Right now, that appears to be technology.

After a strong run, many tech names have pulled back amid concerns around interest rates and how artificial intelligence might reshape parts of the industry. That shift in sentiment has made the space feel more uncertain in the short term.

But it has also made it more interesting.

If I were looking for a single exchange-traded fund (ETF) to gain exposure to that uncertainty, while still backing the long-term opportunity, one fund that stands out to me is the Vanguard Global Technology Index ETF (ASX: VTEK).

A different way to think about tech exposure

When people think about investing in technology, the focus is often on a handful of well-known US stocks like Apple, Microsoft, Nvidia, Meta Platforms.

But the reality is more complex than that. Technology is not just about the platforms we use every day. It is also about the infrastructure that powers them, the chips that run them, and the systems that connect everything together.

That is where the VTEK ETF feels a little different.

It provides exposure to a broad group of around 300 global technology companies, spanning everything from software and cloud computing to semiconductors and advanced manufacturing. This includes ASML, Broadcom, Taiwan Semiconductor, and Shopify.

For me, that wider lens matters. It means you are not relying on one specific trend or trying to pick the next winner. Instead, you are backing the ecosystem as a whole.

The selloff could be doing the heavy lifting

One of the challenges with investing in technology is valuation. When sentiment is strong, it can be difficult to justify buying in at elevated prices.

That is why periods like this can be useful. The recent pullback has taken some of the heat out of the sector. It does not mean tech is suddenly cheap across the board, but it does mean expectations have come down.

I think that shift can be important. Lower expectations can make it easier for companies to surprise on the upside over time, particularly if underlying demand continues to grow.

Not just a US story

Another aspect I like about the VTEK ETF is that it is not solely focused on the United States. While US companies still play a major role, the fund also includes technology leaders from Europe and Asia.

That matters because innovation is not confined to one region.

Semiconductor manufacturing, for example, is heavily concentrated in parts of Asia, while specialised equipment and advanced engineering often come from Europe.

By spreading exposure across regions, I think this Vanguard ETF better reflects how the global technology landscape actually works.

It will not be a smooth ride

That said, this is not a low-volatility investment. Technology shares can move sharply, particularly when interest rates are rising or sentiment turns cautious.

This ETF is designed for growth, which means it is likely to experience ups and downs along the way.

For me, the key is being comfortable with that. If you are investing in this space, it needs to be with a long-term mindset.

Foolish takeaway

Calling any single Vanguard ETF the best is always a stretch. Different investors will have different goals, and what works for one person may not suit another.

But I do think the VTEK ETF makes a strong case right now. It offers broad exposure to the global technology sector, captures multiple layers of innovation, and comes at a time when sentiment has cooled.

For investors who believe in the long-term role of technology in the global economy, I think it is an ETF that is well worth a closer look.

The post Is this the best Vanguard ETF money can buy right now? appeared first on The Motley Fool Australia.

For long-term investors, one way to harness these forces is through exchange-traded funds (ETFs) that provide diversified exposure to the stocks driving them.

Here are three ASX ETFs that tap directly into megatrends that look set to run for decades.

Betashares Cloud Computing ETF (ASX: CLDD)

The shift to the cloud is no longer a future trend, it is now core infrastructure for the global economy. Businesses are increasingly moving data storage, software, and computing power away from offline systems and into scalable, cloud-based platforms.

The Betashares Cloud Computing ETF provides exposure to companies enabling this transformation. Its holdings include cloud software and infrastructure leaders such as Microsoft Corp (NASDAQ: MSFT), ServiceNow (NYSE: NOW), and Shopify (NASDAQ: SHOP). These businesses sit at the centre of enterprise digitisation, e-commerce, and workflow automation.

As data usage grows and artificial intelligence (AI) workloads expand, demand for cloud services is likely to keep compounding over time, making the Betashares Cloud Computing ETF a pure-play way to access that structural shift. It was recently recommended by analysts at Betashares.

Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

Automation and artificial intelligence are rapidly becoming essential productivity tools. Labour shortages, rising costs, and the need for efficiency are pushing companies to invest heavily in robotics and AI-driven systems.

