3 fundamental stocks for a future-proof portfolio

[email protected] (Keith Noonan, James Brumley and Daniel Foelber)



As an investment strategy, the accumulation of “time in the market” has a long history of beating “trying to time the market”. Having said that, it also makes a huge difference in which companies you choose to spend your time and money on. For most successful investors, a handful of big winners end up playing outsized roles in the performance of their portfolios.

To get you on the track for this kind of high-quality action, we asked a panel of Motley Fool contributors to explain some of their favorite long-term choices. Here’s why they think Airbnb (NASDAQ: ABNB), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN) stand out as fundamental stocks for a future-proof portfolio.

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This travel leader could hold overwhelming market gains for you

Keith Noonan (Airbnb): When it comes to growth stocks that can deliver fantastic returns for patient investors, I think Airbnb offers some of the best risk-return dynamics in the market right now. The vacation rental specialist has skillfully navigated what will hopefully end up being the worst operating conditions of the pandemic era, and it appears to be on the right track to return to excellent results as it shapes and benefits from powerful long-term trends.

Airbnb already offers a variety of cutting edge locations and pricing options for short stays, and a growing number of hosts using the platform should lead to an even wider range of options. There’s a good chance this trend will help improve customer engagement with the platform, which in turn should make Airbnb an even more attractive choice for hosts. This is a classic example of the network effect – and still in its infancy.

While that isn’t a strong enough foundation for a stellar long-term growth thesis, the company is also building a position in the local event booking space. If you can book accommodation and also get a ticket for a tour or concert at a reduced rate, why not?

Across the economy, companies have also made big changes towards remote working and employment contracts, and these changes make it easier for workers to travel and enjoy new flexibility in their terms. of life. In that sense, the pandemic may have significantly accelerated a trend that could benefit Airbnb in the long run.

Airbnb has a big company, a big brand, and a large and growing addressable market in which to grow. While its current market cap of around $ 107 billion is nothing to sneeze at, I think it will seem paltry compared to the company’s valuation a decade from now.

Designed for change

James brumley (Microsoft): The sustainability of a portfolio is not just about identifying the products and sectors that will always be in demand. It’s also about identifying companies that are built from the ground up to adapt to changes in their particular industry. Microsoft meets these two criteria very, very well.

Think about it. Thirty years ago, the internet as we know it today wasn’t even really a thing, while cloud computing wasn’t even a concept. Originally, Microsoft rose to greatness by developing the software that was at the center of the individual computing revolution, namely its Windows operating system and a host of widely used programs that ran on it. However, as technology evolved, so did Microsoft. Cloud computing, online ad management, business collaboration, and even video games are now all part of its repertoire. Its operating system segment has almost become an afterthought.

But maybe it is as it should be. In the company’s 2021 fiscal year, which ended in June, revenue grew 18% despite the myriad of hurdles that arose during that time, while net profit climbed by 38%. It was the third year in a row that both measures increased by double-digit percentages. Microsoft’s corporate formula for changing direction and finding ways to seize new opportunities is clearly working.

I don’t know what Microsoft will look like 20 years from now. Chances are good, however, that it’s going to be different in all appropriate and relevant ways.

Zoom out and focus on the big picture

Daniel Foelber (Amazon): Amazon shares fell on Friday after the e-commerce company posted third-quarter results lower than analysts’ consensus earnings estimates. Revenue was $ 110.81 billion, compared to $ 111.6 billion expected. Diluted earnings per share were $ 6.12, well below the expected $ 8.96. This was also down substantially from Q3 2020 diluted earnings per share of $ 12.37.

One thing that worried industry watchers as the report approached was that higher costs would impact Amazon’s operating profit. They did it. Operating profit only reached $ 4.9 billion, up from $ 6.2 billion the previous year.

The fourth quarter is Amazon’s bread and butter. But the company has warned investors that it would be difficult to mitigate its higher costs this holiday season.

“In the fourth quarter, we expect to incur billions of dollars in additional costs in our consumer business as we deal with labor shortages, rising labor costs, global supply chain issues and an increase in freight and shipping costs, while doing whatever it takes. to minimize the impact on customers and business partners this holiday season, ”CEO Andy Jassy said in a statement. “It will cost us dearly in the short term, but it is the right priority for our customers and partners.

Amazon’s concerns about logistics and manpower aren’t surprising given what other companies are saying. The parcel delivery giant FedEx has warned investors that it also incurs higher costs and is not even sure if it will be able to hire enough workers to make it through the holiday season.

Despite the many short-term headwinds rocking Amazon, it’s important to remember one thing: it’s Amazon we’re talking about, one of the most influential players in e-commerce, cloud computing, digital streaming. , etc. Over the years, it has proven that it can support the growth of its sales and results. He’s also shown that he can tighten the spending valve to increase free cash flow and increase profits whenever he wants. Simply put, Amazon is the kind of company whose quarterly performance, for better or worse, pales in comparison to its long-term investment thesis.

Amazon stock has only risen 2% year-to-date, far underperforming the S&P 50022.4% gain. Investors hoping to lay a solid foundation for their portfolios should take a serious look at Amazon.

10 stocks we like better than Amazon

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Daniel Foelber does not have a position in any of the stocks mentioned. James Brumley has no position in the stocks mentioned. Keith Noonan owns shares of Airbnb, Inc. The Motley Fool owns shares and recommends Airbnb, Inc., Amazon, FedEx and Microsoft. The Motley Fool recommends the following options: January 2022 long calls at $ 1,920 on Amazon and January 2022 short calls at $ 1,940 on Amazon. The Motley Fool has a disclosure policy.

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