The stock market's short-term twists and turns are almost impossible to reliably predict with meaningful consistency. But history has shown that taking a buy-and-hold approach to high-quality companies is a dependable path to building wealth. Even a $1,000 initial investment can turn into a much larger sum if you back the right businesses and give them time to flourish.
If you're on the hunt for great stocks that are worth owning for the long term, read on to see why two Motley Fool contributors identified these industry-leading giants as fantastic investment opportunities right now.
Microsoft has never been stronger
Keith Noonan: Thanks to its successful push into the cloud infrastructure services space and transitioning key software offerings to subscription-based models, Microsoft (MSFT 1.82%) has been posting fantastic business results. Even in the face of macroeconomic headwinds, the company's revenue increased 7% annually to hit $211.9 billion at the end of its most recently concluded fiscal year, which wrapped June 30. Meanwhile, its non-GAAP (adjusted) net income rose 6% to hit $72.4 billion, and the tech giant closed out the year with a stellar profit margin of 34.1%.
It seems clear the business is on track to continue being a cash-generating machine. Revenue and earnings growth actually accelerated significantly in the final quarter of the company's previous fiscal year, rising 8% and 20%, respectively. And thanks to the dawning artificial intelligence (AI) revolution, the tech giant looks poised to enjoy impressive growth through the next decade and beyond.
Microsoft has strong positions across a large number of categories in the tech space. This means that the company has access to an incredible array of data that can be fed into AI models. It also means that useful artificial intelligence software can deliver benefits that extend across its family of products.
While plenty of companies are on track to benefit from the implementation and evolution of AI technologies, Microsoft is positioned as a clear leader in the unfolding tech trend. Artificial intelligence features and applications are poised to spur demand for the company's Azure cloud-infrastructure business, and AI is also set to strengthen the tech giant's operating systems, productivity software suites, and other offerings.
MSFT Dividend data by YCharts
For long-term investors, Microsoft also has appeal as a dividend growth stock. Incredible stock gains over the last decade have pushed the company's dividend yield down to roughly 0.9% despite impressive payout growth, but the software leader's hugely profitable business will help it continue to serve up substantial dividend hikes.
With its established competitive advantages, opportunities in AI, and dividend growth, Microsoft continues to be a great buy for long-term investors.
Disney offers long-term investors an excellent choice
Parkev Tatevosian: If you have a very long investing time horizon, then Walt Disney (DIS -0.04%) is one of my favorite stocks to consider right now. The House of Mouse has several short-term headwinds that need resolving. Consumers with their purchasing choices have stated they strongly favor streaming their content. That does not bode well for Disney's legacy business through linear connections. Still, switching to streaming means increasing overall content consumption, which is good news for Disney.
That's why I highlight the need for a long investing time horizon. While Disney transitions the business, making streaming the priority, it will cannibalize its cable business. And it remains to be seen how long it will take for the streaming business to generate enough profits to make up for the losses during the transition. Indeed, in 2022, Disney's operating income of $6.77 billion was only a fraction of the $14.8 billion it generated in 2018 before the move to streaming gained momentum at The House of Mouse. Nevertheless, Disney has a century-old connection with its customers, who continue to watch its content, visit its theme parks, and purchase its merchandise.
DIS PE Ratio (Forward 1y) data by YCharts
Moreover, investors are getting Disney stock at a bargain valuation of a forward price-to-earnings ratio of roughly 17.3. Given the company's meaningful near-term headwinds, it's understandable that investors are shying away from Disney stock. However, those with a long-term mindset can benefit and purchase Disney stock now. You will likely thank yourself for making that decision 20 years from now.
Microsoft and Disney are built to win in the long term
Microsoft and Disney stand atop their respective industries, and each company's competitive advantages will likely translate into wins for long-term shareholders. While conditions for the broader market and individual challenges faced by each business can be expected to create valuation volatility in the short term, investors who take a buy-and-hold approach with these two stocks stand excellent chances of seeing market-beating returns.
