Discussions on some Reddit boards are often associated with "meme stocks" like GameStop and AMC, which skyrocketed to all-time highs last year as retail investors promoted them as short-squeeze candidates across the social network's subreddits. Its top investing subreddit, WallStreetBets (WSB), currently has 12.3 million members.
But over the past year, many of the so-called "Reddit stocks" collapsed as rising interest rates drove investors toward more conservative investments. The term "Reddit stock" also became synonymous with low-quality stocks which merely traded on their short-term momentum and short-squeeze potential instead of their fundamental strengths.
However, investors who are familiar with Reddit's WSB community will likely tell you that many of the top stocks aren't throwaway names. In fact, blue-chip tech giants like Apple (AAPL 1.28%) and Advanced Micro Devices (AMD -0.43%) are still two of the most frequently mentioned stocks on WSB. Both of these "Reddit stocks" should remain solid investments for years to come.
Between fiscal 2011 and fiscal 2021, which ended last September, Apple's annual revenue more than tripled from $108.2 billion to $365.8 billion, representing a compound annual growth rate (CAGR) of 13%. Its earnings per share (EPS) increased at a CAGR of 19%.
Apple reduced its share count by 38% over the past 10 years with big buybacks, and it's raised its dividends every year after reinstating them in 2012. Its stock has risen 560% over the past decade, and it's generated a total return of about 670% after factoring in reinvested dividends. The S&P 500 generated a total return of 245% during that same period.
Apple's stunning performance silenced the critics who believed the company would languish after Steve Jobs passed away in 2011. Jobs' successor, Tim Cook, continued to expand Apple's ecosystem with new devices (including the Apple Watch and AirPods) and new services (like Apple TV+ and Apple Music) while refreshing its flagship products.
Apple still generates most of its revenue from the iPhone, the most widely used premium smartphone in the world, but it also locked in 825 million paid subscriptions across all of its services in its latest quarter. That sticky ecosystem, along with its $193 billion in cash and marketable securities, should enable Apple to easily expand into newer markets like augmented reality, virtual reality, and connected vehicles in the near future.
When that happens, Apple will likely evolve into a more diversified tech giant, which will generate even bigger returns for its long-term investors. That's probably why Warren Buffett allocated a whopping 40% of Berkshire Hathaway's portfolio to Apple's stock.
However, Su turned around AMD by selling more custom APUs (which merged together CPUs and GPUs) to gaming console makers, rebooted its CPU business with a brand-new architecture, and kept pace with Nvidia by launching a new lineup of affordable gaming GPUs.
AMD's decision to outsource the production of its chips to Taiwan Semiconductor Manufacturing (TSM 0.73%) also enabled it to pull ahead of Intel, which still manufactured its own chips, in the "process race" to manufacture smaller and denser chips.
As a result, AMD's share of the CPU market rose from a nadir of 17.5% in the third quarter of 2016 to 35.3% in the third quarter of 2022, according to PassMark Software. Intel's share plunged from 82.5% to 64.4%, with losses across the laptop, desktop, and server markets.
Between 2014 and 2021, AMD's revenue rose from $5.5 billion to $16.4 billion, representing a CAGR of 17%. Its adjusted EPS grew at a CAGR of 47%. If you had invested in AMD on Lisa Su's first day as its CEO, you would now be sitting on a multibagger gain of about 2,200%.
But the ride's been much bumpier for recent investors. AMD's stock was cut in half this year as rising interest rates, slowing PC sales, and Intel's ambitious turnaround efforts sparked concerns about its near-term growth.
However, I believe AMD will continue to grow with Lisa Su at the helm, and investors who stick with this resilient chipmaker could be rewarded with even more impressive long-term gains.