Business is a competition. Companies that can deliver superior services or produce better products will outshine their competitors. And as a result, their stocks are likely to outperform over the long term.
As investors, it's important to identify durable competitive advantages that exist. With that in mind, here are three companies I think have long-lasting competitive advantages, making their stocks worthy of investment today.
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1. Advanced Micro Devices
Advanced Micro Devices (AMD +1.31%) is a leader in the semiconductor field, with numerous competitive advantages.
NASDAQ: AMD
Key Data Points
The company boasts a diverse array of products that target different end markets. Its four operating segments -- Client, Data Center, Gaming, and Embedded -- each target a distinct subsector (i.e., personal computing, cloud services, video games, and industrial/aerospace). This assortment grants AMD some measure of revenue stability within a volatile sector.
Furthermore, AMD's management represents a further competitive advantage. Lisa Su, AMD's chief executive officer (CEO) since 2014, has overseen a complete turnaround in AMD's fortunes. AMD shares have grown by 3,600% since she took over on Oct. 8, 2014 -- meaning a $10,000 investment in AMD shares on that date would be worth over $370,000 today.
AMD Total Return Level data by YCharts
AMD has been one of the best investments over the last 10 years. And with the company still at the forefront of semiconductor production and innovation, it stands to reason that its long-held competitive advantages will remain and perhaps go stronger in the years to come.
2. The Trade Desk
Next up is The Trade Desk (TTD 2.84%). The company, which operates as a leader in programmatic advertising, is riding the immense growth of the digital advertising market.
NASDAQ: TTD
Key Data Points
More to the point, The Trade Desk holds a key competitive advantage due to its ability to provide customers with data-driven insights into how their ad dollars are spent. Through tools such as its OpenPath software, clients can gain transparency into the source, supply path, and value of each ad impression they purchase -- which isn't always the case in digital advertising.
The Trade Desk's long-standing links to the connected TV field is another key competitive advantage. More streaming services, including Netflix, Disney, and Paramount, turned to ad-supported models as the battle for streaming supremacy rages on. To this end, The Trade Desk offers advertisers numerous ways to target, optimize, and analyze ad dollars spent on connected TV.
As a result of its competitive advantages, The Trade Desk's finances have steadily improved since 2019. In fact, The Trade Desk's revenue soared 284% -- growing from $478 million to $1.8 billion today. What's more, analysts expect 2024 revenue to hit $2.3 billion -- representing a further 21% growth.
TTD Revenue (TTM) data by YCharts
While it's true that the stock's rich valuation may put it out of reach for some investors -- shares trade at a price-to-sales ratio of 19 -- long-term growth investors willing to buy and hold may find it's a perfect fit for a growth-oriented portfolio.
3. Amazon
Perhaps no company enjoys more competitive advantages than Amazon (AMZN +0.84%). Consider just a few:
- One-stop shopping: Amazon's seemingly limitless supply of products gives customers endless variety at bargain prices.
- Logistics juggernaut: The company's immense logistics network allows it to fulfill orders faster and cheaper than competitors.
- Hassle-free customer service: Amazon returns are easy and usually free.
- Prime network: The company's vast network of Prime subscribers provides a large amount of recurring revenue -- while also stoking discretionary spending.
- Amazon Web Services: The company's flagship cloud computing division is the world's largest cloud services business.
Many of the company's competitive advantages are extremely durable thanks to the company's massive global scale. Moreover, Amazon's forays into artificial intelligence, advertising, and content production offer further avenues for the company to build out its wide and deep moat.
What's more, Amazon's fundamentals look solid. As of its most recent quarter (the three months ending on Sept. 30, 2023), Amazon's revenue growth stood at 13%. Net income for the quarter grew to $9.9 billion -- the second-highest quarterly figure ever for the company. Moreover, analysts expect Amazon 2024 earnings per share (EPS) to grow to $3.24, up 33% from this year.
AMZN Net Income (Quarterly) data by YCharts
Behind the rebound in net income and earnings is the company's recent cost-cutting, which has led to a fantastic year for Amazon's stock. Shares of the company soared by 75% in 2023, making it one of the year's best-performing stocks.
Investors looking for a stock that boasts an impressive collection of competitive advantages along with strong fundamentals should strongly consider Amazon.
