household brands are down 50% or more -- but as with previous market declines, this too shall pass.
Market crashes can be a great opportunity to upgrade your holdings with quality companies that can compound in value for decades. Microsoft (MSFT 0.17%), Amazon (AMZN 1.30%), and Walt Disney (DIS 0.44%) have sold off hard this year and would make great additions to a well-diversified portfolio. Let's find out a bit more about these three buy-and-hold stocks.
1. Microsoft
Microsoft is known for Word and Excel, but the most important reason to buy the stock is the company's shift to a subscription-based sales model and the future growth opportunities that presents, especially in cloud services. With shares down 23.5% year-to-date, the market decline is handing investors a golden opportunity to start a position in this top computing brand.
NASDAQ: MSFT
Key Data Points
There is a long runway of growth in cloud services, where Microsoft Azure holds second place in the cloud infrastructure services market behind Amazon. Businesses are still early in the process of shifting their data systems over to the cloud, which is why leaders in this market continue to report high growth in sales. The overall cloud market grew 34% in the first quarter, according to Synergy Research, but Microsoft is growing faster. Azure reported growth of 46%, helping drive Microsoft's total revenue up 18% year over year.
Microsoft lowered its forward guidance for revenue because of adverse foreign currency fluctuations, but that is clearly a temporary issue that doesn't impact the company's ability to grow over the long term. Even if the economy dips into a recession, businesses will likely still spend on cloud services. This is because companies are focused on the long-term benefits to their operations that moving to the cloud provides, such as saving money, security, and enabling remote work for employees.
It's for these reasons that Microsoft should navigate a recession better than most consumer-dependent companies, and would make a great addition to a diversified portfolio.
2. Amazon
The e-commerce giant is another stock investors should be confident to buy and hold through the market decline. Shares of Amazon are offering much better value to investors after falling 36.1% year-to-date. The stock price is trading at a discount despite Amazon's streak of growth in recent years, where annual revenue has more than tripled over the last five years to reach $477 billion.
NASDAQ: AMZN
Key Data Points
Perhaps the most telling sign of Amazon's staying power is the intangible value it demonstrated during the pandemic. Customers turned in droves to shop on Amazon for everyday essentials. Demand was so great that revenue growth accelerated to 37% in 2020, up from 20% the year before.
Like Microsoft, Amazon has successfully adapted its business from selling goods online to other ways of generating revenue, such as Prime subscriptions, third-party fulfillment services, advertising, and cloud services. This reflects a corporate culture that is willing to experiment to discover new ways of rewarding customers and shareholders over time.
Amazon Web Services is holding its lead in the cloud market, while the e-commerce side of the business has over 200 million Prime members paying regular fees for the privilege of getting free shipping and streaming entertainment. E-commerce also offers a long runway of growth for the company, considering industrywide e-commerce comprises less than 20% of total retail sales in the U.S.
Considering all the ways it has to drive growth, Amazon remains a great investment.
3. Walt Disney
Investors can buy one of the top consumer brands in the world at a huge discount. Shares of Walt Disney are down nearly 40% year-to-date, despite a strong recovery for the company's iconic theme parks and growth in streaming.
NYSE: DIS
Key Data Points
Disney's films and characters are beloved by families all over the world, and that has helped drive pent-up demand at the parks as they emerge from the pandemic stronger than ever. Strong results from the parks and Disney+ have pushed companywide revenue up 32% over the same period three years ago.
After reaching 138 million subscribers in just over two years since launch, Disney+ appears to have a bright future. The company is just starting to unload a deep slate of content for the service that management expects will drive strong sign-ups for the second half of the year.
Several economic cycles over the last century have failed to put Mickey Mouse out of business. It's impossible to imagine a world without Walt Disney, and that's enough of a reason to buy and hold Disney stock.
