Trading stocks on a daily basis can be exhilarating, but it’s a risky way to invest. Markets can turn on a dime and very few investors have generated a long-term competitive advantage day trading.
Instead, buying and holding great companies over the course of years and decades is a better way to beat the market and generate wealth. Three stocks that could provide great returns (and allow you to sleep easy at night) are Apple (NASDAQ:AAPL), Zillow (NASDAQ:Z), and Square (NYSE:SQ).
The cash flow machine
Apple can be a foundational company for any portfolio. Its products sell in high volumes and at high margin, and the company spits off a lot of free cash flow. Despite being one of the biggest companies in the world, Apple has continued to grow both revenue and free cash flow over the past five years.
What’s great about Apple’s business is how sticky it is, and how the company is gradually expanding into new hardware, software, and services. The iPhone is still the center of the ecosystem, but iPads, Macs, the Apple Watch, and Airpods continue to expand Apple’s reach. And with new hardware in virtual and/or augmented reality expected in the next few years, we may see a new generation of Apple’s product lineup emerge before our eyes.
Apple’s shares aren’t cheap by most historical standard with the stock trading at 34 times earnings and 27 times free cash flow. But Apple has also shown that its stability and slow but steady growth is worth paying a premium for. And in today’s market this is still a great stock to own.
Disrupting real estate
Zillow is known as a place where shoppers can find information about real estate and even connect to a real estate agent. In fact, advertisements from real estate agents are where Zillow makes most of its money today. That’s not really the company’s future, though.
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