The Betashares Global Robotics and Artificial Intelligence ETF targets businesses leading this transformation. Its portfolio includes Nvidia Corp (NASDAQ: NVDA), a key supplier of AI computing hardware, Intuitive Surgical (NASDAQ: ISRG), a pioneer in robotic-assisted surgery, and ABB Ltd (SWX: ABBN), a global leader in industrial automation.

This is a megatrend driven by necessity rather than hype. As economies digitise and industries modernise, robotics and AI adoption is likely to accelerate across healthcare, manufacturing, logistics, and services. It was also recently recommended by the team at Betashares.

Global X Battery Tech & Lithium ETF (ASX: ACDC)

Electrification is transforming transport, energy storage, and power generation, and batteries sit at the heart of that transition. The Global X Battery Tech & Lithium ETF provides exposure to the stocks building the supply chain behind electric vehicles and renewable energy storage.

Its holdings span miners, battery manufacturers, and technology leaders such as Tesla Inc (NASDAQ: TSLA), Albemarle Corp (NYSE: ALB), and Contemporary Amperex Technology Co Ltd (CATL). Together, they reflect the end-to-end ecosystem required to support the global shift away from fossil fuels.

With governments and consumers pushing toward cleaner energy solutions, and battery costs continue to fall, demand for battery technology and lithium materials could grow strongly for many years. This bodes well for the companies held by this fund.

The post 3 ASX ETFs that benefit from unavoidable megatrends appeared first on The Motley Fool Australia.

Our homes, workplaces and even our governments are leaning more heavily into digital systems, smarter automation and cloud-driven technology. And when huge structural shifts like these occur, investors who position themselves early often reap the biggest rewards.

Fortunately, you don't need to be a tech expert or chase risky individual stocks to participate.

Several thematic ETFs provide simple, diversified exposure to the industries shaping the next decade. And if these megatrends continue gathering momentum, the ASX ETFs in this article could be among the strongest performers on the market.

BetaShares Cloud Computing ETF (ASX: CLDD)

Cloud computing is one of the most powerful long-term structural trends in technology. Every year, more businesses move their operations into the cloud, relying on scalable platforms for data storage, workflow management and AI-driven tools. The BetaShares Cloud Computing ETF gives investors access to the companies building and enabling this infrastructure.

The ASX ETF's portfolio includes global names such as Shopify (NASDAQ: SHOP), which powers cloud-based e-commerce; ServiceNow (NYSE: NOW), a leader in digital workflow automation; and Salesforce (NYSE: CRM), the world's largest cloud CRM provider. These companies don't just benefit from cloud adoption, they help accelerate it, creating sticky recurring revenue and deep customer integration.

BetaShares Global Cybersecurity ETF (ASX: HACK)

As the world becomes more digital, cyber threats are increasing at an alarming pace. Businesses, governments and individuals all require greater protection, and this is driving explosive growth in the cybersecurity sector. The BetaShares Global Cybersecurity ETF offers exposure to key players in this space.

This fund includes heavyweights such as CrowdStrike (NASDAQ: CRWD), known for its AI-powered endpoint protection; Palo Alto Networks (NASDAQ: PANW), a leader in enterprise network security; and Fortinet (NASDAQ: FTNT), which provides integrated cybersecurity solutions. These companies enjoy rising demand regardless of economic cycles because cybersecurity is no longer optional, it is essential.

And with cybercrime expected to cost trillions globally over the next decade, the BetaShares Global Cybersecurity ETF is positioned at the heart of a growth story that shows no signs of slowing.

BetaShares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

Finally, robotics and artificial intelligence are transforming industries from manufacturing to healthcare. The BetaShares Global Robotics and Artificial Intelligence ETF provides access to companies leading these innovations.

Its holdings include Nvidia (NASDAQ: NVDA), the chipmaker powering most of the world's AI systems; ABB (SWX: ABBN), a global leader in industrial robotics; and Fanuc (TSE: 6954), which produces factory automation technologies used across automotive, electronics and aerospace manufacturing.

As automation spreads and AI becomes embedded in everyday business operations, companies in this ASX ETF's portfolio could enjoy substantial growth tailwinds.

