So far your investment efforts have been less than you expected? So here’s a next level idea to embrace: Less can be more. That is, simplified stock picking and longer waiting periods often pay off more than constantly searching for what appears to be the next hot ticker.
With that as a backdrop, here’s a rundown of three investments you really can’t go wrong with, as long as you’re willing to leave them alone for years and let them do their thing.
The Walt Disney Company ( DES 0.13% ) is an old but good: a brand that is associated with all kinds of quality entertainment.
But not everyone necessarily sees Disney’s potential as an investment these days. It turns out that there has been a bit of infighting within the company, from top management to the ranks of front-line employees; “the happiest place in the world” may not be the happiest place to work. It would also be naive to believe that the company’s growth plans for Disney+ were not, in hindsight, too aggressive. It was recently announced ad version of the streaming service tacitly suggests that subscriber interest is waning long before the 2024 goal of between 230 million and 260 million Disney+ subscribers is reached.
That line of thinking, however, is too narrow and too short-sighted in nature.
You see, an investment in Walt Disney is an investment in a brand that is bigger than any CEO, any product and any era. That’s not to say that investors should simply ignore the new hurdles that crop up from time to time. This is a resilient company, however, with a tradition of success that its employees (at all levels) strive to uphold. Any short-term weakness is always a great buying opportunity.
It’s another painfully obvious choice. Amazon (AMZN 0.69% ) is not only one of the most recognized companies in the world, but one of the largest in the world. The stock is also one of the world’s best performers, rallying around 1,600% over the course of the last 10 years and still regularly hitting new all-time highs. It seems that selling pretty much everything to as many people as possible is a great business model.
The funny thing is that the company has only scratched the surface of the market that will drive most of its future growth.
As big as Amazon’s online marketplace is, e-commerce isn’t a particularly profitable endeavor. Surcharges on merchandise are modest, and once you add in the costs of picking, packing, and shipping, there simply isn’t much profit left to put in your pocket. Of last year’s North American consumer sales of $279.8 billion, just $7.3 billion, or 2.6%, was converted to operating income. Amazon’s international e-commerce efforts were unprofitable in 2021.
It just doesn’t matter. The company’s fast-growing cloud computing arm (Amazon Web Services, or AWS) may account for only 13% of last year’s gross revenue of $469.8 billion, but this high-margin segment grew its operating income by 2021 by 37% to represent more than 74% of the total company. and there is so much more Cloud Computing business to win Market research firm Technavio estimates that the cloud computing market will grow at an average annualized rate of 17% through 2025, led by growth in North America.
The point is that the market may be underestimating how much earnings growth awaits Amazon.
Finally, if you’re really ready to strike it rich, consider delegating your stock-picking duties to a proven management team. Berkshire Hathaway (BRK.A 1.92% )(BRK.B 1.81% ).
If you’re not familiar with it, Berkshire Hathaway is Warren Buffett’s proverbial baby. Initially a textile company, it became a kind of holding company, then a conglomerate, and now it’s more like a mutual fund than anything else.
That in itself is not the reason anyone would want to own a piece of the company, of course. The big draw here is the fact that Buffett’s long-term approach to stock picking is still (for the most part) employed by the managers he has been training for years.
Not everyone agrees that Buffett’s value-oriented buy-and-hold trick is still relevant in the modern market environment. They will also point to the fact that Berkshire Hathaway stock underperformed S&P 500 during the pandemic as proof of his claim — a period when growth stocks Buffett usually avoids soared.
However, take a closer look at how Berkshire and the market in general have fared lately.
Simply put, Buffett has been vindicated. Berkshire shares rocketed higher starting late last year, apparently at the expense of most other stocks that had been on the rise until then. That move renewed Berkshire’s usual stock leadership as a whole. More than that, though, the move reminds us that all too often there’s a price for chasing hot tickers, even if the price is a missed opportunity to own other 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 are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.