Inflation. Rising interest rates. Supply chain snags. An uptick in Covid-19 cases. Recession fears. The list goes on.
With the U.S. economy facing a myriad of challenges, 2022 has been a difficult time to be an equity investor. However, history has shown that the market finds a way to work through the hard times and emerge to new highs.
So if history repeats, time is on our side. The catch is that it’ll likely take some time for the major indices to recoup their current 20% slide. According to Carlson School of Management professor Murray Frank, it could take three to four years for the S&P to return to where it was when the year began.
That means the road back may be a long and bumpy one. It also means this is a good time for investors to lean towards mega cap stocks, i.e., companies with market values of $200 billion and above.
Why? Because mega-cap stocks represent proven businesses that have withstood the test of time. They are leaders in their respective industries and have the financial strength to survive the down cycles.
Of the roughly 30 U.S. mega-cap stocks, some are looking more attractive than others. For however long the recovery takes, these three technology names are built to weather the storm and climb to new heights.
What are Microsoft’s Growth Drivers?
Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of the global digital transformation and will continue to be for some time. Grand View Research estimates that this market will grow 23.1% annually for the remainder of the decade. In addition to improving operational efficiency and reducing costs, the shift from traditional to digital infrastructure will bring new products and services to the world across many industries.
In turn, demand for the Microsoft Azure intelligent cloud platform should continue to grow. Azure, which has already expanded into 60 regions globally, is becoming a force to be reckoned with in a cloud computing market dominated by Amazon Web Services. Microsoft is investing heavily in the platform in anticipation of more and more enterprises moving their data and apps to the cloud.
At the same time, the Windows operating system and Office suite are showing no signs of giving up their stranglehold within the personal computing market. Most of the world’s PCs are equipped with both, and with so much legacy information residing there, a shift to the Apple or Google platform is generally cost-prohibitive.
Then there are Microsoft Teams which is slated to be a growth contributor for years to come as workforces continue to operate remotely or in hybrid setups. Toss in an expanding gaming division turbo-boosted by the takeover of Activision Blizzard and the reasons to own Microsoft for the long haul are plenty.
Does Broadcom Have Good Growth Prospects?
Broadcom Inc. (NASDAQ:AVGO) is a great long-term play on what is expected to be two of the biggest growth areas of technology—5G networking and the Internet of Things (IoT). The company supplies both markets with an expanding lineup of semiconductors and related technology that make these advancements possible.
While the global buildout of 5G connectivity is the more immediate growth opportunity, IoT may be Broadcom’s biggest and most exciting. The IoT industry is poised to make our daily lives interconnected like never before by allowing billions of devices—from smartphones to appliances to city lights—to communicate and make our world smarter, faster, and safer.
As that market develops, Broadcom will have multiple other growth engines at its disposal. Its networking and server storage solutions continue to find favor with enterprises that are looking to upgrade their IT capabilities. The acquisition of virtualization leader VMware also bodes well for long-term growth and stands to be another example of Broadcom’s ability to expand into new markets.
Is Adobe a Good Long-Term Stock Holding?
As one of the world’s biggest software companies with exposure to digital growth, Adobe Inc. (NASDAQ:ADBE) is a solid long-term bet. Its digital solutions are the driving force behind the media content created by large enterprises and small businesses worldwide.
The user-friendly Creative Cloud and Document Cloud suites help Adobe customers design and disseminate internet and video content across devices. And with entertainment and advertising rapidly gravitating towards digital, these and future Adobe innovations should be in high demand for years to come.
To gain a competitive edge in the digital world, companies are leaning more on areas like data analytics, ad targeting, and social relevance. In anticipation of this demand, the company has been building its stable of businesses that can address these end markets through acquisition and in-house development.
Adobe has found success over the years by constantly staying ahead of the curve and appears positioned to implement this playbook again successfully. Over the next few years, an explosion in digital video content is expected to be a huge opportunity as businesses seek to connect with younger generations. It is an opportunity that Adobe will likely capture to deliver above-industry growth and significant share price appreciation.