These businesses are begging to be bought.
The stock market has continued to give investors a remarkable run up as the bull market is in full swing. If you’re looking for great companies that you can buy and hold through market thick and thin, it’s important to be selective about the businesses you put cash into and keep in your portfolio.
If you have even a more modest amount like $500 to invest, you can still take advantage of investment methods like fractional investing or dollar-cost averaging to become part owner of quality stocks. Here are two no-brainer growth stocks to add to your buy list as summer kicks off.
1. Bristol Myers Squibb
Bristol Myers Squibb (BMY -0.71%) hasn’t delivered the share price growth some investors may have hoped for recently, but overlooking this business could be a mistake. If you’re wondering what’s behind the stock’s roughly 35% decline over the past 12 months, there are several factors at play.
First off, the company is facing the impending loss of patent exclusivity on a few core products, including the blockbuster blood thinner Eliquis. The company is working to stave off the long-term headwinds that the entry of generic competitors to this addressable market will bring, and has made a series of important acquisitions recently.
These acquisitions have included two cancer drugmakers, and a company that specializes in treatments for psychiatric and neurological disorders. Not surprisingly, the company has paid billions for these acquisitions, which hold significant growth opportunity for the business over the long run.
Such acquisitive growth is inevitably going to weigh on a company’s top and bottom lines in the short term, as has been the case with Bristol Myers. The biopharmaceutical industry is remarkably resilient in a wide range of economic backdrops, but it is also cyclical. Fluctuations in growth due to factors like loss of patent exclusivity, acquisitive maneuvers, and the inevitable adjustment periods that follow are to be expected.
For investors taking a position in a stock like this for five, 10, or more years, that isn’t something to be worried about. Income-seeking investors may be glad to learn that Bristol Myers is a faithful dividend payer, and has raised its dividend every year for well over a decade at this point.
While the stock’s performance has been lackluster of late, that has helped elevate its dividend to an eye-popping yield of just under 6%. The company maintains a payout ratio of about 60%. Bristol Myers still has a strong balance sheet overall, with plenty of cash to maintain its shareholder obligations.
It’s brought in revenue of about $46 billion over the trailing 12 months, with operating cash flow of about $14 billion. Its levered free-cash-flow position has totaled about $16 billion in that same time frame. It ended the most recent quarter with about $10 billion in cash and cash equivalents on hand. The company still looks like a smart buy if you’re searching for a long-term buy-and-hold investment in the healthcare space.
2. Amazon
Amazon (AMZN -0.29%) is hardly a company that needs an introduction, but sometimes the best investments are the mainstay businesses that keep delivering growth through economic thick and thin. The tech giant’s continued expansion in the burgeoning world of artificial intelligence (AI) is breathing new life into its growth story.
While Nvidia still undeniably dominates the AI chip market, Amazon makes its own AI chips, called Inferentia and Tranium. These are offered at a lower price compared to competitors in the space, and Amazon’s management has indicated that demand is consistently growing.
Selling chips is far from the only opportunity for Amazon amid the AI revolution. It’s introduced a series of AI-focused applications. These include Amazon Bedrock (a service for building generative AI applications), Amazon Sagemaker (a machine learning service that can help build AI chatbots among various use cases), and Amazon Q (a generative AI-powered assistant).
These are all applications that integrate seamlessly with its cloud infrastructure platform, Amazon Web Services (AWS), which is habitually the single largest driver of profitability for the company. Management said in the first quarter earnings report that AWS’ AI capabilities are driving the segment to achieve a $100 billion annual revenue run rate.
Last year, AWS reported segment sales of about $91 billion. It’s worth noting that Amazon’s flagship e-commerce business is still the single largest piece of the pie when it comes to net sales.
In the first quarter of 2024, net sales rose 13% year over year to $143 billion. Of that total, $55 billion was derived from online store sales and $35 billion from third-party seller services for its e-commerce platform.
Operating income rose 219% year over year to $15.3 billion ($9.4 billion of that amount was from AWS), and net income jumped 225% to $10.4 billion. Amazon also brought in free cash flow of $50 billion over the trailing 12 months, with operating cash flow of $99 billion in that same time frame.
This is a company that has proven its ability to reinvent itself through the years, and the future looks to be no different. The growth and overall dominance of its mainstay e-commerce and cloud computing businesses, as well as the promise of tremendous growth as it expands in the world of AI, are all incredible value propositions for long-term investors to consider.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rachel Warren has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Bristol Myers Squibb, and Nvidia. The Motley Fool has a disclosure policy.