Over the past five years, the Nasdaq 100 has outperformed the S&P 500 by better than 2-to-1, returning 214% to the S&P 500’s 103% through Aug. 19, 2021. It’s not surprising, really, since the Nasdaq index consists of the 100 largest non-financial stocks on the exchange. Look back 10 years and you’ll see the same disparity in performance.
While that’s helpful in understanding where investors should have looked for winning stocks back then, you want to know which stocks to buy today, ones that will help make the Nasdaq 100 a winning investment over the next five or 10 years. The following three stocks ought to provide such market-beating results.
If Broadcom‘s (NASDAQ:AVGO) performance in 2021 looks unremarkable, you’re not wrong — the stock trades almost exactly where it did six months ago. Yet despite the maturity of the chip industry and the shortages it currently faces, Broadcom is still a growing company and will continue to be one well into the future.
That’s because technology is constantly changing and advancing, so as long as Broadcom continues to evolve with it (and so far it has been able to do so relatively seamlessly), it has exceptional room for future growth.
Apple is Broadcom’s biggest customer, accounting for 15% of revenue, but that’s down from 20% the year before as Broadcom added more customers to its roster. Its top five customers represent 30% of total sales, and while such concentration does introduce risk should they take their business elsewhere, Broadcom is also diversified across industries such as finance, insurance, transportation, and other sectors.
Still, the primary growth catalyst for the chipmaker over the coming years remains the 5G network rollout and the booming demand for 5G smartphones. Its growing data center business, for which it supplies switching, routing, processors, controllers, and more, also offers significant opportunity.
With a dividend that yields a healthy 3% annually, investors will be rewarded with both capital appreciation on the stock and a payout to enhance the returns.
Payments and financial services technology provider Fiserv (NASDAQ:FISV) has a three-pronged approach to facilitating cashless transactions that ought to benefit from the post-pandemic economic recovery.
It offers businesses of any size the opportunity to meet their customers however they shop. Its Carat technology lets large merchants adopt an omnichannel approach to commerce while the Clover platform was built for small- and medium-sized companies to accept and process payments whether in store or online.
Fiserv also offers digital payments processing, fraud protection, and credit and debit cards to financial institutions, while also allowing them to manage customer deposit and loan accounts. It also provides them with financial and risk management services.
The growth in cryptocurrencies also presents a unique opportunity for Fiserv. Over the past year it moved $4 billion worth of payments volume in and out of crypto wallets, but moved $2 billion in the second quarter alone, indicating the swift increase cryptocurrencies are experiencing.
Recessions can wreak havoc on a financial services company like Fiserv, as last year showed. The decline in global economic activity resulted in a significant decrease in payment volumes and transactions, so there will be periods when its business slumps. The benefit for investors is that economy-expanding bull markets tend to last a lot longer than bear markets, and as demand for digital financial services increases, Fiserv should see its own business ramp up for years to come.
Last year Intel (NASDAQ:INTC) was rattled by Apple moving away from its chips to those of its own design and by Microsoft also saying it was developing its own chips for data centers. The current chip shortage is doing it no favors either, but it’s intent upon regaining its footing.
Despite the hiccups, Intel remains the biggest semiconductor vendor by revenue with a 15.6% share of the market, comfortably ahead of second place Samsung with a 12.5% share. It was also able to grow throughout the pandemic with revenue expanding 8% to $78 billion in 2020, its fifth consecutive year of record revenue, indicating it remains a highly recession-resistant business. It also has plenty of levers to pull for future growth, too.
As more businesses move to the cloud, they will need solutions that allow them to store and process ever larger amounts of data. New management at Intel is intent on ensuring the chip maker is at the forefront of the industry, announcing earlier this year it would be investing $3.5 billion to expand its manufacturing capabilities, focused particularly upon its 3D packaging technology. That will allow Intel to stack chips vertically rather than side by side, increasing computing power in a smaller footprint.
At just 12 times trailing and estimated earnings, Intel is offering investors a chance to get in relatively cheap on this tech giant that has the potential to disrupt expectations.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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