This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Most investors are so curious about the stocks that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) owns that it's easy to forget it's not a mutual fund, but rather, a conglomerate of several privately owned businesses that also happens to hold a bunch of individual equities. 

We were reminded of this reality this past weekend, however, when Berkshire posted third-quarter results that very plainly lay out its operating profits for the quarter in question. It booked a total of $13.49 billion in operating income for the three-month stretch, up 34% from the year-earlier comparison of $10.09 billion. Nice!

It's a number that requires some additional insight though, just to keep things in the proper perspective. 

Berkshire Hathaway's Q3, under the microscope

Yes, the most-watched aspect of Berkshire Hathaway's is arguably the stock-picking that Buffett and his lieutenants do with the company's cash. There's far more to the company, however.

Indeed, the conglomerate's stock holdings are a relatively small part of the total business. Given the company's current market cap of just a little over $1.0 trillion, its privately owned entities like Fruit of the Loom, Duracell, insurer Geico, Shaw flooring, and Clayton Homes (just to name a few of its 68 wholly owned companies) are collectively worth more than Berkshire's current stock holdings.

And these businesses produce a fair amount of reliable, recurring cash flow. They're largely seen as cash cows, supporting Berkshire Hathaway's other ventures like its insurance operations and the purchase of publicly traded companies. These entities collectively contributed $13.5 billion to the company's bottom line during the third quarter of this year, on revenue of just under $95 billion.

Now here's the rest of the story.

1. The figure doesn't reflect any gains (or losses) on Berkshire's stock holdings

Just to be clear, Berkshire Hathway's operating earnings only reflect the operating profit of the company's wholly owned enterprises like the aforementioned Geico, or its railroad BNSF. Gains or losses -- realized or unrealized -- on its stock holdings don't add or subtract from the number.

The conglomerate still discloses this information, however. While it's a bit difficult to ferret out between all of its sales, purchases, and its payoffs for simply remaining patient, the quarterly report notes that Berkshire Hathaway experienced $9.2 billion in total investment gains for the three months ending in September, offsetting losses suffered earlier in the year to bring its year-to-date investment gains up to $3.3 billion.

2. The operating income number isn't quite as impressive as it sounds

The 34% year-over-year improvement in operating profits is enormous to be sure. Just remember that it's a comparison to a particularly disappointing third quarter of 2024, when operating earnings fell 7% year over year thanks to a couple of catastrophic losses that weren't offset by windfall gains.

In other words, the bar was set fairly low.

Also know that a little over $700 million of the $3.4 billion swing reflects currency-exchange gains and "after-tax interest, dividend and other investment income of Berkshire Hathaway (parent company) and certain other related entities" that didn't actually come from any of the conglomerate's privately owned companies, but is still booked as operating income.

3. But it's still pretty darn impressive

Beneficial accounting or not, there's no denying the number itself is still very impressive.

Largely fueled by manufacturing income along with a quick recovery of its insurance underwriting business following last year's setback, last quarter's $13.5 billion in operating income is the highest third-quarter operating income ever reported by the company, and the second-highest for any quarter. The highest was last year's fourth-quarter operating income of $14.5 billion despite the economic headwinds -- like inflation -- blowing at the time.

Image source: Berkshire Hathaway's Q3-2025 report.

Don't be surprised to see record-breaking operating income for the current quarter when those results are released in February of the coming year either. Although the economic malaise is palpable, most of Berkshire Hathaway's privately held businesses along with its publicly traded stock holdings tend to be quite resilient.

Just a reminder of what makes Berkshire such a reliable performer

Now take a step back and look at the bigger picture. Berkshire isn't a mutual fund or a conglomerate. It's both, offering the best attributes of both entities without also being limited by the less desirable qualities of either. Unlike mutual funds and most insurers, for instance, Berkshire Hathaway isn't required to keep the majority of its assets invested in a stock market that may or may not be worth being in at any particular time. The company's got more than $380 billion in cash just waiting on the sidelines, in fact -- a tacit warning from Buffett to all investors.

And yet, the benefit of Berkshire's business structure is even more nuanced than that.

Although you have to go all the way back to 2009's letter (published in early 2010) to Berkshire shareholders to hear Buffett's complete -- and brilliant -- explanation, as he put it then:

"Insurers receive premiums upfront and pay claims later... This collect-now, pay-later model leaves us holding large sums -- money we call 'float' -- that will eventually go to others. Meanwhile, we get to invest this float for Berkshire's benefit... If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money -- and, better yet, get paid for holding it."

This the overlooked beauty of Berkshire's unrestricted structure. The "float" can be used in a range of ways, from buying publicly traded stocks to wholly owned companies to partial stakes in privately held enterprises, all of which contribute to the bottom line one way or another. And Buffett has masterfully used this flexibility and subsequent cash flow to produce a long-term market-beating performance.

Incoming CEO Greg Abel is likely to do the same, by the way, having learned how to manage it since becoming part of the Berkshire family back in 1999 when the conglomerate acquired a controlling stake in MidAmerican Energy where Abel was serving as an executive.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It's been a not-so-great year for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders. Long-time CEO and in-house stock-picking wizard Warren Buffett announced in May that he'd be stepping down from the role at the end of this year. Berkshire's stock has struggled ever since, down 8% from then versus the S&P 500's (SNPINDEX: ^GSPC) 18% gain. There's arguably nothing worse for a ticker's value than uncertainty, and there's certainly plenty of that surrounding this name now.

Forward-thinking investors of course know short-term setbacks like these can be long-term buying opportunities. Is that the case here, while you can still step into Berkshire's B shares for less than $500 apiece? (The A shares are currently priced at nearly $750,000 each, making them out of reach for most investors.) If you can take a step back and look at the bigger picture, yes, it's worth capitalizing on this current weakness.

A performance pedigree to be proud of

There's no denying Warren Buffett and Berkshire Hathaway are nearly synonymous. He's the chief reason Berkshire's become the massive success that it is today since he took the helm of the then-textile company back in 1970. From its early 1980 initial public offering (IPO) at a price of $290 per share, the stock's gained more than 250,000%, pumping the conglomerate's market cap up to over $1 trillion. That makes it the world's tenth-biggest company.

Perhaps more relevant to interested investors, this ticker's average annual gain of more than 15%, easily trounces the S&P 500's long-term average year gain. That's what most people fear will be going away in Buffett's absence.

And maybe it will go away.

Just because something is possible, however, doesn't make it likely. In fact, it's actually unlikely we'll start seeing a subpar performance from Berkshire shares once Buffett's no longer in charge. Here's why.

Berkshire's strength isn't just Buffett's brilliance

Having celebrity CEOs like Buffett can be a double-edged sword. Bigger-than-life personas often correlate with high-performing stocks. High-profile leaders, however, can't remain in charge forever. Once they're gone, it's not unusual for their companies to lose some of their magic. Apple's Steve Jobs and Amazon's Jeff Bezos come to mind. The organizations each formerly led are still solid investments, but there's no denying things aren't quite the same now as they were under their leadership.

These aren't quite apples-to-apples comparisons with Berkshire Hathaway though, for a couple reasons.

One of those reasons is simply how Warren Buffett has been as much of a teacher as he's been a chief executive, leaving behind 60 years' worth of instructional materials to absorb. His wisdom applies to everyone ranging from Berkshire's executives to individuals who simply want to build a bigger nest egg or achieve more success in life. His advice extends beyond the world of business too, reminding people that reputations are something that should be well protected. He also encourages investing in yourself as much as investing in the stock market.

The point is, there will be no ambiguity about how Berkshire's management team should steer the company as well as conduct themselves.

And the second reason Berkshire Hathaway's performance isn't likely to be all the different after Buffett steps down? It's the structure of the organization itself.

It's generally understood -- but underappreciated -- that there's nothing else quite like Berkshire Hathaway out there. It's a mutual fund in the sense that it owns a sizable portfolio of publicly traded stocks. Unlike most funds, however, it's not limited to a particular kind of stock, nor is it required to keep a minimum amount of money invested in the market at all times. It's also like a private equity firm in that it wholly owns a range of cash-generating businesses like insurer Geico, Duracell batteries, Dairy Queen, railroad BNSF, and Fruit of the Loom, just to name a few. But it's not looking to grow and then sell any of those businesses; as is the case with its stocks, Berkshire's favorite holding period with its privately owned companies is forever. And without the prospect of short-term shareholder pushback, the conglomerate can do what's best for these businesses in the long run even if it means short-term turbulence.

That being said, it's worth noting that once they're vetted, Buffett mostly prefers to leave the managers of Berkshire's businesses alone...which usually ends up being the smartest move. Buffett knows he doesn't know everything about every single one of the conglomerate's business lines.