The post 3 ASX thematic ETFs that could boom over the next decade appeared first on The Motley Fool Australia.

That's because rather than trying to pick a single winning stock, ETFs allow you to buy a basket of stocks in one fell swoop.

But which ASX ETFs could be good options for Aussie investors today? Let's look at three top picks for investors in November. They are named below:

Betashares Cloud Computing ETF (ASX: CLDD)

The Betashares Cloud Computing ETF could be a top pick for Aussie investors. It provides exposure to global cloud leaders such as Shopify (NASDAQ: SHOP), Snowflake (NYSE: SNOW) and ServiceNow (NYSE: NOW).

These are enabling businesses to manage and analyse sales and data more efficiently. And with cloud services now essential for AI, remote work, and cybersecurity, this ASX ETF offers investors a front-row seat to the cloud transformation.

It was recently tipped as one to consider buying by the team at Betashares.

Betashares Crypto Innovators ETF (ASX: CRYP)

For investors with a higher tolerance for risk, the Betashares Crypto Innovators ETF could be worth considering.

It provides exposure to stocks that are building the digital asset ecosystem. While the crypto market has seen its fair share of volatility, the long-term opportunity in blockchain technology, tokenisation, and decentralised finance remains significant.

The Betashares Crypto Innovators ETF's holdings include stocks such as Coinbase (NASDAQ: COIN), which is one of the largest cryptocurrency exchanges, and Marathon Digital Holdings (NASDAQ: MARA), which is a key Bitcoin miner. While volatile, these businesses are positioned to benefit if digital assets continue their march into mainstream finance.

Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

A third ASX ETF that could be a buy is the Betashares Global Robotics and Artificial Intelligence ETF.

This fund is designed to capture growth from one of the defining megatrends of our time, automation and artificial intelligence (AI).

It provides easy exposure to stocks that are building robots, AI software, and technologies that are reshaping industries. Its holdings include Intuitive Surgical (NASDAQ: ISRG), which is a pioneer in robotic-assisted surgery, and Nvidia (NASDAQ: NVDA), whose chips power much of today's AI revolution.

With adoption of AI expected to accelerate over the coming decades, the Betashares Global Robotics and Artificial Intelligence ETF gives investors an easy way to ride this structural growth wave.

The team at Betashares also recently tipped it as one to buy.

The post Where to invest $5,000 in ASX ETFs in November appeared first on The Motley Fool Australia.

Let's see what makes them potentially top picks for Aussie investors with money to put into the share market:

BetaShares Cloud Computing ETF (ASX: CLDD)

Cloud computing has been called one of the most transformative trends of the 21st century and it is still only partway through its story. The BetaShares Cloud Computing ETF gives investors access to stocks powering the world's digital backbone.

Its holdings include Shopify (NASDAQ: SHOP), ServiceNow (NYSE: NOW), Amazon (NASDAQ: AMZN), Oracle (NYSE: ORCL), and Microsoft (NASDAQ: MSFT). These are all leaders in cloud infrastructure, enterprise software, and online services.

ServiceNow's software helps large organisations automate workflows and reduce inefficiencies, becoming an indispensable tool for corporations undergoing digital transformation. With its customer base growing across government and enterprise sectors, the company is well-positioned to capture more of the global shift toward automation and cloud-based operations.

Analysts at Betashares recently named the BetaShares Cloud Computing ETF as one to consider buying.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

If you want a focus on quality, the VanEck Morningstar Wide Moat ETF is hard to beat.

This fund invests in US-listed stocks that have wide economic moats. These are competitive advantages that make them difficult to disrupt. Holdings include names such as Adobe (NASDAQ: ADBE), Nike (NYSE: NKE), Walt Disney (NYSE: DIS), and Applied Materials (NASDAQ: AMAT).

With respect to Adobe, its subscription-based software suite, which includes Photoshop, Acrobat, and its growing Experience Platform, continues to deliver reliable recurring revenue and robust profit margins. Its entrenched market position, coupled with expanding AI integration, makes it a textbook example of what wide moat investing is all about.

BetaShares India Quality ETF (ASX: IIND)

Finally, India represents one of the most exciting long-term growth stories on the planet.

