What's a monster stock? A leader in its industry that's delivered a long track record of earnings growth and share price performance. These are the sorts of players that investors have been able to count on over time for solid returns, and that means when you buy these sorts of players, you should plan on holding for a number of years.
Though the S&P 500 has soared this year, some quality companies haven't participated in the movement. This offers us the opportunity to get in on these fantastic long-term bets for a reasonable price -- and right now, two companies in particular look very attractive. Let's check out these two monster stocks to buy and hold for the next 10 years.
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1. Amazon
Around the globe, Amazon (AMZN 1.47%) has become a part of many people's daily lives. The company is an e-commerce giant, selling everything from groceries to mass merchandise and even entertainment like books and movies. Amazon focuses on offering the lowest possible prices, and if you become a member of its Prime program, you also benefit from fast and free shipping and other perks.
All of this has helped Amazon build an e-commerce empire -- and its extensive fulfillment network, as well as its Prime program, represent a moat, or competitive advantage that should ensure the company's leadership over time.
Amazon's e-commerce strengths have resulted in billions of dollars in earnings, and a recent revamp of its cost structure should further boost earnings down the road as it's made the company even more efficient.
NASDAQ: AMZN
Key Data Points
On top of this, Amazon has become a key player in artificial intelligence (AI). The company uses the technology across its e-commerce platform to boost efficiency -- for example, designing the shortest and fastest delivery routes. And these sorts of moves reduce the company's cost to serve.
Where the results of AI really are showing, though, is in Amazon Web Services (AWS), the company's cloud computing unit. AWS offers a wide range of AI products and services -- from an assortment of AI chips to a fully managed AI platform -- to its customers, and this has supercharged growth. AWS recently reported its strongest growth, at 20%, in 11 quarters, and this business reached a $132 billion annual revenue run rate.
Considering all of this, today, Amazon, trading for 31x forward earnings estimates, offers us a fantastic buying opportunity.
2. Costco
Costco (COST +1.12%) is another retail company that focuses on offering customers deals on a variety of items -- from food to gas and electronics. And Costco can do this because it buys products in bulk, meaning it can obtain the best possible prices and then go on to share the savings with customers. Of course, this means that Costco doesn't mark up goods by very much and therefore doesn't make huge profits on sales of the items in its warehouses.
This is true, but it's not a problem. Here's why. It's all part of Costco's business model, which makes membership the main source of profit. So, when you sign up and pay the annual membership fee -- the basic $65 one or the $130 executive level one -- Costco is making a profit before you even start shopping. And what's great about membership fees is they're very high margin -- it doesn't cost the company much to offer you a membership card.
NASDAQ: COST
Key Data Points
Costco has a high membership renewal rate -- greater than 90% year after year in the U.S. and Canada -- so this offers investors visibility and a reason to be confident about earnings over the long run.
Getting back to Costco's products, the company also has its own brand -- Kirkland Signature (KS) -- which is going strong, and this is positive because KS offers Costco more sourcing and production flexibility as well as higher margins than brands made by others. In the latest quarter, KS growth surpassed overall revenue growth.
Costco stock generally isn't cheap, due to these positive points I've mentioned, but today it's trading for 42x forward earnings estimates, down from about 58x earlier in the year. At this level, Costco is a monster stock to buy now and hang onto for at least a decade as the next chapters of growth unfold.