Perhaps more than anything though, Berkshire's got the option of doing nothing for long stretches of time. Although it's recently earmarked just under $10 billion to wholly acquire Occidental Petroleum's chemical arm OxyChem -- Berkshire's biggest purchase in the past three years -- that's only a tiny fraction of Berkshire's current cash hoard of more than $300 billion that it's been sitting on for over a year now. Most companies would be forced to do something with that money, even if just giving a bunch of it back to shareholders in the form of a special dividend. Not Berkshire Hathaway, though. Investors seem to understand that the conglomerate is just waiting for the right opportunity to come along. And they're OK with that.

Sooner is better than later

So, yes -- most investors arguably should buy into Berkshire Hathaway's B shares while they can still be bought for less than $500 apiece. Just don't tarry if you're going to be one of those investors. The market now seems to be seeing everything discussed above, pushing shares up again following their pullback from May's peak to August's multi-month low. The Buffett news never really merited that sort of response in the first place, and now that more and more investors are realizing it, the tide's turning bullish again. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy Berkshire Hathaway while it's below $500? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• How to build massive wealth with ASX shares

James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Occidental Petroleum. The Motley Fool Australia has recommended Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• The high-profile technology company's stock is priced nearly twice as high as the broad market.
• This rich valuation, however, is supported by the company's results and growth trajectory.
• While arguably worth their steep price, expensive stocks also tend to be more volatile than average.

Given that shares are priced at more than 40 times this year's expected earnings of just under $4.40 per share, buying into AI technology giant Nvidia (NASDAQ: NVDA) may feel a little intimidating. For perspective, the S&P 500 currently trades at less than 25 times its trailing earnings and just under 24 times its forward-looking profits.

Still, there's a case to be made for buying Nvidia stock despite its steep valuation. One simple chart will explain why.

One amazing chart

As the image below illustrates, projected revenue growth of 53% for Nvidia's fiscal year 2026, currently underway, is expected to lead to a per-share profit of nearly $4.40, up 46% from last year's $2.99 and en route to next year's anticipated earnings of $6.04 per share. That's simply enormous growth that few -- if any -- other companies are matching.

Data source: StockAnalysis.com. Chart by author.

This incredible growth isn't apt to end in just a couple of years, though. The expanding demand for artificial intelligence (AI) technology is likely to last far longer. An outlook from Global Market Insights suggests the worldwide AI hardware market is set to grow at an average annualized pace of 18% all the way through 2034.

Not actually all that unreasonable

Generally speaking, what's considered a reasonable price-to-earnings ratio is the same as a company's rate of earnings growth. For instance, Nvidia's per-share profits are projected to grow by an average of a little more than 40% this year and next, which is in line with Nvidia's fiscal 2026 P/E ratio of just above 40.

In other words, given the company's current rate of earnings growth, the stock's valuation actually is rather reasonable.

Still, even if they're worth it in the long run, Nvidia shares' frothy valuation makes them vulnerable to extreme volatility. Buckle up if you're buying here following the slight post-earnings setback. 

 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Think Nvidia stock is expensive? This chart might change your mind. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Like all funds and portfolios, Berkshire Hathaway has underperformed from time to time.

• Warren Buffett's quality-oriented approach to buying and holding stocks has paid off of late.

Artificial-intelligence-related tech stocks like Nvidia and Palantir have dominated headlines and led the marketwide bullish charge over the past five years. But, not every market-beating stock has been an AI technology name -- or even a growth name -- during this stretch. Warren Buffett and his team have proven their mettle once again, leading value-oriented Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) to a market-beating performance of its own since the middle of 2020.

Back in fighting form

If you had you invested $1,000 in Berkshire Hathaway shares in early August of 2020, as I write this on Aug. 10, you'd be sitting on $2,221. That's an annualized growth rate of 17.3%, outpacing the S&P 500 's (SNPINDEX: ^GSPC) average annual growth pace of 13.8%, or 15.5% when factoring in reinvested dividends.

BRK.A data by YCharts

Making this five-year run even more impressive is that Berkshire has performed relatively poorly since May. That's not only when Buffett announced his end-of-year retirement, but also when investors began shedding their defensive value stocks that Buffett's conglomerate holds so they could plow back into growth-oriented technology names. It's still well ahead despite the headwind.

There's also some vindication in this market-beating performance.

You may recall that Berkshire's persistent underperformance for several years prior to 2021's rekindled leadership was prompting criticisms and questions of his old-school stock-picking approach. The past three years have reminded everyone that patience pays off when you prioritize owning quality businesses rather than chasing growth.

Buying and holding quality is always a sound strategy

Don't misunderstand. Just as it did for several years prior to 2021, there will come another time when Berkshire Hathaway shares lag the market. That's just the nature of Warren Buffett's value-minded style -- it tends to underperform when investors are captivated by new, game-changing industries.

Just remember the past five years the next time that happens, and the past three years in particular. A truly great stock is worth buying and holding even through the rough patches.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post If you'd invested $1,000 in Berkshire Hathaway stock 5 years ago, here's how much you'd have today appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• How to build massive wealth with ASX shares

James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway, Nvidia, and Palantir Technologies. The Motley Fool Australia has recommended Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Bad news for Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Consumer technology titan Apple (NASDAQ: AAPL) may soon be adding artificial intelligence (AI)-powered web-search tools like OpenAI and Perplexity to its mix of search platforms offered to users of Apple's Safari web browser. Given the threat this poses to Google's dominance of the global search business -- which accounts for more than half the company's top line -- shares of parent company Alphabet fell 8% on Wednesday after this possibility was revealed.

The pullback makes superficial sense. What if, however, the market overreacted by jumping to an unnecessarily bearish conclusion?

That's arguably what happened, making already beaten-down Alphabet shares even more attractive to anyone considering taking on a new position in this powerhouse name.

Don't read too much into it, or worry too much about it

Take the possibility with a big grain of salt. It wasn't announced in a press release or during an official corporate presentation. Rather, it came out during a trial that doesn't even directly involve Apple. Merely serving as a witness for the antitrust case the U.S. Department of Justice is making against Alphabet, Apple's services chief Eddy Cue commented on Wednesday that he believes artificial intelligence-powered web search tools like OpenAI or Perplexity will eventually be added to the list of search engines made available to users of Apple's proprietary web browser, Safari. No likely time frames were given, nor were any guarantees made. Just a broad brushstroke. The bears took the ball and ran with it anyway, without any perspective on just how loose Cue's comment was.

Just for the sake of argument, however, let's say Apple's willingness to introduce these alternative search tools or even remove Google as Safari's default search engine is imminent. Is it actually a serious problem for Alphabet?

Probably not, for a couple of reasons.

One of those reasons is Google's existing dominance, as well as Safari's relatively limited use as a means of browsing the web. According to StatCounter, Google consistently handles 90% of the world's web queries. Some of those are made through Safari, where Google is currently the default search engine option. Many of them aren't, though. Safari's browser market share is still a fairly scant 17%, which is a distant second to Google Chrome's browser market share of 66%.

Could that 17% still make a measurable dent in Google's search business? Maybe, but it's not likely. See, according to online advertising research outfit Chitika, 97% of iPhone owners (by far the majority of Apple's iOS users) still use Google to search the internet, with roughly half of those searches being made with the Safari browser.

And this data underscores the other reason Alphabet shareholders may not want to sweat Apple's vague plans to offer other web-search options in the future. That's not Google's dominance of the search arena, but its overwhelming integration into so many people's use of the internet itself.

Google's Gmail alone boasts over 2.5 billion worldwide users, for instance, while Google Docs has eclipsed Microsoft's Office within the productivity software space. TV ratings outfit Nielsen says Google's YouTube is the United States' single-most-visited streaming video platform as well, facilitating more viewing time than industry powerhouse Netflix. And globally, more than 1 billion hours' worth of YouTube videos are accessed on television sets alone every single day.

The point is, Google is an inescapably important part of how and why many people connect to the World Wide Web, including for iPhone and iOS users. It's going to take a lot to sever Safari users' usage of Google's other services from their usage of Google's search engine. That's particularly true given how Google's AI-powered search is already in place and is being well received; Alphabet reports that during the first quarter of this year alone, its AI Overviews averaged on the order of 1.5 billion monthly users.

Not nearly enough threat to avoid Alphabet stock

Never say never, of course. It's possible a handful of Safari users could give alternative search tools like OpenAI, Perplexity, and Anthropic a try and end up sticking with them. It's also likely that one of the outcomes of the aforementioned trial could be an end to Google's payments to technology companies in exchange for making its search engine the default option for their web browsers.

This prospect isn't nearly as catastrophic as some are fearing it may be, though.

Again, Safari's reach is modest, and even when and where Safari is used, it's largely being used to facilitate a Google-based search. That's a habit that isn't apt to be kicked anytime soon, if ever. Indeed, the fact that we don't even think about how the word Google has become as much of a verb as it is a name ("just Google it") -- and for some people, almost synonymous with the internet itself -- underscores just how much this all-encompassing tech giant has ingrained itself into so many people's daily lives. That's the kind of staying power that isn't simply disrupted by a new web search option, even if that alternative is powered by AI.

