Best Stocks to Buy Now for Long-Term Gains

Investing in stocks for the long term can be a smart way to grow your money. With the right choices, you can build wealth over time. Here are some stocks that experts believe are great options for long-term gains. Each of these companies has strong business models and good prospects for growth, making them worth considering for your investment portfolio.

Key Takeaways

• Taiwan Semiconductor Manufacturing is a leader in the chip-making industry, crucial for tech advancements.
• NXP Semiconductors focuses on automotive and security solutions, promising steady growth.
• Rentokil Initial provides pest control services, benefiting from ongoing demand in various sectors.
• Microsoft continues to innovate in software and cloud services, ensuring its market position.
• Airbus is a key player in aerospace, with increasing demand for air travel and defence solutions.

1. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Company (TSMC) is a major player in the semiconductor industry, holding a remarkable 60% market share. This company is known for its strong focus on research and development, which helps it stay ahead in technology. Here are some key points about TSMC:

• Price/Fair Value: 0.73
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary

Key Benefits of Investing in TSMC

1. Leadership in AI: TSMC is seen as one of the best stocks for investing in artificial intelligence technology.
2. Strong Market Position: As the largest contract chip manufacturer, TSMC has a solid foundation in the market.
3. Future Growth Potential: The company is expected to benefit from trends in high-performance computing and the Internet of Things.

Investing in TSMC could be a smart choice for those looking for long-term gains, especially as the demand for semiconductors continues to rise.

Overall, TSMC is trading 27% below its fair value estimate, making it an attractive option for investors looking for growth in the semiconductor sector.

2. NXP Semiconductors

NXP Semiconductors is a major player in the semiconductor industry, particularly known for its strong position in the automotive market. This company is one of the largest suppliers of chips for vehicles and also plays a significant role in the analogue and mixed-signal chip markets.

Key Highlights:

• Price/Fair Value: 0.74
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Standard
• Industry: Semiconductors

NXP has a solid reputation due to its competitive advantages, which include:

• High switching costs for customers
• Valuable intangible assets
• Strong market presence in automotive, industrial, mobile, and communications sectors

Despite being in cyclical industries, NXP is expected to generate excess returns over the cost of capital for the next decade. The stock is currently trading 26% below its fair value estimate of $320 per share.

Investing in NXP Semiconductors could be a wise choice for those looking for long-term growth, especially as the demand for automotive technology continues to rise.

3. Rentokil Initial

Rentokil Initial is a leading player in the pest control and hygiene services industry. The company has a strong focus on expanding its market share through strategic acquisitions. Since 2015, it has completed over 200 acquisitions, which have helped it build a solid customer base across various regions.

Key Highlights:

• Price/Fair Value: 0.75
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Specialty Business Services

Growth Strategy

Rentokil Initial’s growth strategy includes:

1. Acquisitions: Targeting pest-control companies to enhance market presence.
2. Geographic Expansion: Focusing on increasing customer density in existing markets.
3. Innovation: Investing in new technologies to improve service efficiency.

Rentokil Initial aims for over 20% revenue growth in the coming years, driven by its successful integration of acquired companies and a focus on operational efficiency.

Financial Performance

The company is currently trading at a 25% discount to its fair value estimate of $39.50 per share, indicating a potential opportunity for investors. With a strong economic moat and a commitment to maintaining its leadership position, Rentokil Initial is well-positioned for long-term gains in the market.

4. Microsoft

Microsoft is a leading player in the software industry, particularly known for its cloud services. The company has a strong position in the market, with a price-to-fair value ratio of 0.82, indicating it is currently undervalued. Here are some key points about Microsoft:

• Revenue Growth: Microsoft has shown impressive revenue growth, especially with its Azure cloud services, which grew at a remarkable 30% rate in fiscal 2024.
• Investment in AI: The company is also a leader in artificial intelligence, thanks to its investment in OpenAI.
• Customer Relationships: Microsoft has deepening ties with its customers, which helps in maintaining its market position.