The BetaShares India Quality ETF provides exposure to high-quality Indian stocks benefiting from rapid urbanisation, digital transformation, and a rising middle class. Its portfolio includes leaders such as Infosys (NYSE: INFY), Reliance Industries (NSEI: RELIANCE), Tata Consultancy Services (NSEI: TCS), and Bharti Airtel.

A standout here is Reliance Industries, one of India's largest conglomerates. Its operations span energy, retail, and telecommunications. These are sectors that are all expanding alongside the country's economy. Reliance's pivot toward digital services and green energy could make it a long-term winner as India continues modernising.

It was also recently named as one to consider buying by the team at Betashares.

The post Where to invest $10,000 in ASX ETFs next week appeared first on The Motley Fool Australia.

But with signs that cooler heads will prevail and a full-blown trade war likely to be avoided, attention is turning back to what could come next.

And if history is any guide, periods of uncertainty often set the stage for the next major market rally.

For long-term investors, that means now could be the ideal time to focus on high-quality, growth-focused exchange-traded funds (ETFs) positioned to lead the next upswing.

Here are three ASX ETFs that could be standouts when the next market boom arrives.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF is one of the simplest and most effective ways to gain exposure to the world's leading growth companies. It gives investors access to the 100 largest (non-financial) stocks on the Nasdaq index.

While technology dominates the fund, it is more than just the usual household names. The Betashares Nasdaq 100 ETF's portfolio includes global leaders such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), Starbucks (NASDAQ: SBUX), and Costco (NASDAQ: COST).

These businesses are highly profitable, globally diversified, and many sit at the centre of megatrends like artificial intelligence, cloud computing, and digital transformation. If optimism returns and investors re-embrace growth, the Betashares Nasdaq 100 ETF could once again be a front-runner in the next bull market.

Betashares Australian Momentum ETF (ASX: MTUM)

The Betashares Australian Momentum ETF offers investors a unique way to capture strong-performing Australian shares. Unlike traditional index funds, this ASX ETF doesn't hold the same shares all the time. It dynamically adjusts its holdings based on momentum, focusing on shares that are already trending higher.

This strategy can work particularly well in rising markets, as it systematically identifies and holds the shares leading the charge. At present, the Betashares Australian Momentum ETF's portfolio includes Qantas Airways Ltd (ASX: QAN), Coles Group Ltd (ASX: COL), and Evolution Mining Ltd (ASX: EVN). These are a blend of cyclical and defensive names that reflects the current market's mixed sentiment.

If market confidence improves and Australian equities regain upward momentum, this ASX ETF's strategy is designed to capitalise automatically, keeping investors exposed to the strongest trends without the need to trade in and out of individual shares.

Analysts at Betashares recently recommended this fund.

Betashares Cloud Computing ETF (ASX: CLDD)

The Betashares Cloud Computing ETF is another ASX ETF to consider. It gives investors access to one of the most powerful long-term growth stories in technology. That is the global shift to the cloud.

Businesses across every industry are moving their operations, data, and services online, and this transformation is still only in its middle stages.

The Betashares Cloud Computing ETF holds a portfolio of companies driving this revolution, including Shopify (NASDAQ: SHOP), ServiceNow (NYSE: NOW), and Salesforce (NYSE: CRM). These provide the digital tools, infrastructure, and platforms that modern enterprises rely on to operate efficiently and scale globally.

This fund was recently recommended by analysts at Betashares.

The post 3 high-growth ASX ETFs that could lead the next market boom appeared first on The Motley Fool Australia.

By buying a single ETF, you can instantly access a diversified basket of stocks and industries, cutting out the need to pick individual winners.

With $2,000, you could spread your investment across a few high-potential options. Here are three ASX ETFs that could be among the best to buy next month.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The first ASX ETF to consider in October is the Betashares Nasdaq 100 ETF. It gives investors access to some of the world's most influential technology stocks. This includes Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Tesla (NASDAQ: TSLA). These businesses have been at the forefront of innovation in areas such as artificial intelligence, cloud computing, and electric vehicles.

