Financial independence – especially after retirement – is one of the reasons many people choose to invest in stocks. But to be truly financially secure in retirement, it helps to start investing as early as possible. For young investors, putting money in quality stocks and letting the magic of compounding do its work is one of the secrets to building financial wealth and securing a relatively comfortable retirement.
If you are still under 30, Intuitive surgery (NASDAQ: ISRG) and Amazon (NASDAQ: AMZN) are the two main actions that will make your money grow over the next decades. These companies have things in common that make them excellent choices: they both have a long history of success, a strong competitive advantage and a bright future in at least one sector still ripe for growth.
1. Intuitive surgery: a leader in robot-assisted surgery
Intuitive Surgical is best known for its da Vinci System, a robot-assisted surgical device that was licensed by the United States Food and Drug Administration in 2000. Since then, the healthcare company’s revenues and profits have risen at a relatively steady rate, and its stock performance has crushed that of the wider market, as shown in the chart below.
Its signature da Vinci system helps physicians perform minimally invasive surgeries, which have several health benefits over other types of procedures, including less bleeding, shorter hospital stays, and longer recovery times. faster recovery, to name a few. Despite these advantages, most of the surgeries performed with these nifty devices still represent a small percentage of the overall procedures performed worldwide.
In other words, although Intuitive Surgical installed 5,865 of its devices globally in its third quarter ended September 30 (an 8% increase year-over-year), there is still a lot of room for growth in its own market.
And despite the potential competition from Medtronic, Johnson & johnson, and others, there is good reason to believe that intuitive surgery can remain a leader. The healthcare company has already cleared several hurdles to enter this market, including building a robot-assisted surgery device and accompanying instruments, obtaining approval from regulatory authorities , the marketing of its product and the training of health professionals in its use.
Competitors will have to do the same if they hope to catch Intuitive Surgical, but the company has no plans to sit back on its laurels in the meantime. This gives Intuitive Surgical a strong competitive advantage over its peers, and the company looks likely to continue to outperform the market for the foreseeable future.
2. Amazon: e-commerce and much more
If there is such a thing, Amazon has definitely been a winner in the COVID-19 pandemic. Although the company’s shares fell sharply with the market in the early days of the outbreak, they have recovered well since then, and have risen about 73% since the start of the year, against gains of 14% for the S&P 500 in the past 12 months or so. Greater reliance on e-commerce by the general public is part of the reason for Amazon’s excellent performance this year.
Perhaps more importantly, the tech giant has consistently outperformed the market as a whole for over 20 years. And what’s more, Amazon is just getting started. First, although e-commerce now appears to be ubiquitous, e-commerce sales made up only 14.3% of total sales in the third quarter of 2020, according to the U.S. Department of Commerce.
This industry has grown steadily in recent years, and it still has a lot of leeway to expand – and Amazon is well positioned to take advantage of it. The company benefits from at least two competitive advantages in this space, namely its brand and the network effect, which refers to the increase in the value of a product or service as it becomes available. use.
Amazon’s shopping platform offers several advantages to customers, including convenience, low prices, and prompt delivery, which helps attract many consumers. Merchants looking to reach a large customer base then turn to Amazon, and as the number of merchants on the platform grows, so does the number of customers, etc.
Second, Amazon is a leader in the cloud computing industry, thanks to Amazon Web Services (AWS). In fact, according to research firm Canalys, AWS had a 31% market share in the second quarter of 2020, the largest share of a single company (the closest competitor to Amazon had a market share 20%).
And given that this industry has grown rapidly and will likely continue on that trajectory, betting on Amazon to take advantage of this long-term trend is a safe bet. With a leadership position in two industries, a hand in many other businesses (video and music streaming, electronics such as tablets, etc.) and a management team that continues to look for ways to widen its moat. , Amazon is a solid stock to buy for young investors considering retirement.