New to Investing? 3 Stocks to Buy in 2023 and Hold Forever

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There haven’t been many better times to begin investing over the past year than now. The Nasdaq Composite index has dropped nearly 26% over the past 12 months, and many individual stocks have fallen far more. In other words, you can invest in businesses at multi-year lows, making it an opportune time to start investing. 



New to Investing? 3 Stocks to Buy in 2023 and Hold Forever


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New to Investing? 3 Stocks to Buy in 2023 and Hold Forever

If you’re investing in individual stocks, where should you start? Much like a house, an investment portfolio for long-term investors requires a robust foundation, a durable structure, and a few decorations. Using this analogy, let’s find out what stocks can be phenomenal long-term purchases for beginning investors. 

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Step 1: Build the foundation

Apple (NASDAQ: AAPL) can help serve as the bedrock for incoming investors for a few reasons. The first is that it has a recognizable name anywhere in the world, making it easy to understand what the company does and how it makes money. The second reason is that Apple is one of the largest businesses in the world, meaning that it has proven itself to investors better than nearly any company out there. 

To become one of the best global businesses, it had to have one of the best income statements in the world. This holds true today as the company generated net income of $99.8 billion over the trailing 12 months. The company has also generated $111 billion in free cash flow over the same period, representing a margin of 28%. In other words, for every dollar Apple made in revenue over the past year, $0.28 was retained in cash flow.

Shares of Apple have plummeted 22% over the past year, bringing its valuation down to just 22 times earnings. New investors should build the foundation of their portfolio no matter what, but with Apple trading near its lowest valuation since the market crash of 2020, now looks like a better time than any lately.

Step 2: Add the structure

Once you construct the foundation of a house, you need an equally durable structure. Autodesk (NASDAQ: ADSK) is the equivalent of this stable frame. The company is the leading provider of computer-aided design (CAD) software for the architectural, engineering, and construction industries. 

Autodesk is the Coca-Cola of the design industry, except there’s no Pepsi to rival it. Some estimates pin Autodesk’s market share at 31% in the CAD space, with the second-place provider miles behind, controlling only 12%.

This unrivaled dominance has led to jaw-dropping profitability for Autodesk. The company expects to generate nearly $2 billion in free cash flow in the 2023 fiscal year — which ends Jan. 31, 2023.

CAD software is critical in the engineering, construction, architecture, and manufacturing worlds, and since Autodesk is the top dog, businesses will likely pay any price for its software. This could enable the company to raise prices over time, potentially resulting in far higher profitability three, five, and 10 years from now. I plan to own this stalwart for the long haul, and this stock could make a great addition to a new investor’s portfolio. 

Step 3: Furnish with some growth prospects

Once you have built a rock-solid foundation and an enduring structure, you can decorate your portfolio with growth stocks. Enter The Trade Desk (NASDAQ: TTD). This company is riskier than Autodesk or Apple, but it could provide far higher returns over the next decade. 

The Trade Desk helps advertisers buy available digital ad inventory across the open internet, and it is one of the leading platforms that does so. The digital advertising landscape is anticipated to explode over the next few years, putting The Trade Desk in an optimal spot to thrive. In 2026, eMarketer predicts that $876 billion will be spent on purchasing digital ad space worldwide. That’s 45% higher than the global spending in 2022.

The opportunity that The Trade Desk is capitalizing on is enormous, but what’s even more impressive is that it is gaining market share rapidly. Even during this harsh economic environment, The Trade Desk saw third-quarter revenue soar 31% compared with the year-ago quarter to $395 million — which is far faster than the sub-10% expected increase in the advertising industry this year.

Revenue is rising fast, but the company has balanced its rapid adoption with healthy cash generation. This advertising technology stock generated $485 million in free cash flow over the trailing 12 months, representing a margin of 33%. With high cash generation, impressive adoption, and a dominant position in a lucrative space, The Trade Desk might deserve a spot in a new investor’s portfolio.

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Jamie Louko has positions in Apple, Autodesk, and Trade Desk. The Motley Fool has positions in and recommends Apple, Autodesk, and Trade Desk. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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