We all want to invest in stocks that will rise, right? Naturally. However, it is difficult to predict which stocks will be the big winners tomorrow. Given that challenge, it makes perfect sense to simply invest in a low-cost, broad-market index fund, such as one that S&P500 index of 500 of America’s largest companies.
However, if you want to put some of your long-term dollars into some promising individual stocks, here are five growth stocks to consider – two of which are among the “Magnificent Seven” stocks.
1. Amazon
It’s not hard to imagine how Amazon (NASDAQ: AMZN) could boom in the coming years and decades, in part because it is involved in so many different companies, from A to Z, such as Amazon Web Services and Zappos, the shoe retailer. Amazon Web Services (AWS), a leading cloud computing platform, is often undervalued. As of last year, it had an impressive market share and grew its customer base by 31% year on year.
As big as Amazon is, it’s still growing well, with sales recently up 10% year-over-year in the last quarter and operating cash flow up 75%. Amazon has also invested heavily in artificial intelligence (AI), which is likely to provide major support for further growth. With its recent forward-looking price-earnings ratio (P/E) of 32, well below the five-year average of 54, the stock appears attractively valued.
2.Microsoft
Microsoft (NASDAQ: MSFT) arguably has an even more impressive array of companies under its roof, including the mainstream Office productivity software, the Azure cloud computing platform, the Xbox gaming platform, and the Windows operating system, among others. The company is also ready to ride the AI ​​growth wave, having invested billions in ChatGPT maker OpenAI and incorporating AI into many of its offerings.
With the recent forward-looking price-to-earnings (P/E) ratio of 33, not far off the five-year average of 30, Microsoft shares appear fairly valued.
3. PayPal
PayPal (NASDAQ:PYPL) is a major player in the fintech arena – another domain, besides AI and cloud computing, with high growth expectations. Recently, it boasted 426 million active customer and merchant accounts and 25 billion annual transactions. In the second quarter, revenue grew 8% year-on-year, while payment volume increased 11%.
The company had slowed down in recent years, but its prospects are looking brighter lately, with a new management team, a strong balance sheet and more streamlined operations. It has also introduced new features such as the FastLane and Cash Pass rewards program. With its recent forward-looking price-to-earnings (P/E) ratio of 16, well below the five-year average of 21, the stock appears undervalued.
4. Veeva Systems
Veeva systems (NYSE: VEEV) is not a household name like the companies mentioned, but has grown to a recent market value of $35 billion by offering essential cloud-based services, primarily to the life sciences industry. For example, it helps pharmaceutical companies manage clinical trials – and its clients include many big names, such as Modern And Eli Lily.
In Veeva’s second quarter, revenue increased 15% year over year and subscription services revenue increased 19%. That last tidbit is promising, because subscriptions generate relatively reliable recurring revenue. If a customer has a subscription, you don’t have to keep selling to them; you just have to keep him happy.
With the recent forward-looking price-earnings ratio (P/E) of 34, well below the five-year average of 50, the stock appears attractively valued. Better yet, it has billions in cash and no debt, giving it a lot of flexibility to seize opportunities.
5. iShares Semiconductor ETF
The iShares Semiconductor ETF (NASDAQ: SOXX) is not technically a stock. It’s an exchange-traded fund (ETF) – looks a lot like a mutual fund, but trades like a stock. I have high hopes for this, as it gives you co-ownership in 30 stocks of semiconductor specialists, and our modern world is now heavily dependent on semiconductors – for everything from cloud computing, AI, data centers, smartphones and more.
The ETF’s top holdings were recently included Nvidia, Broadcom, Advanced micro devices, Applied materialsAnd Qualcomm.
Five stocks to watch
These are five investments that appear to have tremendous growth potential in the years and decades to come. They may or may not rise this year, but I suspect anyone who buys them now will be glad they did in five or ten years.
After you learn more about the things that interest you, there’s no need to invest in them if you’re not sure. There are other great stocks – and great index funds too, which can also help you build wealth – with less risk.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Advanced Micro Devices, Amazon, Broadcom, Microsoft, Moderna, Nvidia, PayPal, Qualcomm, Veeva Systems and iShares Trust – iShares Semiconductor ETF. The Motley Fool holds and recommends Advanced Micro Devices, Amazon, Applied Materials, Microsoft, Nvidia, PayPal, Qualcomm, Veeva Systems, and iShares Trust – iShares Semiconductor ETF. The Motley Fool recommends Broadcom and Moderna and recommends the following options: long January 2026 $395 calls on Microsoft, short December 2024 $70 calls on PayPal, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Prediction: These 5 Phenomenal Stocks Will Rise was originally published by The Motley Fool