Microsoft is not just a software company; it is a technology leader shaping the future of cloud computing and AI.

Overall, Microsoft remains a strong choice for long-term investment, given its growth potential and market leadership.

5. Airbus

Airbus is a major player in the aerospace industry, primarily known for making commercial aircraft. The company is currently valued at about 17% less than its fair value estimate, making it an attractive option for long-term investors.

Key Highlights:

• Price/Fair Value: 0.83
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary

Why Invest in Airbus?

1. Duopoly Advantage: Airbus and Boeing dominate the market for aircraft with 130 seats and above, ensuring a steady demand for their products.
2. Growing Air Travel: With the rise in commercial air travel, Airbus is well-positioned to benefit from increased demand.
3. Limited Competition: The company faces little competition in the high-end narrow-body market, allowing it to expand its fleet offerings.

Investing in Airbus could be a smart move as it continues to grow and adapt in a competitive market.

Summary

Airbus is a strong candidate for long-term gains due to its strategic position in the aerospace sector and its ability to meet the growing demand for air travel. With a solid market presence and limited competition, it stands out as a valuable investment opportunity.

6. Amazon.com

Amazon.com is a leading player in the internet retail sector, known for its vast selection and competitive pricing. The company has shown remarkable resilience and growth potential, making it a strong candidate for long-term investment.

Key Highlights:

• Price/Fair Value: 0.83
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary

Competitive Advantages:

1. E-commerce Leader: Amazon’s size and scale allow it to offer a wide range of products at low prices.
2. Cloud Services: Through Amazon Web Services (AWS), it leads in public cloud services, which is a significant growth area.
3. Advertising Growth: The advertising segment is expanding rapidly, contributing to overall revenue.

Financial Overview:

Amazon’s diverse revenue streams and strong market position suggest it will continue to thrive in the coming years. Investors should consider its potential for sustained growth as a key factor in their decision-making.

7. Autodesk

Autodesk is a leading name in the computer-aided design (CAD) software industry. The company has successfully transitioned to a subscription model, which means that over 95% of its revenue now comes from recurring sources. This shift allows Autodesk to earn more from its loyal customers as they upgrade their software.

Key Highlights:

• Price/Fair Value: 0.85
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Mid-Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Software—Application

Reasons to Consider Autodesk:

1. Strong Market Position: Autodesk is seen as the global standard in CAD software, making it a go-to choice for professionals.
2. Recurring Revenue: The shift to subscriptions means steady income, which is great for long-term growth.
3. Educational Partnerships: Autodesk has built strong ties with universities, ensuring that new professionals are trained on its software before they enter the workforce.

Autodesk is well-positioned to continue leading the CAD market, thanks to its innovative approach and strong customer base.

Overall, Autodesk’s stock is currently 15% undervalued compared to its fair value estimate of $275 per share, making it an attractive option for long-term investors.

8. BAE Systems

BAE Systems is a leading British company in the defence and aerospace sector, recognised as the largest defence contractor in Europe. With rising global security issues, especially due to the ongoing Ukraine conflict, the demand for defence solutions is expected to grow significantly. This trend is likely to continue for several years, as many nations, particularly in Europe, have not invested enough in their defence since the Cold War.

Key Highlights:

• Price/Fair Value: 0.88
• Morningstar Uncertainty Rating: Medium
• Industry: Aerospace and Defence

Why Invest in BAE Systems?

1. Strong Market Position: BAE is one of the six main contractors for the US Department of Defence, giving it a solid foothold in the market.
2. Growth Potential: The company is well-placed to benefit from increased spending on defence projects globally.
3. Valuation: Currently, BAE Systems stock is trading about 12% below its estimated fair value of $74, making it an attractive option for long-term investors.

Investing in BAE Systems could be a wise choice for those looking to benefit from the growing demand in the defence sector. The company’s strategic involvement in major international projects positions it well for future growth.

In summary, BAE Systems stands out as a strong candidate for investors seeking long-term gains in a sector that is likely to see sustained growth due to global security concerns.

