Let’s be honest. A lot of people say their positions in flashy technology companies are meant to be long-term holdings, but they’re really just an effort to make a quick buck. And that’s OK. Any profitable trade is technically a good trade. If you can get in and out at the right time, so be it.
Thing is, there are plenty of tech names that are more than just flash-in-the-pan prospects, and are better suited for holding periods measured in years rather than weeks.
Here’s a closer look at three such technology companies. Not only will they be just as impressive 10 years from now as they are today, but their stocks should be trading at much higher prices.
It’s tough to imagine a world without Microsoft (NASDAQ:MSFT). Its Windows operating system is installed on three-fourths of the world’s desktops and laptops, according to GlobalStats, and its Office productivity software remains the gold standard for the category. Sony‘s PlayStation gaming console enjoys more worldwide market share than Microsoft’s Xbox, but the Xbox is closing the gap, and is still the most popular game console in the U.S.
And these are things consumers can readily see. There’s a whole different unseen array of Microsoft-made products that are doing similarly well. For instance, Canalys reports Microsoft’s cloud computing business accounted for a second-best 19% of the world’s first-quarter cloud infrastructure spending, and the company continues to close the gap with market-leader Amazon.
Now take a step back and ask a thoughtful, critical question: Is there any chance the world will have less need for computers, cloud computing, productivity software, or game consoles 10 years from now?
Any reasonable and realistic answer has to be “no.” Indeed, it would be surprising if demand for these products and services wasn’t considerably greater a decade from now. Being a market leader in multiple categories, Microsoft can steer the market’s ongoing growth in a way that serves itself best. For example, the Windows operating system comes with trial versions of Office software pre-installed.
Bolstering the bullish argument for long-term ownership of Microsoft is the company’s evolving business model. Access to Azure, Office, and even video games can now be utilized on a monthly subscription basis, accessible via the cloud. This shift not only makes the company’s products more affordable to begin using but also gives Microsoft a better chance of keeping those customers by making it easy to update and upgrade software.
Last year, the last time Microsoft disclosed such data, it had already lined up more than $100 billion worth of subscription cloud revenue that had yet to be booked — a figure that continues to edge upward.
Palo Alto Networks
Even after several high-profile cybersecurity gaffes embarrassed organizations ranging from Target to Equifax to Yahoo!, some of the world’s most important companies are still being hacked. Most recently, Colonial Pipeline agreed to fork over $4.4 million to a computer hacking group known as Darkside to regain control of its 5,500 miles worth of refined oil pipelines.
These things are preventable. They’re just not being prevented, as too many organizations don’t utilize all the digital defenses available to them. Perhaps the Colonial Pipeline debacle will encourage procurement of this protection.
Enter Palo Alto Networks (NYSE:PANW). Simply put, Palo Alto offers software preventing unauthorized access to a company’s network, internal apps, and data. It’s even got a ransomware protection solution in its lineup that might have been able to save Colonial Pipeline a few million bucks.
The opportunity is incredible, and should remain so for a while. P&S Intelligence believes the cybersecurity market will grow at an average annual pace of 12.6%, from 2019’s $120 billion to $434 billion by 2030. That’s a lot, but it’s only a fraction of the $10.5 trillion that Cybersecurity Ventures believes cybercrime will cost the world in 2025 alone if enterprises don’t step up their digital defense games.
Palo Alto is doing fine, logging more than seven consecutive years of rising revenue as more and more outfits build their digital moats. Given the outlook, more of the same kind of growth is in the cards for a while.
International Business Machines
Yes, this is the same IBM that failed to respond to the advent of things like cloud computing, mobile devices, and all that goes with both. The company’s “strategic imperatives” plan unveiled in 2015 was meant to steer the company away from a legacy mainframe business that was already dying and toward more contemporary opportunities like the aforementioned cloud and mobile security. By and large, though, it was too little too late.
The IBM of today, however, isn’t the IBM from even as recently as two years ago. It’s ready to compete where it counts.
Take last month’s revelation of new technologies capable of fabricating a 2-nanometer microchip as an example. The microscopic measure is in reference to how small a chip’s transistors can be made and still function properly. The smaller, the better, as smaller transistors consume less power, operate faster, and require less space when room is a factor. For perspective, 7-nanometer chips are the best the market has to offer right now.
It’s not just more functional chips IBM is starting to develop, either. Just within the past few weeks, the company has unveiled a way for data centers to more efficiently store and retrieve data, and launched AutoSQL, which is capable of retrieving data eight times faster than previous approaches are. Both technologies have a myriad of potential uses, including in the artificial intelligence arena.
Read between the lines. This isn’t yesteryear’s IBM.
It could still take years for the company to fully monetize these and other breakthroughs, but they’re worth the wait.
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.