It’s hard to find many blue-chip stocks trading at bargain prices when the overall market is at an all-time high. That’s the superpower long-term investors have. As long as you don’t significantly overpay, a growing and fundamentally strong business can generate impressive investment returns over time.
Looking at some of the top technology stocks, MicroStrategy (NASDAQ: MSTR) and Salesforce (NYSE: CRM) either have long-term upside or have reasonable valuations that I can support, and I think they could beat the market. It stood out as a brand that has been proven.
Here’s why each stock is likely to continue its strong performance over the next few years, and why investors should consider buying it now.
1. Cryptocurrency investment with profits through software
MicroStrategy is a unique company. The company started as a software company selling business intelligence and analytics software licenses, subscriptions, and consulting services. MicroStrategy generated operating revenue of $480 million over the past four quarters. However, most of the company’s value currently lies in Bitcoin, and management has been acquiring Bitcoin continuously since 2020. Currently, MicroStrategy holds approximately 226,500 Bitcoins at an original value of $8.34 billion, worth more than $15 billion at Bitcoin’s current price.
The company primarily raises funds through convertible bonds. Ideally, MicroStrategy would create value for shareholders by increasing the amount of Bitcoin they hold faster than increasing the number of shares by issuing shares. At MicroStrategy, we refer to this ratio as Bitcoin Yield.
Image source: MicroStrategy.
So far, this approach has been remarkably effective, as the stock has outperformed Bitcoin itself over the past five years, even as Bitcoin’s price has risen dramatically. During that time, MicroStrategy achieved returns of over 1,100% compared to 110% for the S&P 500 index. Executive Chairman Michael Saylor is one of Bitcoin’s most ardent supporters and hopes to eventually leverage MicroStrategy’s assets to form a Bitcoin investment bank.
This is not a stock to value using traditional financial analysis, as most of its value is locked in digital assets. Rather, purchasing MicroStrategy is essentially an investment in Bitcoin’s long-term performance and potential to become part of the digital economy. MicroStrategy’s impressive results over the past few years make it one of the most attractive ways to add Bitcoin exposure to your investment portfolio.
2. This proven winner can grow through expansion and cross-selling.
Salesforce was one of the first SaaS stocks. The company began selling customer relationship management (CRM) software at the beginning of this century and is now one of the world’s largest software companies. Salesforce has expanded through innovation and acquisition, building a do-it-all software ecosystem that sells a variety of tools and services to run your business. The stock’s lifetime return was over 6,600%, easily outperforming the S&P 500.
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CRM software is essential for businesses that track customer interactions, including quotes, sales, history, and anything else you need to know. It is estimated that over 150,000 companies worldwide use Salesforce as their CRM. This has not only made Salesforce a huge company with over $36 billion in annual revenue, but also an epic sales funnel as it can cross-sell other products and services to its vast customer base. Today, more than 80% of the company’s incremental recurring revenue comes from existing customers.
Management is targeting 8% to 9% revenue growth this year, and the company believes cross-selling opportunities will help sustain this growth, especially as it implements artificial intelligence (AI) across its products.
Meanwhile, analysts expect Salesforce to see its profits grow by an average of nearly 15% annually over the next three to five years. Earlier this year, Salesforce began paying its first dividend, offering investors an initial yield of 0.5% that could increase as management raises the dividend.
Ideally, I would have bought the stock sooner, as the stock has increased 40% over the past year. Still, the buying window appears to still be open. The company’s stock trades at 26 times estimated full-year earnings, which seems reasonable for a company with such a solid growth track record and 15% compounded return. Again, to win in the long run, you need to get good stocks at fair prices.
Don’t miss out on this potentially lucrative second chance
Have you ever felt like you missed out on buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our team of expert analysts will issue a “Double Down” stock recommendation on a company we think is about to crash. If you’re already worried that you’re missing out on an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves.
Amazon: If you invested $1,000 when it doubled in 2010, you’d get $21,285!*
Apple: If you invested $1,000 when it doubled in 2008, you’d get $44,456!*
Netflix: If you invested $1,000 when it doubled in 2004, you would have earned $411,959. *
We currently have “double down” alerts on three great companies, and we may not see an opportunity like this again anytime soon.
See 3 “Double Down” stocks »
*Stock Advisor will return as of October 14, 2024
Justin Pope has no position in any stocks mentioned. The Motley Fool has a position in Bitcoin and Salesforce and recommends Bitcoin and Salesforce. The Motley Fool has a disclosure policy.
2 Top Tech Stocks to Buy Right Now was originally published by The Motley Fool