9. Experian

Experian is one of the Big Three credit bureaus in the United States, playing a crucial role in the financial landscape. The company has been expanding its services beyond its core credit bureau business, especially in emerging markets like Brazil. This growth is driven by the increasing middle-class population and favourable regulatory changes that allow for the use of more data types.

Key Highlights:

• Price/Fair Value: 0.88
• Morningstar Uncertainty Rating: Medium
• Industry: Consulting Services

Growth Opportunities:

1. Expansion in Brazil and other emerging markets.
2. Development of new products to meet changing consumer needs.
3. Potential growth in Asia, although with some uncertainties.

Experian’s position in the market is strong, but it faces challenges such as currency fluctuations and macroeconomic pressures. However, the long-term outlook remains positive as the demand for credit services continues to grow.

Summary Table:

In conclusion, Experian is well-positioned for long-term growth, especially as it adapts to the evolving financial landscape and seeks opportunities in new markets.

10. Dassault Systèmes

Dassault Systèmes is a leading software application company that plays a crucial role in the design and manufacturing sectors. With a strong grip on the computer-assisted design market, it is essential for industries like automotive and aerospace. Here are some key points about the company:

• Market Position: Dassault’s software is used in 90% of all aircraft and 80% of all cars worldwide.
• Revenue Growth: The company has shown a revenue increase of 3.8%, reaching €6.1 billion, while maintaining stable EBIT margins over the past year.
• Future Prospects: The firm is adapting to new trends, including electric vehicle design, which strengthens its competitive edge.

Dassault Systèmes is well-positioned to continue its success due to significant switching costs and a strong network effect in its midmarket CAD software, SolidWorks.

Investing in Dassault Systèmes could be a wise choice for those looking for long-term growth in the tech sector.

and more

Emerging Opportunities

Investors should keep an eye on several emerging companies that show promise for long-term growth. Here are a few to consider:

• NVIDIA: A leader in graphics processing units (GPUs) and artificial intelligence.
• Palantir Technologies: Known for its data analytics capabilities, it has a strong foothold in government and commercial sectors.
• Shopify: A robust platform for e-commerce, helping businesses set up online stores.

Key Considerations

When investing in stocks, consider the following:

1. Market Trends: Stay updated on industry trends that could affect stock performance.
2. Financial Health: Look at the company’s earnings, debt levels, and cash flow.
3. Management Team: A strong leadership team can drive a company’s success.

Investing in stocks requires careful thought and research. Always consider your financial goals and risk tolerance.

Conclusion

The stock market offers numerous opportunities for long-term gains. By diversifying your portfolio and staying informed, you can make wise investment choices that align with your financial objectives.

Frequently Asked Questions

What are growth stocks?

Growth stocks are shares in companies that are expected to grow faster than the market average. They often reinvest their profits back into the business instead of paying dividends.

Why should I consider long-term investing?

Long-term investing can help you build wealth over time. It allows you to ride out market ups and downs and benefit from compound interest.

What factors should I look for in a stock?

When choosing a stock, consider the company’s growth potential, financial health, and whether it is currently undervalued.

How do I know if a stock is undervalued?

A stock is considered undervalued if it is trading for less than its intrinsic value, which can be assessed using metrics like price-to-earnings ratios.

Is it risky to invest in stocks?

Yes, investing in stocks involves risks, including market volatility and potential loss of capital. It’s important to do your research and invest wisely.

How long should I hold a stock for it to be considered a long-term investment?

Typically, a long-term investment is held for five years or more. This allows time for the company to grow and for the stock price to increase.

What are some good strategies for long-term investing?

Some effective strategies include diversifying your portfolio, regularly reviewing your investments, and focusing on quality companies with strong fundamentals.

Can I invest in stocks through a fund?

Yes, you can invest in stocks through mutual funds or exchange-traded funds (ETFs), which pool money from many investors to buy a diversified portfolio of stocks.