If you want an easy way to win in the stock market, long-term investing is the way to go.
Holding stocks over the long term removes the risk of volatility and allows compounding to work for you. Long-term investing doesn't mean set and forget. You want to make sure your investment thesis still applies to your holdings, but investing is much easier if you can buy superior businesses at good prices and allow them to grow over time.
Keep reading to see three stocks that look like great long-term buys right now.
1. Bill.com Holdings
Bill.com (NYSE: BILL) stock just got shellacked after its latest earnings report with the stock falling 27%, but long-term investors know that stock declines are often buying opportunities.
In this case, investors were turned off by the company's guidance, which called for slower revenue growth than expected in the current quarter. However, that shouldn't affect the long-term growth opportunity.
Bill.com is a software company that helps small and medium-sized businesses make payments and handle back-office accounting. It's a fast-growing business that has expanded through both organic growth and acquisitions. The company is also coming off a quarter where core revenue jumped 49% and total revenue, which includes interest earned on funds held, rose 66% to $260 million. On an adjusted basis, the company also reported a strong profit of $49.4 million, or $0.42 per share.
Over the long term, Bill is an attractive opportunity. It's penetrating a highly fragmented market and often competing with pen and paper, or Excel, as many of its potential customers don't use software to manage payments.
Bill estimates it has a $46 billion addressable market, yet its revenue has only reached a run rate of $1 billion. The company should continue to grow as it penetrates that market and expands to adjacent markets through acquisitions.
No big tech company is as diversified as Microsoft (NASDAQ: MSFT). It has three major segments: software like Office, its intelligent cloud which includes Azure, and its computing segment based around Windows.
The company also owns businesses like LinkedIn and GitHub and makes money from a wide range of revenue streams, including gaming and advertising.
That diversification makes the company more resilient than its peers, which get most of their money from one business.
CEO Satya Nadella has driven strong returns while at the helm as he's rebuilt the company around the cloud. In fact, last year was the first year that Microsoft underperformed the S&P 500 since he took the top job in 2014.
With its partnership with OpenAI, Microsoft is poised to shake up the tech sector once again. It's deploying OpenAI tools like ChatGPT in products like Azure and Teams and is reportedly preparing to launch a ChatGPT-powered version of its Bing search engine, which could disrupt Google's monopoly.
Microsoft continues to generate huge profit margins. It's well positioned to grow in multiple directions, and Nadella has proven to be a master strategist, remaking the company from a stubborn laggard into a bold innovator.
For a long-term investment, you want a wide economic moat. Few companies can match that of Visa (NYSE: V), which dominates a credit card duopoly with Mastercard, or a triopoly if you include American Express.
Threats from crypto and BNPL companies seem to have receded, and Visa continues to thrive. Credit cards have proven to be an entrenched consumer habit and a necessary convenience for businesses.
In a weak macroeconomic environment, Visa still posted 12% revenue growth to $7.9 billion in its recently reported fiscal first quarter. Net income rose 17% to $4.6 billion, giving the company a profit margin of nearly 60%. Its adjusted earnings per share jumped 21% to $2.18, as it continues to buy back stock.
The recovery of cross-border travel should benefit the company's growth over the near term, and over the long term, Visa will benefit from global GDP growth and the expansion of the middle class and digital payment options in the developing world. The proliferation of payment tools like Apple Pay will also favor Visa's long-term growth.
With more than 3 billion cards in use and daily habits established with most of those users, unwinding Visa's dominance in digital payments will not be easy, and its steady growth and massive profits make it a great long-term stock to own.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Bill.com. The Motley Fool has positions in and recommends Apple, Bill.com, Mastercard, Microsoft, and Visa. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.