The main reason people invest is to ensure they have enough money when they retire. Getting an early start could mean several decades of investing before that money is needed to replace the income from employment.
The best investing returns typically come from buying great companies and holding them for many years, reaping the rewards as these businesses grow and create shareholder value. Many of the greatest investing success stories have come from stocks that were held for the long term.
When looking for such stocks, it's important to identify companies with track records of success that also have a large market opportunity to look forward to. Here are three stocks that are top of my list of great long-term picks for these reasons.
1. CrowdStrike
When thinking about long-term opportunities for growth, cybersecurity is an area that seems like a no-brainer. As more of our data is moved to the cloud, securing it becomes increasingly important. CrowdStrike Holdings' (CRWD 2.03%) cybersecurity platform was built from the beginning to protect cloud networks.
Many companies are talking about how they're using artificial intelligence (AI) now that it's the popular topic in the investing world, but CrowdStrike has been walking the walk with AI since its inception. It uses AI to detect and prevent cybersecurity threats and instantaneously protect its network of customers. This means that every time its AI detects a threat, it learns and improves, producing a kind of network effect.
The market opportunity in cybersecurity is massive and continually growing. At its initial public offering in 2019, CrowdStrike estimated its total addressable market to be $25 billion. Today, the company sees its potential market opportunity being $158 billion by 2026.
These numbers should not be taken at face value, but even if they're way off, there's no denying that the opportunity for CrowdStrike is massive. Consider that the company's trailing-12-month revenue was only $2.4 billion.
2. ASML
The semiconductor industry is fascinating, with dozens of companies working on bringing new semiconductor chips to market. This provides investors with several ways to gain exposure to this important industry. There are companies that design chips, others that manufacture them, and still more that do both.
Despite being a cyclical industry, there's little doubt the world will use more chips in the future, making this space one that's full of long-term opportunities for investors. One company in particular that plays a vital role is ASML Holding (ASML 2.04%).
ASML specializes in a process called lithography. Put simply, this is the act of printing layers of circuits on a chip using light. What's important for investors to know is that ASML makes and sells lithography machines to every company that manufactures semiconductors.
In fact, it's the only company in the world that makes the machine used for a specific kind of lithography needed for the most advanced chips.
By manufacturing a machine that is essential in the production of semiconductors, ASML is in position to take advantage of the digital transformation happening before our eyes. The semiconductor market is expected to have a compound annual growth rate of 12% and reach $1.4 trillion by 2029.
3. Apple
As one of the largest companies in the world, Apple (AAPL -0.35%) might seem like an odd choice as a great long-term pick. It would be easy to assume all the shareholder gains have been had already, but that's not necessarily the case. Consumers might think of Apple as a hardware company, but investors need to think of it as a software and subscription company.
The big news recently was the announcement of Apple's Vision Pro mixed reality device. It looks roughly like high-tech ski goggles, and is differentiated from other similar devices in design and price point.
Unlike its competitors, the Vision Pro allows users to still see the room they're in while apps are overlayed in the goggles. This potential expands the use cases for the device.
It's also significantly more expensive than rival devices, with a retail price of $3,499. This will limit adoption in the near term, but provide Apple with time to refine the device and get developers on board to create apps.
But the story investors should keep an eye on is how this device further pulls customers into the Apple ecosystem of software and subscriptions. The company breaks out its revenue into two segments: products and services. Services revenue includes subscription offerings like Apple Music, Apple News, and iCloud storage. This segment has a higher margin profile than its hardware segment, and it's growing steadily over time.
In the most recent quarter, services accounted for 22% of revenue, up from 20% one year ago. This helped contribute to the 60-basis-point improvement in gross margin over the same time frame.
Apple is still going to make billions each year selling its popular devices, but this should also drive customers to its services, helping grow the bottom line and cash generation.
