Successful day trading is a complex thing to pull off. Stocks often rise or fall for no apparent reason and in ways that are impossible to predict consistently. That’s why making money from day trading is so difficult. It’s also more stressful than long-term investing. Those willing to hold on to shares of companies for several years (or even decades) aren’t worried about the daily ups and downs of the market. That’s just short-term noise.
Having a long-term view also allows the magic of compounding to do its thing. That’s why as an investor, I am a fan of the following quote by the great Warren Buffett: “Our favorite holding period is forever.” Two stocks that I fully intend to keep for that long are Intuitive Surgical (NASDAQ:ISRG) and Facebook (NASDAQ:FB). Here’s why.
1. Intuitive Surgical
Most businesses operate in a highly competitive environment. To be successful in the long run, companies have to build a competitive advantage. That’s what medical-device supplier Intuitive Surgical managed to do. Thanks to its da Vinci system, the company is a leader in the robotic-assisted surgery market. The device allows surgeons to perform procedures in a way that’s minimally invasive compared with traditional operations, resulting in less bleeding and faster recovery times for patients.
Intuitive Surgical benefits from patents and other intellectual property that protect its devices and accompanying accessories. Also, entry into this market is capital-intensive and requires navigating myriad regulatory guidelines. These barriers to entry limit the pool of new competitors, and that’s great news for Intuitive Surgical. Meanwhile, its market is projected to expand at a good clip in the coming years.
The company now generates the bulk of its revenue from selling instruments and accessories that go along with the da Vinci system. In the second quarter, which ended June 30, about 54% of its total revenue came from this source. As the number of procedures performed with its systems grows, so will its top line. Furthermore, given that its customers have spent hundreds of thousands of dollars acquiring its device and accessories, few of them will be inclined to jump ship.
Intuitive Surgical’s future looks bright, even with competition from giants like Medtronic and Johnson & Johnson. That’s why this healthcare stock is one of my largest holdings and will remain so for a very long time.
For some investors, including Facebook in a list of forever stocks might seem odd. The tech giant has faced headwinds due to its stance on political ads and hate speech, as well as its data-breach scandals. Lawmakers have also accused the company of antitrust violations. But these issues have had only a mild impact on the company’s financial results.
#Deletefacebook campaigns on Twitter have failed to gain significant traction. As of June 30, Mark Zuckerberg’s company had 3.51 billion monthly active users across its family of platforms, including its namesake website along with Facebook Messenger, WhatsApp, and Instagram. This figure represented a 12% year-over-year increase. The world’s population currently sits at 7.9 billion people. Within a year or two, 50% of them will be visiting one of Facebook’s apps or websites at least once per month.
Facebook’s business benefits from the network effect, a powerful source of a competitive advantage. It’s a favorite of advertisers thanks to its worldwide popularity. And as more people sign up, it becomes even more attractive to companies looking to reach a broad audience of potential customers.
For those seeking to connect with friends and family, no social media company has a network of users that rivals that of Facebook. Thus, it makes sense for them to stick with it. That’s why the company’s monthly active users will continue increasing, although investors shouldn’t expect dazzling growth rates like it used to deliver.
As far as its financial results go, the company is looking to move beyond targeted ads. It now provides online e-commerce storefronts for businesses. Facebook had 1.2 million stores across its main website and Instagram at the end of the second quarter, a number that should continue climbing. The future of the e-commerce industry is bright, and Facebook looks well positioned to carve out a niche for itself.
The company has other opportunities, including in the metaverse, which CEO Zuckerberg sees as a virtual environment accessible by various devices (including its Oculus virtual-reality headsets) in which users can work, socialize, and play games.
There are many other ways for Facebook to monetize its unmatched network of users. Given management’s track record, I am confident that it will find numerous other growth opportunities. It’s a long way from reaching its peak, and as a shareholder, I intend to ride out this adventure for many years to come.
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.