The ups and downs of major indices in the last three years have been a frustrating experience for new investors. But history shows that the strongest companies always bounce back, giving investors a chance to buy top stocks before they go up again.
Over the last century, there have been many bear markets, but even if you could invest $100 in S&P 500 The index in 1927 (according to the composite index at the time) – just before the biggest market crash in history – would have you worth more than $1.1 million today.
Patiently owning shares of the world’s best companies is the easiest way to become rich in the stock market. The following stocks are examples of the types of companies you may want to think about buying right now, as well as those you may want to avoid.
Buy Amazon: It has clear opportunities to generate profitable growth
There’s a Definite Buy for the Next Bull Market Amazon (AMZN -2.99%). The stock was due for a halving in 2022 along with many other growth tech stocks. Investors were concerned about Amazon’s slow sales growth, which does not reflect the company’s long-term potential. Despite a partial rebound this year, there are some reasons why investors should not hesitate to add the stock to their investment portfolio.
Amazon posted sales growth of just 9% last year, well above its previous 10-year annual average of about 24%. With annual sales of more than $514 billion, Amazon is more exposed than ever to changes in consumer confidence.
Those headwinds will turn into tailwinds. The past three years have been anything but normal for the broader economy and Amazon, but the company still isn’t getting enough credit for reporting higher sales despite the tremendous disruption it caused to retailers.
As headwinds in the economy begin to ease, Amazon has already shown some progress. After a 1% decline in online store sales at the start of 2022, growth accelerated over the past year with sales up 5% year over year in the most recent quarter.
Even Amazon’s physical stores are growing faster than its online business, which suggests that the online business is capable of growing faster, given the long-term tailwinds fueling e-commerce. Amazon’s focus on improving inventory management and speeding up logistics will lead to faster deliveries, more satisfied customers, and better profit performance as the broader e-commerce market improves.
Investors should also pay attention to Amazon Web Services (AWS), the company’s cloud computing arm, which makes up 17% of Amazon’s total sales. AWS has been one of the company’s fastest-growing businesses in recent years, but growth slowed last year as organizations tightened their budgets in an uncertain economy. However, AWS may see rapid growth in the coming years as it meets the growing demand for Generative Artificial Intelligence (AI), where Amazon is using this technology to help companies gain better insights and productivity from their data. Can become a major player in.
Since AWS generates revenue based on the resources customers use, increasing use of AI services could be very lucrative. Amazon’s operating profit last quarter doubled from a year earlier to more than $7.6 billion, with AWS contributing $5.3 billion to the total. That’s why growth in AWS is a major catalyst for the stock, as it is still Amazon’s main engine of profitability.
The stock is trading 25% below its previous high, but profitable growth from online stores and AWS will propel the stock to new highs over the next decade.
Avoid Peloton: Falling sales with uncertain long-term growth
Amazon has clear opportunities to deliver higher returns to investors, but the same can’t be said for the fitness services provider Peloton Interactive (PTON-2.14%).
A lot has changed in the past three years for this fast-growing manufacturer of exercise bikes. Quarterly sales are down nearly 40% since the December-ending quarter of 2020. After the rush to buy at-home exercise equipment during the pandemic led to a drop in demand, the company was left with a lot of unsold bikes in warehouses. Due to this, the company has suffered a net loss of $ 1.26 billion in the last four quarters.
New CEO Barry McCarthy has made progress in turning around the company’s financial situation. The company’s net loss narrowed to $242 million in the quarter ended June from $1.2 billion a year earlier, but the biggest problem for investors is uncertainty about long-term demand.
Demand for connected fitness products is more worrisome after the most recent quarter, where Peloton reported a 2% decline in subscriptions compared to the previous quarter and 5% year over year. Sales of connected fitness products have declined 32% compared to last quarter and appear to be nowhere close to stabilizing.
By comparison, leading gym operators planet health Solid growth has been recorded in the last few years. The popular fitness chain is proving more resilient to volatile consumer spending than Peloton, and the same can be said for Amazon, as its sales have improved over the past year.
Overall, it’s difficult to tell whether Peloton is suffering from the high inflation affecting many retailers at the moment, or whether there has been a permanent shift in consumer preference for other types of workouts, such as strength training, that online training Is in circulation at a price of Rs. ,
Due to the lack of clarity about Peloton’s future, I would avoid the temptation to buy the stock at these low share prices, and instead, stick with a proven long-term winner like Amazon.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. John Ballard holds positions at Amazon.com. The Motley Fool has positions on and recommends Amazon.com, Peloton Interactive, and Planet Fitness. The Motley Fool has a disclosure policy.