2 Monster Stocks to Own for 10 Years or More

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5 hours ago

Amazon's major segments all have massive growth runways, and the company has a wide moat.
Coca-Cola is a buy thanks to its stable business and incredible dividend program.
10 stocks we like better than Amazon ›
Whenever the stock market experiences significant volatility, as it has this year, it can be helpful to step back and examine the performance of broader equities over a decade or more. Doing so puts things in perspective. Corrections appear as pretty minor blips on a chart of the S&P 500's long-term performance, which consistently moves upward for those who wait long enough.
That's why panic selling is never a good solution to market volatility. Even in challenging times, it's worth it to purchase shares of excellent companies that can perform well over 10 years or more. Amazon (NASDAQ: AMZN) and Coca-Cola (NYSE: KO)are two notable examples.
Amazon started as a modest online bookstore, expanded into broader e-commerce offerings, and then launched its cloud segment, Amazon Web Services (AWS), in 2006. More recently, it made a significant impact in the artificial intelligence (AI) market.
Here's where it gets interesting: The company arguably still has massive whitespace in each of those industries. E-commerce made up 16.2% of total retail transactions in the U.S., as of the first quarter.
It hasn't peaked yet. Analysts continue to project that the e-commerce market will expand at a good clip.
Meanwhile, Amazon CEO Andy Jassy says that more than 85% of IT spending still occurs on-premises, i.e., not in the cloud. And the recent AI explosion is also just beginning.
These are opportunities Amazon could ride for well beyond the next 10 years. And what's even more promising is that Amazon's newer opportunities carry higher margins than its legacy e-commerce business. As of the end of 2024, the segment had an annualized run rate of $115 billion. That doesn't seem that impressive compared to Amazon's total sales of almost $638 billion it reported last year.
But AWS is growing faster than the rest of the business, already accounts for over 50% of the company's operating income, and by 2035 should make up a far larger percentage of its top line, leading to even even greater profits and margins. Amazon's AI business will speed up the process.
Then there is the company's rapidly growing advertising business. The company's namesake website, which is one of the most visited websites worldwide, should help it maintain a robust, rapidly growing ad business.
Furthermore, Amazon generates substantial cash flow and, thanks to its massive ecosystem of Prime users, has numerous monetization opportunities. It is ramping up some of them, including in the healthcare sector. Although it may take some time, initiatives like Amazon Pharmacy should become far more prominent in a decade. That's just one example.
Finally, Amazon has a wide moat from multiple sources, including its brand name, a network effect, and high switching costs.
Though Amazon will encounter some issues -- including potential tariff-related troubles and slowdowns in economic activity that could harm its business -- its long-term prospects are impeccable. Investors can't go wrong with this stock.
Coca-Cola's business isn't as exciting as that of some major tech companies. But it is effective. The company markets a vast portfolio of drinks across nearly every category. Coca-Cola has sports drinks, water brands, alcohol, tea, coffee, juice, etc.
Of course, the company remains most famous because of its namesake soft drinks. Coca-Cola's popularity -- it is one of the most valuable brands in the world -- means it attracts regular business from consumers and generates steady revenue and profits.
Revenue growth might not be outstanding, but the stability of its business is a significant strength. Further, it won't be too disrupted by tariffs. Although Coca-Cola is a global brand, it has substantial manufacturing and supply chain operations in every region. It makes most of the products sold to U.S. consumers in the country, shielding the company from import duties.
Coca-Cola did encounter some headwinds in recent years. The pandemic severely disrupted its business. The company could also suffer due to changing consumer demands.
However, Coca-Cola survived the worst of the outbreak, and its financial results rebounded. Additionally, the company frequently introduces new beverage options to meet the evolving needs and demands of its consumer base. That's how Coca-Cola has thrived for as long as it has, and although the past is no guarantee of future success, the beverage specialist still has the qualities to perform in the long run.
Lastly, Coca-Cola is an outstanding dividend stock. It increased its payouts for 63 consecutive years, making it a Dividend King. This is one income stock investors don't have to worry about cutting its payouts. Reinvesting the dividend should lead to superior returns over the next decade and beyond.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
2 Monster Stocks to Own for 10 Years or More was originally published by The Motley Fool