Bottom line? Alphabet's search business might be dented by the advent of other AI-powered search options featured by Safari. It won't be major or permanent damage, though. If you liked Alphabet before Wednesday, there's still just as much to like now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Here's why I'm not too worried for Alphabet despite Apple's potential new AI-powered Safari search appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley has positions in Alphabet. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Microsoft, and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Apple, Microsoft, and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It's been a tough past few weeks for Amazon (NASDAQ: AMZN) shareholders. The stock's down more than 30% from its early February peak and is still testing the waters of new multi-month lows. Blame worries of tariff-prompted economic weakness, which have been a drag on the entire market. High-profile Amazon was just one of the bears' top targets.

Just remember that investors' collective assumptions aren't always correct. Indeed, the market might be completely misjudging Amazon's future here.

With that as the backdrop, here are three specific reasons interested investors should plow into Amazon stock while it's on sale.

1. Its biggest and best profit center is resilient

You probably think of Amazon as an e-commerce company that also manages a cloud computing venture. And your assessment is basically right. Not only are this organization's roots in the online shopping arena, but about 80% of its top line stems from the sale of physical goods and related services, such as Prime. Only about a fifth of its revenue is generated by its cloud computing arm, Amazon Web Services, or AWS.

In terms of profits, though, these proportions are roughly reversed. This company's e-commerce arm only accounts for about 40% of its operating income, while AWS makes up nearly 60% of Amazon's bottom line.

Data source: Amazon Inc. Chart by author. Figures are in billions.

And this matters.

See, while newly enacted tariffs might strain the consumer demand behind Amazon's e-commerce business, cloud computing isn't nearly as vulnerable. Institutions need their cloud solutions, and increasingly so. Industry research outfit Canalys believes worldwide spending on cloud infrastructure will grow by 19% this year, a prediction made after the tariff wars began. Already being the cloud market's leader, Amazon is positioned to win at least its fair share of this growth, maintaining the company's healthy overall profit growth.

2. Tariffs won't be devastating and might even help

But tariffs? It would be naïve to ignore their potential impact on Amazon's e-commerce business. They won't necessarily be devastating, though. Indeed, in some ways, the new tariff laws might even help.

First things first. Sure, Amazon has something to lose here. While plenty of nations are coming to the negotiating table to find tariff rates that work for the parties on both sides of the table, the tariff standoff between China and the U.S. remains unresolved. It matters simply because 25% of Amazon's own private-label merchandise is sourced from China, according to research from Morgan Stanley. Barring any changes to the status quo, the cost of those goods is going up sooner rather than later. Presumably, Amazon's third-party sellers are similarly reliant on Chinese-made goods that will also soon cost considerably more.

It's short-sighted, however, to think that Amazon is stuck with China for its own in-house-branded merchandise. Although finding alternative manufacturers may require a bit of work here, plenty of countries other than China are capitalizing on the opportunity to fulfill this diverted demand.

There's even a double-barreled case to be made that new tariff rules could help Amazon.

The first of these prospective upsides is the potential uptick in demand for lower-cost goods. If a recession does end up forcing consumers here and abroad to pinch their pennies even tighter and shop around for the lowest prices on consumer goods, Amazon can win plenty of those battles.

As for the other upside, if you believe that Shein and PDD's (NASDAQ: PDD) Temu are at least partially disrupting Amazon's tight hold of the U.S. e-commerce market, also know this: President Donald Trump's new tariff rules essentially nullify the tariff exemption for packages valued at less than $800 entering the U.S. This, of course, is a major piece of Temu's and Shein's business.

3. Analysts are (extremely) on board

Finally, while the stock's recent weakness makes enough superficial sense (investors panicked when the threat of tariffs became reality), it's worth noting that the analyst community isn't nearly as worried. At least not yet. The vast majority still rate Amazon stock not just as a buy but as a strong buy. And their average price target of $254.14 is a hefty 52% above this stock's current price. That's not a bad way to start out a new trade.

So, why didn't the professionals flinch along with most investors? Well, to be fair, some did. Deutsche Bank's Lee Horowitz dramatically reduced his price target from $287 to $206 per share, for instance, explaining that the most likely scenario ahead could drag this year's per-share profit down to the tune of 15%.

Horowitz's concerns are the exception to most of the rhetoric and analysis, though. As Citizens JMP analyst Nicholas Jones notes, "Its [Amazon's] exposure to consumer staples, and focus on pricing and convenience, should help mitigate discretionary spending headwinds on its e-commerce business." He adds, "We believe the size and strength of AWS and its advertising business within their respective verticals will likely lead to continued share gains, regardless of the economic environment," echoing sentiment from several other analysts.

This bullishness hasn't helped to avert a sell-off; pessimistic individuals as well as institutional investors are obviously calling the shots right now. The analyst community is arguably more level-headed, however, seeing the bigger picture more clearly than the crowd that feels compelled to play defense in this environment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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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. James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There's no denying it. Apple (NASDAQ: AAPL) was not only late to the artificial intelligence party, but it has struggled to catch up.

While the world was admittedly interested in Apple Intelligence's features unveiled in June of last year, demand for this tech -- as well as hardware that can handle it -- has been ho-hum. In fact, iPhone revenue fell during the quarter ending in December, while technology market research outfit IDC reports that unit sales of the iPhone slumped 4.1% year over year for the quarter in question. The company's AI-powered virtual assistant Siri has since been transferred to a new chief as well, after senior director Robby Walker called Apple's artificial intelligence results so far "ugly and embarrassing."

And yes, Apple shares have underperformed this year largely because of its disappointing artificial intelligence efforts.

Then again, perhaps the market was always expecting too much too soon. As UBS analyst David Vogt recently penned, investors shouldn't "expect a significant improvement to Apple Intelligence over the next 12 months even with the upcoming [iPhone] 17 series in the fall of 2025," echoing timeline concerns voiced by Jefferies analyst Edison Lee and Wedbush's Dan Ives.

All three analysts, however, see AI-driven growth for Apple on the horizon once the company makes Apple Intelligence more marketable. In this vein, investment research house Imarc predicts the intelligent virtual assistant market is set to grow at an annualized pace of 26% through 2033. The market's likely to see this growth coming sooner rather than later, however, and simply sensing what awaits could be enough to (re)light a fire under this stock.

Analysts see it coming anyway. The analyst community's current 12-month consensus price target for Apple stands at $253.71 per share, up 15% from the stock's present price. Most of these analysts also rate Apple stock as at least a buy at this time.

The only missing ingredient is a catalyst convincing investors that Apple's AI efforts are back on track. The only problem? Once such a catalyst materializes, it may then be too late to step into a stake.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Jefferies Financial Group. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You probably already know Amazon (NASDAQ: AMZN) has been one of the modern era's most rewarding investments. And rightfully so.

Back in the mid-1990s, founder Jeff Bezos spotted an underappreciated opportunity in the then-budding worldwide web, and acted on it. The rest, as they say, is history. The company's annual revenue has grown from less than $16 million back in 1996 to $638 billion last year.

But exactly how rewarding has its stock been? Only a relatable example can put things in their proper perspective. To this end, a $10,000 investment in Amazon stock back in early 2000 would be worth $627,000 at the time of this writing. That's nearly a 6,300% return on the position over the course of the 25 years in question.

Amazon offers a unique opportunity

There's an important footnote to add to this big gain, however. That is, while Amazon became an enormous winner in a relatively short period of time, this isn't the norm. It's an exception to the norm.

Even the strongest of young start-ups in the right place at the right time typically don't perform this well. Some of the technology companies that were touted just as well as Amazon was back in the 1990s, in fact, are no longer around today.

The key to Amazon's initial survival and eventual thriving is also worth highlighting. That's the fact that the company was plugged directly into the growth of what ended up serving as the basis of a sociocultural revolution: the internet. Although the worldwide web obviously can't be invented again, investors on the hunt for the "next Amazon" may want to keep their eyes peeled for something that's apt to be just as transformative (not unlike artificial intelligence, or AI).

Of course, as was the case with Amazon back in the late 1990s and early 2000s, the world's next game-changing industry won't be obvious in its infancy. You'll need to take something of a leap of faith if you're hoping to score a similar win. That's easier said than done.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post If you'd invested $10,000 in Amazon stock 25 years ago, here's how much you'd have today appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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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. James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There's no denying that Apple (NASDAQ: AAPL) is such a commonly suggested stock pick that it's almost become cliché. Almost. The fact is, whether it's a predictable pick or not, the consumer tech giant deserves a place in most people's portfolios for a range of reasons.

Three of these reasons stand out among all the rest right now.

1. Its AI entry is still miles away from reaching its full stride

Although the unveiling of Apple Intelligence in June of last year was met with great fanfare, interest in this artificial intelligence (AI) technology has been underwhelming.

Specifically, despite the tech launching in October to work with the iPhone 16 that became available just a month earlier, the company didn't see the expected swell of smartphone demand during the final calendar quarter of 2024. IDC says iPhone unit shipments actually fell 4% in the fourth quarter of last year.

