Summer is winding down, but there's no denying that the stock market has been hot in 2023. While this year's rally might have made it more important to be selective when adding shares to your portfolio, there are still great companies poised to continue serving up fantastic performance.
Well-positioned winners tend to keep winning, and some earthshaking trends are still just heating up. With that in mind, read on for a look at two clear-cut category leaders that are on track to serve up big wins for long-term investors.
1. ASML
ASML (ASML 2.04%) is the leading producer of lithography machines that are used in the fabrication of high-performance semiconductors. When it comes to extreme-ultraviolet (EUV) technologies used to produce ultra-high-end semiconductors such as the five-nanometer chips used in Nvidia's top processors, ASML is actually the only player in town.
As demand for AI soars, so will demand for EUV lithography machines. ASML stock has climbed roughly 21% this year, but it still offers plenty of upside for long-term investors.
Thanks to its patents on EUV tech and the highly capital-intense nature of competing in the space, it's almost certain that ASML will remain one of the most important providers of semiconductor equipment hardware for decades to come. With increasingly advanced chips being used to power an ever-widening range of devices and services, the company is on track to continue serving up strong sales and earnings growth.
Last year, ASML recorded a gross margin of 50.5%, quite strong for a hardware-centric company with what looks to be near-unshakeable industry positioning. For the current fiscal year, management actually expects that its gross margin will improve slightly, and it's guiding for revenue to grow roughly 30% annually, up from its previous guidance for growth of 25%.
ASML also pays a dividend. Based on its most recent quarterly payout, the stock offers a forward annual dividend of roughly $6.26 per share. With its current stock price, that works out to a dividend yield of roughly 0.9%.
While that level of yield probably won't delight investors seeking big payouts right away, the company typically pays dividends at a variable rate throughout the year and has also been delivering payout growth at a rapid pace. With its most recent dividend increase, the company raised its payout 23%, and the company has now raised the level of its annual payout by 142% since 2018.
2. CrowdStrike
CrowdStrike Holdings (CRWD 2.03%) provides cloud-based cybersecurity software that helps prevent hardware from being attacked and used to exploit networks. With the help of artificial intelligence, the company's platform is able to learn and adapt as it encounters new threats.
Cybercriminals have continued to ramp up attacks in hopes of holding networks hostage and gaining access to valuable data, and the rising tide of threats has helped spur increasing demand for capable cybersecurity technologies.
With these tailwinds at its back, CrowdStrike has done an impressive job attracting large customers. As of its last update, the company counted more than a quarter of the Forbes Global 2000 and more than half of the Fortune 500 as customers -- 15 of the top-20 largest banks in the U.S. also use its Falcon platform.
Large enterprises are high-value targets for cybercriminals and need high-performance cybersecurity services. The fact that so many enterprises choose to go with CrowdStrike reflects the strength of its offerings.
And it is now placing more emphasis on moving down-market and winning contracts with small and medium-size enterprises (SMEs). Macroeconomic pressures could make that more challenging in the near term, but it's an initiative that should bear fruit over time.
Even with the company's push to increase adoption among SMEs still in very early stages, the business has continued to grow sales and earnings at a robust clip. In the second quarter, CrowdStrike grew its revenue 37% year over year to reach $731.6 million. Of that total, $690 million came from subscription-based sales. The company's adjusted net income rose 78% to reach $155.7 million.
Among customers on its platform, 63% now use at least five service modules, 41% use six or more modules, and 24% use at least seven modules.
While CrowdStrike has seen strong gains in 2023, with the price up 53%, the stock is still down roughly 45% from its high. For long-term investors aiming to benefit from cybersecurity and AI trends, the company looks like a smart buy-and-hold play at today's prices.
