Five Stocks to Buy Today and Retire Early

May 20, 2024

Five Stocks to Buy for Long-term Wealth

Overview

  • 2023 Stock Market Predictions: Many expected a bad year; long-term investors like the speaker stayed in the market.
  • Market Timing Dangers: Jumping in and out of the market can lead to significant losses (e.g., missing a 40% spike).
  • Value of Time: Quality companies perform well over 10-15 years despite short-term volatility.

Three-Prong Investment Strategy

  1. Long-Term Mindset: Stick with investments for many years.
  2. Invest in Good Businesses: Focus on fundamentally strong companies.
  3. Dollar Cost Averaging (DCA): Increase investment during stock price dips.

Analogy

  • Discounted TV Example: Buy more at a lower price just like you would with stocks. Stock market discounts are opportunities.
  • Understanding Investments: Knowing the business well prevents emotional, ill-informed decisions during market turbulence.
  • Warren Buffett Quote: Obsess about stocks before investing to avoid panic during market fluctuations.

Five Recommended Stocks

  1. Amazon (AMZN) - Cloud & Retail Giant:

    • Misunderstood focus on retail; cloud services (AWS) are major revenue drivers.
    • Control ~30% of global cloud market; future growth with AI.
    • Operating margin of AWS: 38%.
    • Trading at a forward PE of 32.

  2. Microsoft (MSFT) - Double-headed Monster:

    • Cloud services growing rapidly; potential future leader.
    • Essential player in AI (owns OpenAI).
    • Revenues doubled in 5 years, stock up by 220%.
    • Large cash reserves ($80 billion).
    • Trading at a forward PE of 31.

  3. Google (Alphabet, GOOGL) - Tech Giant:

    • Dominates global search; owns 95% of global search market (including YouTube).
    • Strong advertising revenue and cloud business (11% market share).
    • Revenue up 124% in 5 years, 20 forward PE.

  4. Tesla (TSLA) - Beyond an Auto Company:

    • Leading in electric vehicles (EV) and full self-driving (FSD) technology.
    • Potential future revenues from software licensing and energy storage.
    • Revenues up 320% in 5 years.
    • Trading at a forward PE of 52.

  5. Nvidia (NVDA) - AI Infrastructure Leader:

    • Monopoly in AI infrastructure (hardware).
    • Revenue up 400% in 5 years, 54% operating margin.
    • Trading at a forward PE of 28.

Mentioned Companies (Additional Considerations)

  • Palantir (PLTR) - AI Software Company:
    • Operating system for AI infrastructure.
    • Steady revenue growth and strong operating margin.
    • Trading at a forward PE of 51.

Conclusion

  • Main Takeaway: Select good businesses and stick with them for the long term. DCA during market dips can lead to large returns over decades without needing to time the market.