It's far too soon to call Apple Intelligence a bust as a growth driver though. Consumers may simply need a little more time to learn about the features and benefits of Apple's generative AI tech.

And it may take even more time for consumers and investors alike to fully appreciate how Apple's artificial intelligence platform is (or eventually will be) a vertically integrated ecosystem capable of offering complete privacy to its users. That just means all the required computing is handled by the properly equipped device itself, or by Apple's own private artificial intelligence servers.

This is in contrast with apps like ChatGPT or Google's Gemini, which currently punt all of this work to a cloud that may or may not be secure. Apple is even working with Broadcom to develop its own processing chips capable of powering AI servers, further privatising its in-house AI by taking third-party chips out of the equation.

Whatever Apple's future generative AI offering ends up looking like, it stands to be a game changer. Precedence Research suggests the global generative AI industry is set to grow at an annualised pace of 44% through 2034.

2. It's (finally) thinking outside the box to drive growth

While Apple is positioning itself to offer a truly private AI experience, it's still being pragmatic about it. It will only make such tech available where it's allowed and feasible to do so. In other somewhat closed markets that may be wary of being left out of the loop, so to speak, it's willing to entertain alternative arrangements.

Case in point: On Thursday of last week, China's e-commerce giant Alibaba announced will be the name providing generative AI support to iPhone owners in this enormous market. In the meantime Apple will also continue to work with China's top search engine, Baidu, on the artificial intelligence front. These are partnerships that were at least a little less likely for a somewhat isolationist Apple just a few years back.

Were it just these two seemingly unlikely agreements, it might be dismissible as the inevitable and only way to reignite iPhone demand in China. This isn't the only new growth strategy Apple's employing though. On Tuesday of last week, the company also announced its Apple TV app is now available to Android users, presenting this crowd with a chance to enjoy programming that was once exclusively available to Apple TV+ subscribers.

It's probably not a game changer in and of itself. It does point to creative and open-minded thinking of ways to expands its reach, however. Don't be surprised to see more growth-driving initiatives in the foreseeable future, particularly ones that grow its high-margin services (apps and digital content) arm.

3. It's a ridiculously profitable, value-creating company

Finally, the best reason to buy the stock like there's no tomorrow is the same reason to have owned Apple stock for the better part of the past couple of decades. That's its sheer dominant size and persistent profitability.

Sure, say what you want about Apple's slowing growth before the COVID-19 pandemic, and outright stagnation since its sales peak in 2022. Net income hasn't really grown any since then either. Blame the iPhone, mostly, which still accounts for about half of Apple's total revenue.

AAPL Revenue (TTM) data by YCharts

Just don't lose perspective. Apple remains the world's biggest publicly traded outfit for a reason. The bulk of that reason is the fact that it also remains the world's most profitable company, reporting net income of nearly $94 billion for its fiscal year ended in September. Between that and its $140 billion worth of cash and near-liquid assets on its balance sheet, it can fund a variety of competitive efforts against rivals that would easily qualify as an unfair fight.

In the meantime the company continues to fund a long-standing streak of stock buybacks, reducing this count from more than 26 billion issued and outstanding shares as of 2012 to a 25-year low of just over 15 billion shares now.

If nothing else, this company's just got too much financial muscle and momentum for anything to stand in its way. It's just a matter of time before it finds the right growth lever to pull, if it hasn't pulled it yet.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, and Baidu. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Alphabet and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

January 2025 was a bullish month for many Nasdaq-listed names. But that wasn't the case for all of them.

While the Nasdaq-100 index advanced 2.2% in January, a handful of its constituents (including a market favourite) lost quite a bit of ground. Here they are, from least bad to worst:

• Monster Beverage (NASDAQ: MNST): Down 7.3%
• Comcast (NASDAQ: CMCSA): Down 10.3%
• Nvidia (NASDAQ: NVDA): Down 10.6%
• Electronic Arts (NASDAQ: EA): Down 16%
• On Semiconductor (NASDAQ: ON): Down 17%

Not every one of these stumbles has a specific catalyst. Monster Beverage, for example, mostly continued to peel back from an overheated rally that peaked in November 2024.

Other setbacks have clear causes, though. For instance, Nvidia shares were upended by the recent introduction of DeepSeek's AI platform, which reportedly provides a range of artificial intelligence solutions without the need for the number of processors typically required for comparable results. If this new approach to AI becomes the norm, Nvidia's AI processor business may not have as bright a future as once anticipated.

Comcast's stock fell in response to a drop in last quarter's broadband customers, while Electronic Arts shares crashed after it lowered its full-year revenue forecast thanks to tepid demand for its latest soccer video game title.

As for On Semiconductor -- last month's biggest Nasdaq-100 loser -- shares were already lagging headed into the new year, but this sell-off accelerated after a Truist analyst downgraded the stock from a buy to a hold on concerns of weak demand.

Just don't jump to sweeping conclusions

Now what? Obviously, market-defying sell-offs are alarming. They are also warning signs of bigger potential problems ahead. Don't take these warnings lightly.

Not all extreme pullbacks are red flags, however. Sometimes they're opportunities to step into compelling stocks at a discount. Indeed, whereas Comcast is currently surrounded by too many questions to merit owning at this time, every other stock on this list at least has a shot at dishing out longer-term upside from their present prices.

Just bear in mind that there may still be some lingering bearish volatility left to wring out.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Monster Beverage, Nvidia, and Truist Financial. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Comcast, Electronic Arts, and ON Semiconductor. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In theory, a company's size shouldn't matter. A stock's potential return on any amount of capital invested in it should be investors' chief concern.

In reality, however, the market's biggest companies are also often the market's most rewarding tickers. That's how they became the biggest names, after all. That's certainly been the case with Nvidia (NASDAQ: NVDA). It was already a $360 billion company at the end of 2022, but two years of triple-digit gains have turned it into a $3.4 trillion titan.

The question is, can the stock repeat that feat in 2025?

How Nvidia got here in the first place

It's not the stock market's biggest company right now -- that honour belongs to Apple once again, which is worth $3.7 trillion as of this writing. But Nvidia currently occupies second-place, according to The Motley Fool's in-house research, and Microsoft is in third with a market cap of about $3.2 trillion.

Regardless, a company's size isn't nearly as important to an investor as its stock's potential upside is. So, where does Nvidia stand in that regard?

The foundation of its recent outperformance and outlook is artificial intelligence (AI). Although the technology giant makes graphics cards for gaming, illustrative and design work, and automotive and robotic applications, its biggest business right now is AI data centres. This segment now consistently accounts for more than 80% of the company's top line, and data centre sales in the most recent quarter (fiscal 2025 Q3) grew by more than 100% year over year to $30.8 billion.

That's a tough act to follow, and mathematically speaking, such triple-digit growth is unlikely to continue for much longer. Although the analyst community is calling for top-line growth of 112% for Nvidia's fiscal 2025, revenue is expected to increase 52% next year.

Data source: StockAnalysis.com. Chart by author.

That's still rapid growth to be sure, bolstered by earnings growth that's apt to be just as brisk. With the stock already priced at more than 50 times its trailing per-share profits and more than 30 times estimates for fiscal 2026, however, would-be buyers of the stock may be balking at the frothy valuation.

The thing is, those hesitant investors may be looking right past a couple of important -- and bullish -- realities.

Don't ignore either of these two things

First, the artificial intelligence revolution is still nowhere near its end. It's arguably still in its earliest stages. For hardware providers like Nvidia, market research outfit Mordor Intelligence puts the industry's potential growth in perspective, calling for average annualised AI hardware revenue growth of 26% through 2030, jibing with expectations from Precedence Research. Market.Us puts the figure closer to 32% through 2033.

Given that Nvidia supplies the vast majority of the processors used by AI data centre owners and operators, it stands to gain the most from this continued market growth.

Competition is coming to be sure. Apple is working with Arm Holdings to develop a chip that's just as AI-capable as any of Nvidia's tech, for instance. But for every poke a competitor takes at Nvidia's dominance of the artificial intelligence hardware market, however, the company seems to counter with something even better. As an example, Nvidia's recently unveiled NIM microservices allow seemingly ordinary desktop computers to function as personal supercomputers capable of handling even the toughest inference or generative AI workloads.

And the second critical reality investors must consider? As richly as Nvidia stock may be priced at this time, that's nothing unusual for this ticker. Nvidia's trailing 12-month price-to-earnings (P/E) ratio has averaged above 80 in the past five years.

The analyst community isn't deterred either. The vast majority of analysts still consider Nvidia shares a strong buy despite its steep valuation, giving the stock a consensus price target of $174.60, or 25% above its present price.

Future growth remains the key

None of this inherently means Nvidia will be the market's top-performing stock in 2025, even among the so-called "Magnificent Seven" companies that already boast massive market caps.

