No two stock portfolios look quite the same. And rightfully so, since no two investors are exactly the same. We all have different goals, time horizons, and risk tolerances.
There are some stocks, however, that every investor should consider holding due to sheer brute strength that isn’t apt to wane anytime soon. These names are Alphabet (GOOG 1.39% ) (GOOGL 1.33% ) , Tesla (TSLA 1.14% )and Amazon (AMZN 1.61% ). Here’s a closer look at what makes each one worthy of at least a small place in your portfolio.
Unstoppable then, now, and in the future
They aren’t stocks that need an introduction. Indeed, these companies are well known for all the right reasons, specifically for demonstrating an unwavering ability to grow and show no signs of slowing down.
In other words, they’re as unstoppable as stocks can be.
Take Alphabet for instance. It’s not just the search engine market leader via its ownership of Google. According to data from GlobalStats’ stat counter, Google fields about 92% of the world’s web searches – extreme dominance the company has enjoyed for many, many years. GlobalStats also reports that Alphabet’s Android mobile operating system powers nearly 70% of the world’s mobile devices. Serving as the planet’s primary intermediary between people and the worldwide web, Alphabet is perfectly positioned to monetize all this traffic by selling many of the advertisements you see while browsing the internet. And Google has gotten very good at doing this. In only two quarters over the course of the past 10 years the company has suffered a year-over-year revenue decline, and one of those quarters was the three-month stretch after the first COVID-19 pandemic took hold in the United States.
Amazon is another unstoppable powerhouse with a lot more room to continue growing, although not perhaps for the reason you might suspect.
While rival retailers are finally answering the competitive call, Amazon’s leading share of North America’s online shopping market isn’t exactly in jeopardy. But that business has never been a particularly profitable one. Between low prices, lots of overhead, and, for many consumers, free shipping and other perks, there’s just not a lot of profit margin left to pocket. Amazon’s nonretailing profit centers are far more lucrative, and this could be a breakout year for two of them.
One of those other profit centers is digital advertising, or selling ad space at its websites to other retailers looking to promote their goods. Amazon generated more than $ 31 billion worth of ad revenue last year, accounting for more than 6% of its total sales. That may not seem like much, but bear in mind this is a fairly new business the company hasn’t really pressed until now. For perspective, Q4’s advertising revenue grew 32% year over year, underscoring just how quickly this business unit is evolving. Also bear in mind that Amazon’s ad revenue is high-margin revenue …
… as is its cloud computing revenue, produced by Amazon Web Services, or AWS. AWS accounted for nearly three-fourths of last year’s operating income despite accounting for only 13% of the company’s top line. This still only scratches the surface of the cloud computing arm’s potential, though. Technology market research outfit Technavio estimates the cloud computing service market will grow by 17% per year through 2025, ending up nearly $ 300 billion bigger than at the end of 2021.
As for Tesla, its competitors are finally coming on strong, too. There’s going to be more than enough business to go around, however. The US Energy Information Administration believes the total number of electric vehicles being driven all over the world will swell from around 10 million now to 672 million by 2050. Being the most recognizable name in the business, Tesla stands to capture more than its fair share of that incredible growth.
The risk is adjusted in the allocation
Do these stocks still seem too risky for your taste? That’s certainly understandable. All three names are down in the wake of Russia’s invasion of Ukraine, and Tesla shares were down nearly 40% from November’s peak even before any shots were fired in eastern Europe. Amazon’s stock has a history of unpredictable volatility, and for that matter, Alphabet shares can’t exactly be considered tame. These are price swings some investors just can’t digest.
The key is in position sizing. You don’t have to commit your entire portfolio to just these three names. In fact, you shouldn’t. As bullishly potent as these stocks may be, they may not merit occupying more than a (very) modest percentage of your portfolio – small enough positions that even worst-case-scenario volatility doesn’t rattle you out of the trade at the worst possible time.
Make no mistake, though. Any portfolio that needs any sort of long-term growth – which is most portfolios – could do with at least a little exposure to these unstoppable stocks.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.