Investing in stocks is both accessible to the general public and likely to yield strong returns over the long term. That's what makes it one of the best ways to increase your wealth. However, putting your money in the right stocks is crucial. Some companies may turn out to be terrible investments, as they significantly lag behind the market and may even cease to exist. Investors can avoid that fate by investing in ETFs that track major indexes or by selecting stocks that have the potential to outperform broader equities over extended periods.
These are typically well-established, highly profitable companies with solid businesses, excellent prospects, and strong competitive edges. Here are two brilliant examples: Alphabet (GOOG 0.56%) (GOOGL 0.63%), and Intuitive Surgical (ISRG -0.17%). Here's why putting $1,000 into either of those stocks would be a great move.
Image source: Getty Images.
1. Alphabet
Alphabet has been one of the more undervalued among the trillion-dollar tech leaders of late. In fairness, that's because it faces some potential headwinds related to antitrust lawsuits in the U.S. Regulators want the company to relinquish its Chrome browser, a key component of its advertising business. While that's worth keeping an eye on, Alphabet continues to impress with its financial results. The company's second-quarter earnings were no different.
The tech giant grew its revenue by 14% year over year to $96.4 billion, while its net earnings per share (EPS) of $2.31 were up 22.2% compared to the year-ago period. Some of Alphabet's current growth drivers, including cloud computing and artificial intelligence (AI), should remain so for many years to come. The company pointed out that its cloud division, Google Cloud, now has a revenue run rate of more than $50 billion.
Though Alphabet's advertising business remains its main cash cow, cloud and AI could take over in the next decade. Investors should be excited about that since it will mean that the company will become far less reliant on its advertising business, which would take the biggest hit if Alphabet loses Chrome. So, the more diversified the business becomes, the less of a risk this potential worst-case scenario of losing Chrome is.
Furthermore, Alphabet is exploring other potential opportunities, including streaming through YouTube, a leader in that niche, and self-driving cars through its subsidiary, Waymo. Lastly, Alphabet has a strong competitive edge from multiple sources, including Google's network effect and strong brand name, as well as the switching costs associated with its cloud solutions. Alphabet is firing on all cylinders, and the company's long-term prospects remain bright.
Even if regulators in the U.S. succeed in forcing the company to relinquish its Chrome browser, Alphabet should recover due to having multiple lucrative opportunities and significant amounts of free cash flow -- to the tune of $5.3 billion as of the end of the second quarter. That's significantly lower than the $13.5 billion it had as of the end of Q2 2024, but that's partly because Alphabet is reinvesting substantial amounts, including a projected $85 billion this year, into capital expenditures to support various growth opportunities.
This investment could pay for itself several times over in the long run as the company makes further progress in cloud, AI, and other areas. Alphabet remains well-positioned to outperform the market over the next decade. Investors can get five of the company's shares for $1,000.
2. Intuitive Surgical
Intuitive Surgical, the leader in the robotic-assisted surgery (RAS) market, has struggled this year. Trump's aggressive tariffs could take a bite out of the company's earnings, which is why many investors are choosing to stay away from the stock.
However, the medical device specialist's outlook is still strong, at least for investors willing to be patient. For one, Intuitive Surgical continues to record excellent financial results. The company's second-quarter revenue was $2.44 billion, 21% higher than the year-ago period, thanks to a 17% year-over-year increase in the number of procedures performed with its crown jewel, the Da Vinci System.
Intuitive Surgical's adjusted EPS came in at $2.19, 23% higher than Q2 2024. The company has had little competition in the RAS field, and although that's about to change, several factors should allow it to perform well over the next decade. First, it will be challenging for newcomers to catch up, as Intuitive Surgical has been earning indications for the Da Vinci System for years. It is approved for use in general surgeries, bariatric procedures, urologic procedures, gynecologic procedures, and more.
Second, since the Da Vinci System is expensive and requires a learning curve, after putting considerable time and money into acquiring one and training medical staff on it, healthcare facilities will need a lot of convincing to switch to a competitor. In other words, Intuitive Surgical benefits from high switching costs. Third, the company is an innovator. It earned clearance for the fifth generation of its crown jewel last year and will undoubtedly continue to improve the device.
Lastly, there is significant whitespace in the RAS market. Intuitive Surgical will benefit from the world's aging population, as older individuals are more likely to require many of the procedures performed with its Da Vinci system. Even with the current volume of surgeries, RAS procedures have captured only 5% of those eligible for robotic surgery. That points to a massive opportunity, and as a leader in the market, Intuitive Surgical should benefit.
The stock may be down this year, but it could deliver superior returns over the long run. With $1,000, investors can purchase two shares.
