There hasn’t been a better time to start investing in the past year than now. U Nasdaq Composite The index has fallen nearly 26% in the past 12 months, and many individual stocks have fallen much more. In other words, you can invest in companies at the bottom of several years, making it an opportune time to start investing.
If you are investing in individual stocks, where should you start? Like a house, an investment portfolio for long-term investors requires a strong foundation, a durable structure and a few decorations. Using this analogy, let’s explore what stocks can be phenomenal long-term buys for novice investors.
Step 1: Build the foundation
Apple (AAPL 0.04%) can help serve as the basis for incoming investors for a few reasons. The first is that it has a name recognized everywhere in the world, making it easy to understand what the company does and how to make money. The second reason is that Apple is one of the largest companies in the world, which means that it has proven to investors better than almost any company.
To become one of the best global companies, it had to have one of the best income statements in the world. This is true today as the company generated a net income of $99.8 billion in the last 12 months. The company also generated $111 billion in free cash flow in the same period, they represent a margin of 28%. In other words, for every dollar that Apple made in revenue over the past year, $0.28 was retained in cash flow.
Apple shares are down 22% during the past year, bringing his assessment up to just 22 times earnings. New investors should build the foundation of their portfolio no matter what, but with Apple trading near its lowest valuation since the market crash of 2020, it seems now. a better time than anyone lately.
Step 2: Add the structure
When you build the foundation of a house, you need an equally durable structure. Autodesk (ADSK -1.00%) is the equivalent of this stable frame. The company is the leading supplier of computer-aided design (CAD) software for the architecture, engineering and construction industry.
Autodesk is the Coke of the design industry, unless there isn’t Pepsi to rival Some estimates put Autodesk’s market share at 31% in the CAD space, with the second-place provider by miles, controlling only 12%.
This unrivaled dominance has led to incredible profitability for Autodesk. The company expects to generate nearly $2 billion in free cash flow in fiscal year 2023 — which ends Jan. 31, 2023.
CAD software is critical in the world of engineering, construction, architecture and manufacturing, and since Autodesk is the top dog, companies will pay any price for their software. This could allow the company to raise prices over time, potentially resulting in much higher profitability three, five and 10 years from now. I think I own this stalwat for the long haul, and this stock could make a great addition to a new investor’s portfolio.
Step 3: Furnish with some growth prospects
Once you have built a rock solid foundation and a lasting structure, you can decorate your portfolio with growth actions. enter The Trade Desk (TTD -3.11%). This company is more risky than Autodesk or Apple, but could provide much higher returns in the next decade.
The Trade Desk helps advertisers buy digital ad inventory available on the open internet, and is one of the leading platforms that does so. The digital advertising landscape is expected to explode in the coming years, putting the Trade Desk in an optimal place to thrive. In 2026, eMarketer predicts that $876 billion will be spent on the purchase of digital advertising space worldwide. It is 45% higher than global spending in 2022.
The opportunity that The Trade Desk is capitalizing on is huge, but what is even more impressive is that it is gaining market share quickly. Even in this tough economic environment, the Trade Desk saw third quarter revenues increase by 31% compared to the year-ago quarter to $395 million – which is much faster than the expected increase under the 10 % in the advertising industry this year.
Revenues are growing rapidly, but the company has balanced its rapid adoption with healthy cash generation. This advertising technology stock generated $485 million in free cash flow over the trailing 12 months, representing a 33% margin. With high cash generation, impressive adoption, and a dominant position in a lucrative space, The Trade Desk it might deserve a spot in a new portfolio of investors.
Jamie Louko has positions at Apple, Autodesk and Trade Desk. The Motley Fool has positions and recommends Apple, Autodesk and Trade Desk. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.