But by supplying the foundation for artificial intelligence technology that's still in huge demand -- and that's apt to remain in heavy demand for years to come -- Nvidia is well positioned to remain one of the market's biggest companies.

Even so, that's not the chief reason you'd want to own a piece of the company. The bull case here remains rooted in Nvidia's strong top- and bottom-line growth prospects.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia became one of the largest companies by market cap in 2024. Will its reign continue in 2025? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Anyone reading this probably already knows that electric-vehicle (EV) maker Tesla (NASDAQ: TSLA) recently reported solid third-quarter results. Profits were better than expected, and the company indicated its production would continue growing. Investors celebrated by sending the stock 22% higher on Thursday.

The numbers alone, however, don't tell the whole story. An image is required to fully appreciate the fact that Tesla may have just turned the profit corner.

Even better than it seems

For the three months ended in September, the electric vehicle company turned $25.2 billion of revenue into earnings that worked out to $0.72 per share. Although the top line fell short of estimates, it was still up 8% from a year ago. Meanwhile, the bottom line topped estimates of about $0.60 per share, improving slightly on earnings reported in Q3 of 2023. Meanwhile, although total deliveries of 462,890 vehicles were just a tad shy of the expected 463,897, the figure was still markedly better than last year's third-quarter count of 435,059.

These numbers alone, however, lack important context for investors.

In this case, the missing context is the evolution of Tesla's results since early 2022 — when production and deliveries of its lower-cost Model 3 cars began ramping up in earnest — followed by substantial price cuts introduced early last year. You may recall that both have increasingly pinched the company's bottom line, as production costs haven't fallen as much as its cars' non-negotiable sticker prices have.

That may no longer be the case, though.

As the graphic below illustrates, thanks to a significant and deliberate reduction in production costs to an average of $34,544 per car in Q3, Tesla's per-vehicle gross profit improved from $8,269 in the second quarter to last quarter's $8,698. It's the first sequential growth of this measure since the first quarter of 2022. It's also the highest since Q2 of 2023, when Tesla was in the midst of reconfiguring its production floors. Making the feat even more significant is the fact that the reduction in production costs was bigger than Tesla's price cuts for its cars.

There's one detail worth mentioning about the image above. That is, although neither significant nor significantly different during Q3, the per-vehicle revenue in question includes regulatory credits and leasing revenue.

Regardless, Tesla's automobile business does appear to be turning an important profitability corner. In light of this new trajectory, investors can entertain hopes for income growth as it seeks to begin production of an even lower-priced car. And, Tesla itself can justify making more and bigger investments in greater production capacity.

The turning point investors have been waiting for

And that's the big takeaway here. Although last year was an expensive one without a great deal of net payoff, we can now see the sacrifice was worth it. Output is growing again. Only this time, profits are growing with it.

One good quarter isn't a trend, of course. But all trends do start with that first good quarter.

More to the point, this is great news for current and prospective shareholders. Given that Chief Executive Officer Musk expects Tesla's unit sales to grow between 20% and 30% next year — growth that will obviously require more production — the fact that profitability is scaling up along with output is exactly what patient shareholders have been waiting to see.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Did Tesla just turn the profit corner? appeared first on The Motley Fool Australia.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If exchange-traded funds (ETFs) like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) or the SPDR Dow Jones Industrial Average ETF Trust (NYSEMKT: DIA) just aren't your thing as an investor, you're not alone. Putting your money into individual stocks is considerably more exciting, as each one offers you the chance to plug into a particular company's growth story. Conversely, ETFs are just big baskets of equities bundled into logical groupings, and their results can be weighed down by their laggards as much as they're lifted by their leaders.  

Don't assume, though, that this lack of excitement means they're destined to be subpar performers. Exchange-traded funds generally perform just as well as most portfolios of hand-picked stocks do — if not better — and are just as capable of turning your consistent stream of moderate investments into a million-dollar retirement stash.  

In fact, ETFs may actually be better suited for the task of retirement investing than individual stocks are.

The broad market is bullish enough

Most investors inherently understand that ETFs such as the aforementioned SPDR S&P 500 ETF Trust and the SPDR Dow Jones Industrial Average ETF Trust reflect the performances of the S&P 500 (SNPINDEX: ^GSPC) and Dow Jones Industrial Average (DJINDICES: ^DJI), respectively. For better or worse, they're meant to match the performance of the broad market rather than beat it.

What you may not fully appreciate, however, is just how well the broad market performs over time. Even after this year's bear market sell-off, the S&P 500 is 50% higher than where it was five years ago, and is up by more than 180% over the past 10 years. Over the past couple of decades, it's up more than 300%.

Those results are in line with the market's long-term averages. When factoring in reinvested dividends, the S&P 500's average compound annual return for the past 100 years stands just above 10%. Some years are better, and some are worse. Some years are even losers. Given enough time, though, a well-diversified portfolio of stocks can reasonably be expected to gain on the order of 10% per year.            

In practical terms, this means that if you make moderate-sized annual investments of $5,000 into an S&P 500 fund within a tax-deferred account, your balance should be about $1 million after 31 years. While it could be tougher in some years than others to scrape together that $5,000, even for those living on average incomes, becoming a millionaire by the time you retire is certainly possible.

This leads to an obvious question: If booking "market average" results can do that, wouldn't chasing after the market's best "story stocks" offer you an even easier shot at building an even bigger fortune? Maybe. But, the data says don't count on it.

Stock picking is just plain hard to do well

For the record, the majority of professional stock pickers do not consistently beat the market. Most of their actively managed portfolios produce returns below those of benchmarks like the S&P 500, in fact.

Standard & Poor's keeps tabs on the performance of each and every mutual fund available to U.S. investors, and publishes updated information on their results every few months. Like every other update thus far, the one posted in September — for results through June — indicates that most large-cap funds failed to beat the S&P 500 over the past 12 months. Specifically, more than 55% of large-cap funds trailed the index.

So 45% did outperform it, which is … not terrible. But that factoid requires a major footnote. The fund industry as a whole fared relatively better than usual through the first half of the year — most likely because the market suffered losses that were largely expected by the pros, who shifted some assets out of stocks in anticipation. Not being fully invested in stocks helped their comparative performances. Looking back at the past five years reveals more typical results: More than 84% of U.S. funds underperformed the S&P 500. And over the past 10 years, 90% of mutual funds sold to investors in the United States trailed the S&P 500's net gain.

Those lagging performances are largely the result of fund managers' efforts to beat the market.

It's not just the mainstream mutual fund industry with a performance problem either. Most hedge funds lag the overall market as well. In the same vein, the average short-term "day trader" also regularly misfires. While performance estimates regarding traders in this category should be taken with a grain of salt in light of how little data is actually collected from them, it's believed that between 70% and 90% of retail, non-buy-and-hold stock speculators end up losing money rather than making it.

All of these poor performances ultimately reflect how unlikely it is that individuals will manage to pick strategies that consistently outperform the market. And when you're trying to beat the averages by guessing what is essentially unguessable, it's easy to slowly nickel and dime your portfolio to death.

When investing in ETFs, however, people typically do so with plans to hold those stakes through the good times and bad, and add to them regularly to take advantage of dollar-cost averaging. This makes ETFs well-suited to a strategy that largely relieves you of two hazardous temptations — the urge to lock in short-term gains by selling, and the urge to hold off on putting money into the market until there's a major low. By dodging those market-timing snares, you avoid playing the version of the investing game that even most professionals lose.

You can still beat the market with ETFs

If, after reading all that, you're still interested in hunting for investment options that at least give you a fighting chance at outperforming the S&P 500 — no problem. While the SPDR S&P 500 ETF Trust is a go-to pick as a low-fee foundational portfolio holding, there are many other exchange-traded funds that feature different approaches. For example, mid-cap funds like the iShares Core S&P Mid-Cap ETF (NYSEMKT: IJH) and the Technology Select Sector SPDR Fund (NYSEMKT: XLK) both have long histories of S&P 500-beating performance. Both are also easy to hold for the long haul, even during periods when things get rocky.

The bottom line is investing in ETFs can turn you into a millionaire just as readily as buying individual stocks can. Better yet, they can give you a path to that outcome that doesn't require the sort of active investing that often ends up doing more harm than good.   

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Can you actually retire a millionaire with ETFs alone? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It's been a banner year for coal prices and, subsequently, coal mining stocks. Alliance Resource Partners (NASDAQ: ARLP) is up 92% since the end of 2021, while Peabody Energy (NYSE: BTU) is higher to the tune of 167%. Consol Energy (NYSE: CEIX) shares have rallied an incredible 214% year to date. The sky-high cost of natural gas is forcing electric utility companies to shop around for cheaper fuel sources, and coal is it. The International Energy Agency estimates this year's global consumption of coal is on pace to roughly match a previously set record.

These stocks' incredible strength, however, is likely only a temporary phenomenon. Investors lucky enough to be in any of these hot stocks may want to think about getting out of them sooner than later, as the underpinnings of this bullishness isn't apt to last.

