Investing in top, market-beating stocks is a great way to generate lucrative returns over the long run.
The two companies below have generally delivered superior market performances.
They still boast excellent prospects for the next two decades.
10 stocks we like better than Microsoft ›
The stock market has an incredibly impressive long-term track record of wealth creation, and we can reasonably expect it to continue delivering excellent returns over the next 20 years. Investors can capitalize on this by buying ETFs that track major indexes, or by investing in individual stocks that can perform as well, if not better, than broader equities.
Two excellent prospects over the next couple of decades are Microsoft(NASDAQ: MSFT) and Intuitive Surgical(NASDAQ: ISRG). Here’s why.
Everyone is familiar with the Microsoft brand, but many still associate it with the company’s legacy computer operating system (OS) business. There is a good reason for that. Microsoft remains the runaway leader in the operating software space in both personal and business computing, and this segment continues to make meaningful contributions to the company’s total revenue and earnings. However, Microsoft’s most significant growth driver these days is its cloud computing business, Microsoft Azure.
The tech leader is second only to Amazon in cloud computing — and in fact, it has been gaining ground on its longtime competitor.
Image source: Getty Images.
Amazon’s CEO, Andy Jassy, has said that more than 85% of IT spending still happens on premises (i.e., off the cloud), despite the benefits of the latter. That grants cloud leaders, including Microsoft, ample addressable market to exploit in the next two decades. Microsoft should remain a top player in the niche for at least two reasons. First, it benefits from a moat thanks to switching costs.
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Second, Microsoft generates a substantial amount of cash to invest in the business.
The company generated $69.4 billion in free cash flow over the trailing-12-month period. Further, Microsoft’s work in artificial intelligence (AI) is providing it with another boost. Riding this tailwind for the next two decades should lead to consistent earnings and market-beating performances for the stock, a continuation of what Microsoft has been doing for a very long time.
Lastly, Microsoft is an excellent dividend stock. True, yield seekers won’t find what they’re looking for here. The company’s forward yield is a paltry 0.7%, lower than the S&P 500‘s unimpressive average of 1.3%. However, with a rock-solid underlying business and a great track record — Microsoft has increased its payouts by almost 168% in the past decade — the company can offer plenty to income seekers as well as growth-oriented investors.
Intuitive Surgical has dominated the robotic-assisted surgery (RAS) market over the past two decades. It has had little competition to speak of, which, coupled with its constant innovations and improvements to its famous da Vinci surgical system, has led to strong financial results. However, other companies, particularly Medtronic, seem close to posing a much bigger direct threat to Intuitive Surgical’s leadership.
Here’s why investors shouldn’t worry about that. First, it will take years for even a medical device giant like Medtronic to earn clearance for its device, the Hugo system, across most of the areas in which the da Vinci system has received approval. Second, Intuitive Surgical also benefits from switching costs. Its devices aren’t cheap, and it takes time to train medical personnel on them.
After investing time, energy, effort, and money on a da Vinci system, healthcare facilities won’t want to switch to a competing one. Third, and perhaps most importantly, there is massive opportunity in the RAS market. That’s a key reason why more companies are entering the market. As Medtronic pointed out two years ago, less than 5% of eligible surgeries were performed robotically at that time.
It’s unlikely to have changed much since. That’s before we take into account the fact that over time, there will be a higher demand for these robotic procedures as the world’s population ages. Intuitive Surgical is better positioned than any other company to ride that wave in the next two decades, especially as it keeps innovating. It launched the fifth generation of its da Vinci system last year and has started integrating AI into some of its features.
Intuitive Surgical’s future looks promising despite mounting competition, which is why the company’s shares remain a worthwhile investment for the long term.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon and Intuitive Surgical. The Motley Fool has positions in and recommends Amazon, Intuitive Surgical, and Microsoft. The Motley Fool recommends Medtronic and recommends the following options: long January 2026 $395 calls on Microsoft, long January 2026 $75 calls on Medtronic, short January 2026 $405 calls on Microsoft, and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.
2 Unstoppable Growth Stocks to Hold for the Next 20 Years was originally published by The Motley Fool
