It can be difficult to know where to start choosing stocks for your investment portfolio. However, if you are willing to graduate from publicly traded funds (ETFs) and choose some stocks for yourself, it is not as daunting as it may seem that you are researching.
Instead of being distracted by the latest meme stocks or early speculative penny stocks, look for companies with solid foundations, reasonable valuations, and growth prospects that are worth getting excited about. There are three actions that meet these criteria Microsoft (NASDAQ: MSFT), Facebook (NASDAQ: FB), i DocuSign (NASDAQ: DOCU).
There are many reasons to add the ubiquitous software giant as a Microsoft service to your portfolio. The company sets industry benchmarks with well-known productivity applications (such as Word and Excel) included in its subscription to Office 365. Although it already claims nearly 90% of the enterprise productivity software space, l ‘Office 365 continues to drive year-over-year revenue growth thanks to the hiring of business customers and the increase in revenue per user.
Microsoft also has valuable partnerships with the U.S. military and other massive business customers for cloud computing and custom VR / AR applications. Azure, the company’s cloud services division, saw revenue growth of 51% in Microsoft’s most recently reported quarter. Compare that to D’Amazon AWS year-on-year growth of 37% over its most recent quarter.
Finally, Microsoft has a major advantage in the rapid growth of cloud games and streaming space with its popular Xbox Game Pass service. Despite the company’s growth prospects and status, it could be argued that the shares are reasonably priced at 37 times revenue, compared to the P / E ratio of Amazon, a cloud giant, of 58.
Facebook, the most influential social networking platform with 2.9 billion monthly active users (MAU), still has room to grow as it explores its role in virtual reality and augmented reality applications, including building the “metaverse” (Mark Zuckerberg’s vision for VR / AR-powered “embedded Internet”).
Despite all the hype, the company’s valuation is certainly quite reasonable. Analysts ’price targets for Facebook range up to $ 500 (with an average target of $ 425) and there is a case to make Facebook already worth $ 500 per share.
Facebook already has a strong position in the virtual reality market, as its Oculus Quest 2 puts the company ahead of the competition thanks to a superior hardware interface, to the smart acquisitions of gaming studios for unique content and the huge network effects that a user base entails. of 2.9 billion. These combined factors give Facebook the industry’s strongest foundation for building a metaverse, but of course, the business has yet to run.
DocuSign is in its early stages of high growth compared to industry giants Microsoft and Facebook. However, if you want to buy at least one stock in the speculative growth category, DocuSign is a great option.
The company has been a leader in the space of electronic signatures since before COVID-19 further promoted the adoption of digital productivity tools adapted to work from home. Now, DocuSign is also growing in new complementary areas such as full-cycle contract management, artificial intelligence (AI) that saves companies time and money in legal analysis and remote digital notarization.
Unlike Microsoft and Facebook, DocuSign has not yet achieved GAAP profitability. While owning long-standing chip stocks like Microsoft and Facebook is a great idea to reduce the risk of downside, buying early-stage growth stocks with solid foundations like DocuSign can greatly increase the bullish potential of your portfolio. Like many things in life, the key to getting a strong portfolio is balance.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis (even one’s own) helps us reflect critically on investment and make decisions that help us be smarter, happier, and richer.