Coal is strictly a temporary, stopgap solution

That's an admittedly tough thing to do. The prevailing advice (as well as instinct) suggests sticking with your winners as long as they're making forward progress. Tickers like Peabody and Consol Energy are still doing so.

But, this is one of those scenarios where the smart-money move is proactive rather than reactive. Coal's price correction is coming, and once it starts to peel back, coal mining stocks could roll over in a big way with little to no warning.

Fitch Ratings spells out the bad news. While last month's revision of its long-term coal price outlook nudged them all higher than its previous outlook, Fitch's forward-looking prices are still below their current levels. This is as true for the coking coal used to make steel as it is for thermal coal needed to generate electricity. Take a look.

 

Data source: Fitch Ratings. Chart by author.

And Fitch isn't the only organization anticipating an abrupt end to coal mania. Only a month ago, the Institute for Energy Economics and Financial Analysis posted a similarly grim outlook for Australia's thermal coal mining industry, which supplies Japan, China, South Korea, and Taiwan, all of which rank among the world's most prolific users of the coal, and all of which rely heavily on Australia's production. Despite brisk demand right now, the institute's coal analysts Simon Nicholas and Andrew Gorringe argue, "In the longer term, the shift of Asian nations toward more reliance on renewable energy and domestic coal will see volumes of Australian thermal coal exports fall significantly." Nicholas and Gorringe add, "This process is outside of the control of Australian state and federal governments."

The dynamic could prove particularly problematic for Peabody, as much of its mining is done in Australia.

It's a proxy for the entire coal industry though. Wood Mackenzie analyst Adam Woods also commented last month on the current coal price surge (in light of the inevitable mainstreaming of renewable energy sources): "We believe that this will be a relatively short-term event, and we do not see companies making major investments to increase [coal] infrastructure or long-term [coal] production."

To this end, note that while still historically high, thermal coal prices have fallen substantially from July's and September's peaks in just the last few days.

 

Data source: Business Insider. Chart by author.

So, connect the dots. This year's 90% run-up in thermal coal prices -- and nearly 300% advance since the beginning of 2021 -- doesn't look like it's built to last.

Not necessarily now, but soon... very soon

None of this is to suggest coal stocks like Consol Energy and Alliance Resource Partners must be sold immediately or that there's no further potential upside remaining for these tickers. Indeed, there are some clear long-term benefits to this short-term price surge.

Peabody, for instance, has used its recent windfall to reduce its debt load by more than $200 million (about 20%) over the course of the past year. That should help boost profit margins even once coal prices are reigned in. Alliance Resource Partners recently secured commitments to sell nearly 25 million tons of coal through 2025 at prices that reflect coal's current lofty value rather than its tepid prices from just three years back. The company is also expanding operations at its Gibson South and Hamilton mines. That's greater scale which may never have been possible without the industry's current boon or its healthy sales agreements.

In the meantime, although the world is addressing the tight supplies of natural gas that are renewing demand for coal, there's no assurance any of these efforts will make a meaningful impact in the foreseeable figure. Coal is readily available right now.

This shift in demand and miners' increased capacity to invest in themselves is an exception to the norm rather than the norm though, and exceptions aren't the stuff of great stock picks. They are (by definition) temporary situations. Investors should be seeking out companies that can consistently capitalize on the norm, which will eventually be restored.

And that's where things can get tricky.

Stocks caught up in unusual situations like this one can behave erratically and unpredictably. It's possible the aforementioned thermal coal stocks as well as their peers could pre-emptively tumble before coal prices themselves do -- with or without seeing similar price action from natural gas -- as investors make sure they're not left holding the proverbial bag once coal mania cools.

Between the sheer risk of this unknown and the fact that so many other quality stocks can be scooped up at a discount here, now would be an ideal time to cash in your coal stocks' gains and go shopping for some new bargains from a different industry.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It's ugly out there. The S&P 500 (SNPINDEX: ^GSPC) is 25% below its January peak, and after its latest rout sits within sight of new multi-month lows. Yikes! Whether you're a new investor or a veteran, it's tough to feel confident about putting money into the market right now.

If you truly believe in a long-term approach, though, this could be the time to do exactly that. Just buckle up if you're going to take the ride.

Not quite but close enough?

The market could still easily move lower before moving higher again. The average bear market drags the S&P 500 to 36% below its peak, according to data from mutual fund company Hartford Funds, while brokerage firm Edward Jones calculates the average bear market lasts about 15 months. We're not quite at either mark yet.

Data by YCharts.

Trying to step in at the precise end of a bear market and the very beginning of a new bull market, however, can prove costly for a couple of different (but related) reasons.

The first reason: You're not going to be able to identify the bottom while the bottom is being established.

Plenty of pundits will argue with that, claiming the market gives clear hints it's hitting bottom. And there might be something to their arguments -- the stock market may be somewhat mechanical some of the time. But those hints are not consistent enough to count on when you're making major buying and selling decisions. At best, it's an exercise in futility; at worst, it's a way of talking yourself out of a great opportunity at the worst possible time.

Why? Consider the second reason you should be more inclined to invest right now despite the clear bearishness rather than hold off: Not being in the market for the entirety of any bullish reversal can cost you ... a lot.

Edward Jones had some curious findings regarding recoveries. Chief among them: The five most recent bull markets averaged a gain of 25% in just the first three months. That's a sizable chunk of the average total bull market gain (more than 150% from beginning to end).

Or think about it like this: While this bear market isn't 15 months old and hasn't reduced the S&P 500's value by 36%, it's closer to both of those milestones than not.

The real danger

Whether or not it's safe to step into the S&P 500 now that it's 25% below its peak mostly depends on your personal situation.

If you're going to need the capital in the very near future (say, for college tuition or to buy a home), then there's danger in being exposed to stocks here. If you're nearing retirement, that also complicates the answer.

Impending retirement doesn't necessarily mean you should remain on the sidelines. While you may start withdrawing some of your retirement funds right away, for most investors the bulk of any retirement savings won't be tapped for years down the road. It would be nice to grow that piece of your nest egg in the meantime, and stocks are still the best long-term growth engine around.  

Perhaps a better question to ask is this: Are you more afraid of losing money in the short run, or more afraid of missing out on an opportunity to make money in the long run? If your portfolio reflects an outlook of five years or longer, your bigger danger isn't being in the market when things are a little rough -- it's not being in the market once things finally take a turn for the better.

Most investors fear the former until they've had a chance to consider the consequences of the latter.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Down 25%, is it safe to invest in the S&P 500 right now? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There are two prevailing opinions of the upcoming, ad-supported version of Netflix's (NASDAQ: NFLX) streaming service. Some investors are cheering the possibility of reigniting subscriber growth, while others are concerned that an ad-supported option tarnishes the brand. Very few observers, however, have a clear idea of what to expect once this tier launches later this year.

Relevant information is hardly out of reach, though. One only has to look at the results that Netflix's competitors are producing as well as Netflix's own outlook regarding its ad-supported platform. Spoiler alert: There's more to like than dislike.

Here come the ads

On the off chance you're reading this and aren't aware, Netflix intends to launch a lower-cost, ad-supported version of its streaming service in select markets sometime later this year, according to industry reports. While the pricing specifics have yet to be confirmed, Bloomberg suggests it could cost somewhere on the order of $7 to $9 per month.

Both price tags are a fairly far cry from Netflix's current cost of $15.49 per month for HD-quality video and simultaneous viewing on more than one screen. If too many of the company's current customers make the switch (more on this in a moment) or nonsubscribers aren't stoked about signing up, the debut of an ad-supported alternative could seemingly hurt more than it helps.

Except that's not likely to be the case. It's even possible that an ad-supported offering could fare better than an ad-free service in terms of per-user revenue.

A proven, consistent business model

A handful of rival ad-supported streaming services that are already in action provide a glimpse of what to expect.

Take Walt Disney's (NYSE: DIS) Hulu as an example. Its average revenue per user (or ARPU) for the three-month stretch ended in June came in at $12.92 per month, which includes advertising revenue. That figure is close to the ad-free version's monthly cost of $12.99, but because roughly two-thirds of Hulu's customers are believed to use the ad-supported version that goes for $6.99 per month, the bulk of the $5.93 difference reflects Netflix's per-user advertising revenue potential.

Warner Bros. Discovery (NASDAQ: WBD) is seeing similar metrics from its HBO Max and Discovery+ services, reporting domestic ARPU of $10.54 for its second quarter of the year. That's in line with the ad-supported version of HBO Max that sells for $9.99 per month versus $14.99 per month for the ad-free option. The reported ARPU figure is stronger than it seems on the surface, though.

Consumers responded well to prior promotions offering access to the ad-free version at a price of only $9.99 per month. The company is also seeing strong sign-ups at a deeply discounted rate of $104.99 per year, which is the equivalent of about $8.75 per month. Further bear in mind that the company's reported ARPU includes the ad-supported and ad-free versions of Discovery+, which go for $4.99 and $6.99 per month, respectively.

