While investors can't predict when the next bull market will appear on the horizon, the good news is, you don't need to do so. Instead, by investing regularly in exceptional companies -- even now when the market remains volatile and some investors are staying fearful on the sidelines -- you can continue building a portfolio ready to benefit from the market's best days and deliver compounded growth with time.
Let's take a look at two powerhouse stocks that have the businesses and industry tailwinds that can drive explosive growth in the years ahead.
1. Amazon
Amazon (AMZN -3.08%) investors had a mixed response to the company's recently released 2022 earnings, following a particularly volatile year for the tech giant's stock. While shares of the company are trading up by approximately 16% since the start of 2023, the stock is still trading down by about 40% over the trailing 12 months.
For all of 2022, Amazon reported revenue of $514 billion, a 9% increase compared to 2021. While the company generated operating income of $12 billion during the 12-month period, this did represent a decline from the prior year. Meanwhile, Amazon reported its first annual net loss in nearly a decade, to the tune of $2.7 billion.
So, does this spell doom and gloom for the future of Amazon? In my opinion, definitely not. Here's why.
First, it's important to dig deeper into the numbers. That net loss, for example, was almost entirely due to the decline in Amazon's common stock investment in Rivian Automotive, a company that has seen shares tank in the amount of about 70% over the last year. In short, the disappointing bottom-line figure that Amazon reported in 2022 had little to do with any deficiencies tied to its underlying business.
And while operating income and revenue growth have decelerated, this is to be expected in the current landscape, where consumer spending is heavily in flux. Amazon is aggressively reducing costs where it can, such as in the waves of recent layoffs it announced, which still comprise a relatively small percentage of its overall business (just around 6%). While e-commerce spending is down, this trend won't last forever. Amazon's market share in this multitrillion-dollar space, which is roughly 40% in the U.S. alone, means that it is poised to benefit from a future rebound in spending.
At the same time, even as cloud spending remains in flux, Amazon Web Services saw revenue soar by about 30% in 2022, to $80 billion. Amazon is also continuing to expand in other areas that can prove to be durable sources of growth over the long term, such as virtual healthcare solutions and entertainment. For example, in 2022, the company launched its new Amazon Clinic segment, which it describes as "a message-based virtual health service that delivers convenient, personalized, affordable care for more than 20 common conditions."
In the entertainment sphere, Amazon's launch of the The Lord of the Rings: The Rings of Power last year not only became the most watched original series in the company's history, but also led more people to sign up for Amazon Prime than in any other past Prime Video launch.
Amazon's giant footprint in some of the most profitable and fastest-growing industries in the world gives it a key competitive edge over the long term as consumer and enterprise spending recovers. Given the stock's current discounted price and ongoing potential, now might be an opportune time for shrewd investors to take the leap.
2. Intuitive Surgical
Intuitive Surgical (ISRG -1.36%) hasn't had the uphill battle that its shares might indicate with the stock is down roughly 13% over the trailing 12 months. While it's worth noting that this decline pales in comparison with what many other growth-oriented stocks have seen over the past year, it's important to understand that the major catalyst for the stock's fluctuating price in recent months hasn't been problems with the business itself.
Intuitive Surgical develops and manufactures surgical robotics systems. Its da Vinci surgical suite has been used in millions of non-invasive procedures since it was first approved more than 20 years ago. That surgical suite, combined with its newer addition, the Ion (for minimally invasive lung biopsies), have enabled the company to amass a share of the surgical robotics market that currently sits at right around 80%.
While procedure volumes globally are on the upswing compared to the height of the pandemic, COVID-19 resurgences over the past year have delayed both elective and non-elective surgeries around the world. Inevitably, this has affected installation of Intuitive Surgical's systems -- and thus, its top and bottom lines. So some investors have balked at the stock. However, even as surgery volumes may take time to recover, Intuitive Surgical is well-positioned to benefit as medical providers work to catch up on their backlogs.
It's also worth mentioning that while Intuitive Surgical's systems cost a pretty penny (upward of $2 million for the da Vinci) and are a reliable revenue source for the company. It actually generates most of its revenue from the instruments and accessories that go with these systems -- as well as recurring revenue from replacing these parts.
Moreover, Intuitive Surgical offers customer service support and other solutions to assist medical providers who purchase these systems. Of the total $1.7 billion in revenue the company reported in the final quarter of 2022, which was up 7% year over year, $451 million was derived from system sales, $941 million from instruments and accessories, and $263 million from its accompanying services.
The fourth quarter also saw the company generate $337 million in net income. Intuitive Surgical closed the quarter with an installed base of 7,544 systems, up 12% from the prior-year period. This follows the trailing decade, in which Intuitive Surgical's earnings alone have risen by the amount of 100%.
The adoption of surgical robotics systems by medical providers is only expected to grow in the years ahead, with the industry set to reach a valuation of $17 billion by 2013. For investors with a buy-and-hold mindset and a diversified portfolio, this profitable healthcare stock that boasts the dominant footprint in its industry looks like a compelling choice.
