Finding market-beating returns is a real challenge for investors at any level. Even finding individual stocks that can simply generate positive returns over extended periods is no easy task. According to one J.P. Morgan study, over 40% of stocks had negative returns between 1980 and 2021.
It's for this reason that investors just starting out often do best when they stick to tried-and-true winners. Let's look at three proven winning stocks to buy that have what it takes to continue helping investors build wealth over time.
1. Apple
There is a reason why Apple (AAPL -0.46%) is the largest holding of famed investor Warren Buffett. Apple has done what few consumer electronic companies have been able to do and established itself as an upscale brand. At the same time, it creates products that consumers upgrade every few years and are considered so important that wireless carriers help finance their purchases.
The driving force behind Apple's future success, though, is its services business which is led by its app store. Apple currently takes a 30% cut (15% for smaller developers) for nearly every dollar customers spend on its app store. This makes for a very high-margin business segment and the company's fastest-growing, with year-over-year revenue up 14% last quarter to $24.2 billion. Its services business had 74% gross margins last quarter compared to its product business with about 35% gross margins.
While there have been regulatory challenges that have forced Apple to open up its business in the European Union to third-party app stores, the company has come up with creative ways to still make a lot of money. This includes charging third-party app stores 50 euro cents ($0.56) per user per year and the same amount from any app developer that sees more than 1 million installs per year for every new install over 1 million.
With a highly sticky business, the company should start to benefit from artificial intelligence (AI) innovations in the years ahead. This will be from both a product upgrade cycle as well as more service revenue from new AI app innovations, where it will get a cut.
Apple has proven itself to be a wealth-builder over time and that should continue in the future. It has also shown a great ability to adapt, going from a nearly bankrupt computer maker to one of the largest companies in the world.
2. Amazon
Amazon (AMZN 0.92%) has proven itself to be one of the most adaptive and innovative companies of the past three decades. And ultimately that business ethos is what will continue to make the stock a wealth-builder.
The company started out as an online bookseller, but it adapted its model to become an e-commerce marketplace and logistics giant. It also developed the first public cloud service with Amazon Web Services (AWS), which has grown to become its most valuable business.
With AI as a huge opportunity, there is no doubt that Amazon will invest to win, a formula that helped build the company into what it is today. The company is attacking AI in a number of ways. This includes helping AWS customers build out their own AI solutions through its SageMaker and Bedrock platforms. SageMaker helps customers develop their own AI models, while BedRock provides customers with foundational large language models (LLMs) from both Amazon as well as from AI start-ups. The company is also developing its own AI chips, as well as applying AI to its own marketplace and logistics businesses to help drive revenue and create efficiencies.
Amazon should continue to dominate the e-commerce landscape, and it has a lot of AI-related growth opportunities in front of it. The company has shown to be a wealth-builder over the years, and its ability to adapt and innovate should continue to lead to long-term wealth creation.
3. Walmart
Walmart (WMT -0.47%) faced a huge threat from the growth of Amazon and e-commerce, but it not only adapted but learned to thrive. The company went from being a general merchandise retailer to the country's largest grocery store operator.
With its scale and buying power, Walmart continues to be the top low-cost retailer in the country, but it has also been successful at drawing in more upper-income customers over the years. It has drawn in these customers through things like its Walmart+ membership, which for about $98 a year gives members free same-store delivery on orders of $35 or more with items priced the same as they are in its stores. It has also implemented features such as scan-and-go shopping, allowing Walmart+ members to skip the line and check out on their phones.
Image source: Getty Images.
The combination of everyday low prices plus the added convenience of these offerings has started really resonating with higher-income consumers. Meanwhile, the company is seeing it own solid e-commerce sales as well. In addition, its Walmart Connect ad business is showing strong growth, offering both online and offline solutions for brands as well as marketplace sellers looking to promote their products on Walmart's websites.
Walmart is poised to remain the leading retailer in the world and has proven to be a winner in almost any economic environment. As such, it will continue to help investors build wealth over the long term.
Wealth-building stocks
What all three of these companies have shown over the years is an ability to adapt. It has made them winners over the long run and will make them winners in the future, helping investors build wealth over the long run.
