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Analyzing the stock market takes a lot of effort. Investors have to stay on top of earnings reports, industry news, economic reports and major events. It is time-consuming to analyze smaller companies and see if they still have good growth prospects or if it is time to abandon ship.
Some investors prefer to buy trusted companies and hold onto them for many years. These investors believe in the benefits of compound growth and prefer to put their money into established companies. As long as these companies continue to perform well, long-term investors will continue to generate capital gains and dividends.
Investors looking for buy-and-hold opportunities may want to consider these undervalued forever stocks.
Broadcom (NASDAQ:AVGO) is a leader in the semiconductor industry poised to benefit from the artificial intelligence (AI) boom. Shares have jumped by nearly 60% year-to-date (YTD) and have soared by more than 250% over the past five years.
AVGO stock trades at a reasonable 26 P/E ratio and offers a 2.15% dividend yield. Broadcom has a good history of delivering exceptional top and bottom-line growth over several years. The company has net profit margins close to 40% and continues to achieve growth.
Although Broadcom is a top semiconductor stock in the right place at the right time for the AI boom, investors shouldn’t expect returns like Nvidia’s (NASDAQ:NVDA). Broadcom reported slower growth in the third quarter which came to 5% year-over-year (YoY) revenue growth and 8% YoY net income growth.
Broadcom has proven itself to be a long-term winner. Semiconductor chips are in essential devices like smartphones, televisions, tablets, AI-powered tools and more. The world’s reliance on semiconductors can help Broadcom maintain strong demand and generate returns for investors.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a cloud computing company offering a reasonable valuation and strong revenue and earnings growth. Shares gained 55% YTD and have almost tripled over the past five years.
The company’s solutions enhance workplace efficiency, protect data and give customers ways to capitalize on artificial intelligence. In the second quarter, Arista Networks grew its revenue by 38.7% YoY. Net income jumped by 64.5% over the same period.
These growth numbers make the company’s 28.4 forward P/E ratio look reasonable. Arista operates on high profit margins that exceed 30%, and further growth can lead to a lower valuation in the future.
Arista Network’s guidance calls for $1.45 billion to $1.50 billion in Q3 revenue. The midpoint represents a 25% YoY increase. Arista Networks delivered record revenue and profits in the second quarter. Continuing this trend can lead to long-term rewards for shareholders, and leadership seems ready to break more records.
Amazon (NASDAQ:AMZN) started by selling books, but the company has expanded beyond its humble beginnings. Amazon’s e-commerce store sells millions of products and has over 200 million Amazon Prime subscribers. The company’s wide selection and free shipping attracted many people to its e-commerce platform, and the company still has more to offer investors.
Amazon also owns Amazon Web Services, Twitch, Whole Foods, and MGM (NYSE:MGM). These business segments have turned Amazon from an online shopping platform to a tech conglomerate. That amount of diversification can reward long-term investors.
Shares have gained 51% over the past five years. The company’s 11% increase in net sales in the second quarter suggests the company can continue the upward trend. Investors should take YoY net income growth with a grain of salt due to Amazon’s unprofitable Rivian Automotive (NASDAQ:RIVN) investment. The Rivian investment cost Amazon billions of dollars, as reflected in its Q2 2022 financials.
The company’s valuation is inflated due to some of the Rivian losses showing up in recent quarters. However, the stock’s 43.8 forward P/E ratio should give investors a better idea of what to expect from the company.
On this date of publication, Marc Guberti held long positions in AVGO and ANET. The opinions expressed in this article are those of the writer, subject to the biedexmarkets.com.com Publishing Guidelines.