In this vein, Warner's CEO, David Zaslav, stated very plainly last year that the ad-supported tier of Discovery+ ultimately generates more than $10 worth of revenue per user per month. That's at least an extra $3.00 more than the ad-free option generates, jibing with the sort of advertising numbers being reported for Disney's Hulu.

Reading between the lines: A monthly ARPU of $10.54 reflects a good amount of advertising revenue.

Given Netflix's best-of-breed status, it's not unreasonable to presume its per-user advertising results will be at least as strong if not stronger. Morgan Stanley puts the per-user monthly advertising revenue figure closer to $7, in fact, which would put Netflix's ad-supported per-user revenue on par with its ad-free per-user revenue...and then some.

What's at stake for Netflix?

Still, what sort of growth is at stake? The Wall Street Journal recently reported that the company believes 40 million people could be signed up for the ad-supported option by the third quarter of the coming year.

Netflix has neither confirmed nor denied the figure, but given that the company already boasts 220 million subscribers, assuming one-fifth of its current customer base is interested in a lower-cost option isn't a stretch. Indeed, that figure might be low in light of a recent poll performed by Samba TV survey and HarrisX. The survey of 2,500 U.S. adults indicates 46% of existing Netflix subscribers would consider switching if doing so cut their monthly price by about half. Certainly, nonsubscribers are interested for the same reason.

To this end, industry analytics outfit Digital TV Research estimates the streaming industry will grow by 475 million subscriptions by 2027. Netflix is projected to capture more than its fair share of that growth -- possibly more than 30 million net new subscribers -- to remain the planet's biggest streaming name. Its lower-cost, ad-supported option features prominently in that outlook.

As for its fiscal potential, Ampere Analysis believes the company could be generating around $2.2 billion in annual advertising revenue by 2027, making up around one-fourth of this tier's potential $8.5 billion in annual sales by that time. For perspective, Netflix did nearly $30 billion worth of business last year.

Not all of that $8.5 billion will translate into incremental top-line growth, mind you, since plenty of current ad-free subscribers intend to switch to the ad-supported option when it launches. Think bigger picture, however. The market is more than ready for this option, as evidenced by ad-supported streaming success from Disney and Warner Bros. Discovery. It's a game changer for Netflix even if the service's biggest benefit is simply improving customer retention.

Misguided fear is your opportunity

Connect the dots here. Netflix stock is down more than 60% from its November 2021 high on fears that the company wasn't willing to adapt or wouldn't be able to find success in a new kind of streaming marketplace. There's your opportunity, since neither worry is merited. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has positions in Warner Bros. Discovery, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Warner Bros. Discovery, Inc. and has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Are you looking for a way to turn a little bit of money now into a lot of money later? If you're reading this, you probably are. You're also looking in the right place to make it happen. The stock market is one of the few means of building significant wealth within one lifetime, even if you're starting out with next to nothing. Indeed, a modest sum of $20,000 could become as much as $350,000 (or more) if you handle things smartly. Here's how to make it happen.

Yes, from here all the way to there

Sounds too good to be true? It isn't. A proverbial down payment of $20,000 on a comfortable future funded by a nest egg of $350,000 is not only possible but also likely. There is a catch, however.

But first things first.

Just for the sake of simplicity, let's use the S&P 500 Index (SP: .INX) as our proxy for the broad stock market. It's obviously possible to own individual stocks en route to riches, but it's easier -- and often just as productive -- to simply plug into a basket of stocks like the S&P 500.

Let's also assume the future will more or less look like the past. That is to say, let's assume the S&P 500 will grow by an average of 10% per year as it has for the past several decades. Some years are better than others; occasionally, the market even logs a loss for the full year. Given enough time, though, yearly 10% returns are a reasonable expectation.

Given these two assumptions, a $20,000 investment in an S&P 500 index fund today should be worth somewhere around $350,000 in 30 years from now.

 

Data source: Calculator.net. Chart by author.

However, there are two catches to achieving this sort of success with stocks.

The two big keys to success

One of these catches is how your investment is managed once it's initially been made. Once you're invested, any gains should be reinvested into the market right away. Ditto for any dividends collected.

It's called compounding. This approach ensures you've got as much money as possible working for you for as long and as often as possible, as you're earning future gains on prior gains and not just on your initial principle. Without reinvesting your gains, your average annual return on an S&P 500 index fund is cut nearly in half.

The other (related) catch is that you really need to give yourself a full 30 years to achieve this sort of long-term gain. Anything less, and you won't do nearly as well.

Take another look at the progress chart of a $20,000 investment above. Half of the $330,000 net gain was achieved only in the final seven years of the 30-year stretch. In other words, if you sat on a $20,000 investment for 23 years, you'd only end that timeframe with a little over $160,000. That's a huge difference, particularly if your nest egg will fund most of your retirement spending.

Of course, this means you'll want to put your initial money to work as early as you can in life.

Doing something small is better than nothing at all

To be clear, the example above assumes you'll make only a one-time investment of $20,000 in the stock market and never add new capital. You likely will be able to contribute fresh cash along the way, though. Even a tiny additional annual investment can make a big impact over a period of 30 years. For instance, in the example above, adding just another $2,000 to your holdings at the end of every year would ratchet your eventual nest egg up to a sum of nearly $680,000.

The underlying lesson is the same in both scenarios, though. That is, getting into the stock market as soon as possible and staying as fully invested as possible the whole time -- even when it's uncomfortable to do so -- is well worth the time and effort. A relatively small stash can become a surprisingly big one when you earn increasingly more money on your past gains and dividends.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Investing in the stock market could turn your $20,000 into $350,000. Here's how appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Let's face it -- some investors just do better than others. It might take some of them more time or require an unpopular track to achieve those superior results. But, in that the best possible net returns relative to a given amount of risk is the ultimate end goal, it only makes sense to do what works best.

With that as the backdrop, here are three not-so-secret secrets that the world's best investors know, and act upon even when it's tempting not to. In no particular order...

1. Less is more

It's a tired (and somewhat overused) cliche. It's a cliche, however, for all the right reasons including the most important one... it's absolutely true, particularly as it pertains to investing.

It's also a vague view without a deeper explanation. So, for less experienced investors, here's the overarching basis for the "less is more" lesson: Buy and sell less frequently, and hold more of your stocks for longer periods. Not that you shouldn't adjust as needed should things change in the meantime, but as a rule of thumb you should be thinking about holding periods of at least five years before stepping into a stock.

It's a toughie to be sure, and the financial media generally doesn't help. Much of cable TV's market coverage as well as the web's constant updates make it sound as if constantly swapping stocks is the best path to wealth. It isn't. That commentary is largely meant to draw a crowd to deliver advertisements to. Sound investment advice, however, generally doesn't draw and excite a crowd. It's a problem simply because investors often make short-term buying and selling decisions at the worst possible time for the worst possible reason, trading away profits right before or right after they're reaped.

2. Simpler is better

The longer you're an investor, the more investment prospects other than stocks you'll come across. Cryptocurrencies have been one of the hotter alternatives of late, while equity and index options seem to be perennial favorites for folks looking to squeeze a little more out of the market. Commodities like gold and even physical real estate also seem to cyclically catch people's eyes when the stock market feels like it's running out of steam.

However, many of these manias are gimmicks mostly meant to enrich the people pushing them rather than grow wealth for the investors risking their own capital on them. Like most fads, these manias tend to fizzle out right around the time the masses are just starting to file in.

Your best bet is keeping things simple by sticking with stocks... instruments that have withstood the test of time. They're not always the best performers in the near term. They tend to be the best performers for the long haul, however, because they're stakes in companies you can see, understand, and evaluate their earnings. The same can't be said for cryptos, or even many commodities.

3. Time is your best ally

Finally, the world's most successful investors understand that the biggest returns are reaped by leaving stock holdings alone for years on end. That's true even in the years when stocks -- or one particular stock -- are struggling. The biggest paybacks materialize during the last portions of a holding period in which gains are reinvested in the market.

Some number-crunching puts this reality in perspective. Say you're contributing $10,000 per year into a fund based on the S&P 500 index (SNPINDEX: ^GSPC), earning an average return of 10% per year, and reinvesting any given year's earnings. At the end of 30 years, you'd be sitting on a nest egg of just over $1.8 million. The thing is, around $1 million of that total nest egg didn't take shape until the last eight years of that 30-year stretch. It took 22 years to build up an asset base to take meaningful advantage of the S&P 500's long-term average return.

Here's another example of the power of sheer time: Even if you only contributed $10,000 per year to an S&P 500 index fund for 20 years and then just let it ride without any fresh capital being added for the next 10, you'd still end the 30-year stretch with a little over $1.6 million. If you cashed just after the 20 years of annual contributions of $10,000 though, you'd only walk away with about $630,000.

