Have your investing efforts so far been less than you’d hoped for? Then here’s a next-level idea to embrace: Less can be more. That is to say, simplified stock-picking and longer holding periods often bear more fruit than constantly hunting for what looks like the next hot ticker.
With that as the 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 (NYSE: DIS) is an oldie but a goodie: a brand name that’s come to be associated with all types of quality entertainment.
But not everybody necessarily sees Disney’s potential as an investment these days. As it turns out, there’s been a bit of infighting within the company, from top management all the way down to the front-line employee ranks; “the happiest place on earth” may not be the happiest place to work. It would also be naive to believe the company’s growth plans for Disney+ weren’t, in retrospect, a little too aggressive. Its recently announced ad-supported version of the streaming service tacitly suggests subscriber interest is waning well before the 2024 goal of between 230 million and 260 million Disney+ subscribers is met.
That line of thinking, however, is too narrow and too short-term in nature.
See, an investment in Walt Disney is an investment in a brand that’s bigger than any one CEO, any one product, and any one era. That’s not to suggest investors should simply ignore new stumbling blocks that surface from time to time. This is a resilient company, however, with a tradition of success that its employees (at all levels) make a point of maintaining. Any near-term weakness is always a great buying opportunity.
It’s another painfully obvious pick. Amazon (NASDAQ: AMZN) is not only one of the world’s most recognized companies but one of the world’s very biggest. The stock is also one of the world’s best-performing, rallying about 1,600% over the course of the past 10 years and still regularly reaching new record highs. Selling virtually everything to as many people as possible, it seems, is a great business model.
The funny thing is, the company has only scratched the surface of the market that will drive the bulk of its future growth.
As big as Amazon’s online marketplace is, e-commerce isn’t a particularly profitable endeavor. Markups on merchandise are modest, and once picking, packing, and shipping costs are added, there’s just not a lot of profit left to put in your pocket. Of last year’s North American consumer sales of $279.8 billion, only $7.3 billion — or 2.6% — was turned into 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 only account for 13% of last year’s top line of $469.8 billion, but this high-margin segment grew its 2021 operating income 37% to account for more than 74% of the company total. And there’s plenty more cloud computing business to be won. Market research company Technavio estimates the cloud computing market will grow at an average annualized pace of 17% through 2025, led by North America’s growth.
The point is, the market may be underestimating just how much profit growth awaits Amazon.
Finally, if you’re really ready to get rich, consider delegating your stock-picking duties to the proven team managing Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B).
If you’re not familiar with it, Berkshire Hathaway is Warren Buffett’s proverbial baby. Initially a textile company, it evolved into a holding company of sorts, then a conglomerate, and now looks more like a mutual fund than anything else.
That in itself isn’t the reason anyone would want to own a piece of the company, of course. The big draw here is the fact that Buffett’s proven value-minded, long-term approach to stock-picking is still (for the most part) being employed by the managers he’s been training for years now.
Not everyone agrees that Buffett’s value-oriented, buy-and-hold shtick remains relevant in the modern market environment. They’ll also point to the fact that Berkshire Hathaway shares underperformed the S&P 500 during the pandemic as proof of their claim … a period when the growth stocks Buffett typically avoids were soaring.
Take a closer look at how Berkshire and the broad market have fared as of late, though.
Simply put, Buffett has been vindicated. Berkshire shares were catapulted higher beginning late last year, seemingly at the expense of most other stocks that had, until then, been soaring. That move renewed Berkshire’s usual leadership of stocks 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.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon, Berkshire Hathaway (B shares), and Walt Disney. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.