Even in a bear market, there are opportunities. Consider the major indexes themselves. The Nasdaq Composite is up 12% year to date, while the Dow Jones Industrial Average is down 2%.
The difference can be even larger for investors willing to pick individual stocks. If I had $5,000 to invest today, I would look to split it evenly across two stocks I believe can double within three to five years: Nvidia (NVDA) and Microsoft (MSFT).
Nvidia
If you’re an investor searching for a stock that can double, look no further than Nvidia. In fact, the company’s stock has more than doubled over the last six months — shooting up from $112 to over $270.
Yet I think Nvidia has more room to run, based on a few factors:
- Data center growth: Organizations are still moving their data to the cloud. As they do, the data centers that run the cloud will require upgrades to the “guts” that make them work. And that means more sales of Nvidia’s graphics processing units (GPUs). These high-performance computing devices help power data centers, and increased sales should help Nvidia regain its revenue growth, which stalled in 2022.
- Automotive demand surge: Similar to data center, there’s growing demand to put Nvidia devices into automobiles. Vehicles increasingly rely on computing power, whether for self-driving, safety, or infotainment systems. Nvidia’s devices can bring the power and speed necessary to turn vehicles into the extension of the home that consumers increasingly demand.
- Revenue growth returns: Nvidia’s revenue flatlined as demand for gaming GPUs waned in 2022. However, analysts now see steady revenue growth on the horizon. Wall Street expects the company to grow sales by roughly 10% over the next 12 months and 24% in the following 12 months.
In brief, Nvidia is positioned to capitalize on the growing need for high-powered computing. Whether it’s data centers, gaming, automotive, or artificial intelligence, tomorrow’s next-generation applications require immense computing power. And Nvidia is one of the few companies able to deliver that hardware at scale.
Microsoft
Buying and holding shares of Microsoft has been a great way to double your money — over and over again. Shares of the software giant are up more than 1,000% over the last decade.
I think it can double again by 2028 — even if its market cap is already a staggering $2 trillion. Here’s why:
- Cloud computing growth: There’s still plenty of juice left in the cloud computing growth cycle. While many enterprise clients have already jumped on board the cloud computing bandwagon, some research indicates the market may double by 2030. If Microsoft can simply maintain its current market share, the company will see a massive increase in its revenue and earnings.
- Artificial intelligence synergies: If there’s one category even hotter than cloud computing, it’s artificial intelligence (AI). Thankfully for Microsoft, it has already cozied up with OpenAI, the company behind ChatGPT and GPT-4. Microsoft has integrated ChatGPT features into its Bing search engine and its Office software.
- Fortress balance sheet: Microsoft’s strong financial position makes it a safe port amid the ongoing bear market. With nearly $100 billion in cash on hand, investors can count on Microsoft to endure whatever comes next in the macroeconomic climate. What’s more, the company has generated $59.6 billion in free cash flow over the last 12 months. Share repurchases have also reduced its average share count by 11% over the previous 10 years.
To sum up, the company has more than enough gas left in the tank to double. Investors looking for a stock with upside — and financial safety to boot — should consider Microsoft.
— Jake Lerch
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Source: The Motley Fool