Tech stocks have risen over the past year, making it harder for growth investors to find good deals. The demand for many popular members of the Nasdaq Composite Indexwhich is up 10% so far in 2024 after rising sharply last year.
A good way to minimize the risk of overpaying for a stock in this environment is to set a longer time frame. Investing with a decade or longer horizon in mind allows you to overlook short-term volatility and the inevitable ups and downs of market returns.
With this long-term focus in mind, let’s look at two tech stocks that, while not cheap, have a good chance of boosting your portfolio’s returns from here.
1. Garmin
If you have decided to pass on Apple (NASDAQ:AAPL) Slow growth means you should consider owning a stock right now Garmin (NYSE:GRMN) instead. The tech device specialist grew its revenue by 13% in the most recent quarter, compared to a 2% increase for Apple. Garmin also saw strong demand for its fitness watches and GPS-enabled smartwatches. “We enter 2024 with strong momentum,” CEO Cliff Pemble said in a press release.
It’s true that Garmin’s sales are skewed more toward hardware, which isn’t as profitable as software services. That’s a big factor in the weaker operating profit margin of 21% compared to Apple’s 31% rate.
However, Garmin still generates ample revenue and excellent cash flow. The company generated free cash flow of $1.2 billion last year, accounting for nearly 25% of revenue. It’s also available at a decent discount, even as shares have risen over the past year. You can buy Garmin today for 5.5x sales, compared to Apple’s premium of 6.9x sales.
2. Metaplatforms
Metaplatforms (NASDAQ:META) The stock will experience volatility around the April 24 earnings report, but investors don’t have to wait until then to secure this outstanding deal.
Meta’s core engagement metrics are solid ahead of this announcement. The social media giant recently reported that its daily user count would have reached 3.2 billion by the end of 2023. And a whopping 80% of its monthly users log in daily to its family of apps, which also includes Instagram and Facebook.
Meta monetizes this usage much better than in the past. Last quarter, average revenue per user exceeded $10, driven by the higher volume of ads the company shows in feeds.
I’ll be looking for meta to find a way to increase average advertising rates in the upcoming earnings report, which could lead to even faster earnings growth. But the momentum is already quite strong at this point. Operating income rose 62% last year to $46 billion, or 35% of sales.
Next year may not be nearly as impressive, as Meta has decided to invest heavily in areas such as data centers, artificial intelligence capabilities, and its virtual reality hardware. But look for CEO Mark Zuckerberg and his team to highlight the stellar returns this spending could generate over the next decade or more. That’s the same long-term focus investors should have with this stock, as it’s the best way to ensure it can weather the volatility that’s likely to follow Meta’s huge rally over the past year.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Demitri Kalogeropoulos holds positions at Apple and Meta Platforms. The Motley Fool has positions in and recommends the Apple, Garmin and Meta platforms. The Motley Fool has a disclosure policy.
Do you have $3,000? “2 Tech Stocks to Buy and Hold for the Long Term” was originally published by The Motley Fool