The moral of the story is, get in and stay in for a long as you feasibly can, so you can earn money on as much of your previously earned returns as you can. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If you're uneasy about the stock market's foreseeable future, you're not alone. The rebound effort that's been underway since mid-June has been tentative at best. And this week's warning from Walmart about its second-quarter earnings, in addition to IBM's currency-prompted caution, could further rattle already-wobbly stocks. It's an inauspicious start to earnings season.

But before bailing out of stocks in an effort to steer clear of any renewed bearishness, wait. As much downside risk as there seems to be ahead, there's at least as much risk of missing out on important upside.

The little things add up

After tumbling a total of 24% between January's high and last month's low, the S&P 500 Index (SP: .INX)'s 7% rebound in the meantime feels like a gift: a chance to get out with smaller losses than most of us were nursing just a few weeks back. The chance of more downside feels palpable, too, particularly given that summer is usually a slow, bearish time of year for stocks. Rekindled worries of a full-blown recession only bolster the bearish case.

There's a funny quirk you need to understand about the stock market, though: It's not always backward-looking. Sometimes it's forward-thinking, pricing in renewed economic growth that isn't always easy to see, or perhaps hasn't even materialized yet. And more than that, some of the biggest forward-thinking gains take shape when you least expect them to. The effort to steer clear of the market's setbacks can often leave you out of those moves.

Mutual fund company Hartford dug through mountains of data to find some eye-opening truths about the stock market's biggest daily gains. Over the past couple of decades, about half of them took shape in the midst of bear markets.

That doesn't necessarily prevent you from suffering setbacks in the days immediately before and after those big winners. Given that nobody sees these rallies coming, though, it does show that trying to sidestep downside could end up costing you -- particularly if you're hopping in and out of stocks while on the way down.

And the cost can be higher than you might ever expect.

Numbers crunched by stock speculator Peter Tuchman -- a trader on the floor of the NYSE who is one of its most-photographed participants -- indicate that between 2000 and 2019, missing the market's 10 biggest daily gains would have cut your annual returns by about half relative to simply remaining invested during that stretch. Missing out on the best 20 days would wind your returns back to almost nil.

There's an upside to steering clear of the stock market's worst daily performance, of course. Just avoiding the 20 worst days during that 20-year stretch would have more than doubled your returns from simply buying and holding. Again though, if you want to capture all of that upside while also avoiding the market's major downside moves, your timing has to be perfect. And nobody's is.

Research done by brokerage firm Edward Jones will help you use a stick-with-it, leave-it-alone approach. The company has found that of the past five transitions from a bear market to a bull market, the S&P 500 rallied an average of 25% in the first three months following the day the pivot, or bottom, was reached.

The moral of the story? Just stand pat, take your occasional lumps, and trust that in time your patience will pay off. If your market timing isn't absolutely perfect all the time, the odds are still stacked dramatically against you.

The real danger is in missing out

In answer to the headline's question, it's safer to keep investing right now than it is to pull your money out of the stock market -- but not for the reason you might think. Sticking with stocks is the safer play at this time because the real danger is missing out on gains nobody sees coming.

Have confidence that time (and not even that much time) will take care of your bottom line, even in the current environment where it feels like the misery might never end. Eventually, it always does.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is it safer to pull your money out of the stock market or keep investing for now? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Best and worst case scenarios this week for global equities: Expert
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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Walmart Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market's recent rout has distracted investors from taking note of some of the big cultural and technological megatrends. But those trends are still underway, translating into opportunities for investors who can look past all the noise.

One compelling megatrend to plug into is the metaverse. It's a market that Bloomberg Intelligence estimates will grow at an average annual pace of 13% through 2024, when it will be worth nearly $800 billion.

Let's take a closer look at three beaten-down names with at least a small stake in the metaverse arena. These small stakes, of course, can evolve into major profit centers as the metaverse market matures.

1. Nvidia

You most likely know Nvidia (NASDAQ: NVDA) as a maker of graphics processors used to connect a computer to a computer screen. The same tech also powers a bunch of artificial intelligence initiatives. But the metaverse? What can this company do to help build the world's virtual meeting places?

It's actually a pretty intuitive fit. A functioning virtual world doesn't just require a network of computers -- the metaverse is first and foremost a visual connection among metaverse users. To be effective, this world must be able to instantaneously deliver computer-based imagery to a set of goggles worn by a user. Nvidia's graphics card expertise is perfectly suited for the task.

In fact, it already has a program for it. It's called Omniverse. Introduced in late 2020 and well supported with additional tools aimed at engineers released in the meantime, the company calls Omniverse an "easily extensible platform for 3D design collaboration and scalable multi-GPU, real-time, true-to-reality simulation."

In other words, if you want to build virtual world, you can use Omniverse to do it.

Omniverse is meant to be more collaborative than fun, and work more as a training and/or prototyping tool. Its earliest adopters being companies looking to design a virtual product or process rather than risk valuable resources only to end up with a not-quite-right outcome. There's nothing to say, however, the tech can't be expanded on and serve more entertainment-oriented uses.

It's a minimal part of Nvidia's revenue mix right now -- so small the company doesn't even break the numbers out, instead lumping it into its data center results. In this light, Nvidia doesn't fully qualify as a metaverse stock. 

That's changing pretty quickly though. In January, Nvidia announced Meta Platforms (NASDAQ: META) -- the company formerly known as Facebook as well as the company arguably leading the metaverse charge -- is buying 16,000 Nvidia-made A100 processors designed from the ground up to handle artificial intelligence workloads. Much of Meta's intended workload will be building its own metaverse platform, underscoring the idea that Nvidia is becoming a serious metaverse name. In the meantime, reliable revenue from all of its other established businesses like data centers, video gaming, and professional visualizations means the company's metaverse efforts don't have to be rushed. It's these other businesses, in fact, that are apt to help Nvidia shares reverse their current downtrend sooner than later.

2. Microsoft

Nvidia isn't the only metaverse stock on the defensive here. Microsoft's (NASDAQ: MSFT) stock price is down 27% year to date, ushered lower by the broad market's bearish tide. Once investors realize this company's sales are still expected to grow 18% this year and 14% next year (because the world's not ready to give up its computers or the software they run), however, the pullback could be mentally reframed as a buying opportunity. 

Microsoft's entry into the metaverse race is similar to Nvidia's, although not identical. Whereas Nvidia's Omniverse is largely a developmental platform, Microsoft Mesh is a turn-key product meant to let users of Microsoft Teams meet with one another virtually. Mesh can help co-workers collaborate on product design, but the company says its chief goal is facilitating "eye contact, facial expressions, and gestures so your personality shines." The company is building the user tech needed to make the most of Mesh as well. Its HoloLens is a pair of augmented reality glasses rather than full-blown immersive goggles, meant to help team members simultaneously see and discuss manufacturing, engineering, and even healthcare matters. 

Mesh and HoloLens are currently aimed at businesses rather than individual consumers, although it's not inconceivable this underlying tech could eventually make its way into consumers' hands so as to expand its use case. Microsoft's newer Xbox gaming consoles are already capable of delivering a virtual reality experience with third-party VR goggles. Connecting the two different platforms into a metaverse-minded offering would be a relatively short leap.

Like Nvidia, Microsoft's current metaverse revenue is so modest that it's not even detailed within its quarterly reports. Also like Nvidia, however, that's not necessarily a bad thing. The company's software and cloud computing profits are poised to spark a rebound rally well before Microsoft's metaverse initiatives start to bear meaningful fruit.

3. Matterport

Finally, add Matterport (NASDAQ: MTTR) to your list of metaverse stocks primed for a bull run after a sizable setback.

Matterport isn't a household name. Indeed, with a market cap of only around $1 billion, it's likely many consumers haven't even heard of it. Of the three names in focus here, however, it's by far the purest metaverse play.

In simplest terms, Matterport makes 3D cameras and related equipment, including the software and online storage needed to get the most out of its hardware. Its strong suit is turning real indoor spaces into digital rooms that can be virtually, remotely explored. That's why the real estate industry has wholeheartedly embraced the technology -- would-be homebuyers can look at a home without actually being there. The potential uses of its solutions, however, are almost limitless. Retailers, insurers, and even architects and engineers are finding that its know-how can make tasks much easier to complete remotely.

While it's one of the few pure metaverse plays out there, know that it's also a riskier prospect than Microsoft or Nvidia. Namely, Matterport is still unprofitable. It's improving in this regard: Revenue is expected to grow by 15% this year before accelerating to the tune of 41%, which should improve this year's loss of $0.49 to a lesser loss of $0.37 in 2023. Any company still suffering losses 10 years into its existence, however, is a name to keep on a short leash; this may be a big reason shares were so easily upended when stocks as a whole started to tank early this year.

It's just got too much upside potential to ignore after its recent pullback, though, with analysts collectively more bullish than not on it, and saying on average that it's worth $9 per share. That's more than twice the stock's current price of $3.85. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 top Metaverse stocks ready for a bull run appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft and Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.