The Betashares Nasdaq 100 ETF has been one of the ASX's most popular ETFs for years, and for good reason. The US tech sector has delivered stellar long-term returns, and many of these stocks remain positioned for further growth as digital transformation accelerates globally. For Australian investors, it is one of the easiest ways to participate in Silicon Valley's success.

Betashares Cloud Computing ETF (ASX: CLDD)

Another ASX ETF to look at is the Betashares Cloud Computing ETF. It focuses on stocks leading the shift to cloud-based services. Holdings include names like Amazon (NASDAQ: AMZN), Shopify (NASDAQ: SHOP), and Snowflake (NYSE: SNOW). These are businesses allowing organisations worldwide to move their infrastructure, data, and software into the cloud.

This isn't just a passing trend. Cloud adoption continues to rise as companies seek more efficient, scalable, and secure ways to operate. With artificial intelligence and data analytics increasingly powered by cloud platforms, this fund gives investors exposure to one of the most critical foundations of the digital economy. It was recently named as one to consider buying by Betashares.

Betashares Crypto Innovators ETF (ASX: CRYP)

Finally, for those who want a more adventurous slice of their portfolio, the Betashares Crypto Innovators ETF provides exposure to stocks shaping the cryptocurrency and blockchain sectors. It includes names like Coinbase (NASDAQ: COIN), Riot Platforms (NASDAQ: RIOT), and Galaxy Digital (NASDAQ: GLXY), which stand to benefit as digital assets gain broader acceptance.

While this ETF is more volatile than traditional market exposures, it offers investors a way to tap into the growth of blockchain technology without needing to buy individual cryptocurrencies directly. For those willing to stomach the ups and downs, the Betashares Crypto Innovators ETF could provide powerful long-term upside.

The post 3 of the best ASX ETFs to buy in October with $2,000 appeared first on The Motley Fool Australia.

Companies behind cloud computing, artificial intelligence, e-commerce, and semiconductors have reshaped entire industries and delivered extraordinary returns to shareholders.

For Australian investors, however, direct access to these opportunities can be difficult. That's where exchange-traded funds (ETFs) come in. With a single trade on the ASX, you can own a basket of the world's most innovative companies.

With that in mind, here are three ASX ETFs that could be among the best ways to invest in global tech from Australia.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF provides exposure to 100 of the largest non-financial companies listed on the Nasdaq exchange, the beating heart of U.S. technology. Investors get instant ownership of household names like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA), alongside growth stories in sectors like e-commerce and digital media.

It is a simple, low-cost way to invest in some of the world's most valuable companies, all in one trade.

Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

Artificial intelligence and automation are no longer fringe technologies — they are increasingly central to how businesses operate. The Betashares Global Robotics and Artificial Intelligence ETF invests in stocks at the forefront of this transformation.

Its portfolio spans innovators such as Intuitive Surgical (NASDAQ: ISRG), a pioneer in robotic-assisted surgery, and Keyence Corporation, which is a leader in factory automation. With AI adoption accelerating across industries, the Betashares Global Robotics and Artificial Intelligence ETF offers exposure to one of the biggest structural growth themes of our time.

It was recently named as one for investors to consider buying by Betashares.

Betashares Cloud Computing ETF (ASX: CLDD)

The shift to the cloud has been one of the defining business trends of the past decade, and it still has years to run. The Betashares Cloud Computing ETF captures this growth by investing in leading cloud infrastructure and software companies.

That includes holdings like Shopify (NASDAQ: SHOP), which specialises in cloud-based ecommerce software, and ServiceNow (NYSE: NOW), a global leader in digital workflow solutions. As more businesses move operations online and adopt multi-cloud strategies, the demand for these services should keep growing strongly.

This fund was also recently named as one to consider buying by the team at Betashares.

The post 3 of the best ASX ETFs to invest in global tech from Australia appeared first on The Motley Fool Australia.

Some invest in safe-haven stocks and assets, while others are willing to take on more risk in the hope of hitting the jackpot.

The Australian recently compiled a list of 10 Australian billionaires, and the stocks they like to invest their money into.

Gina Rinehart

The Australian heiress, billionaire mining magnate, and businesswoman has built a $2 billion stock portfolio through Hancock Prospecting. It consists mainly of mining stocks and exchange-traded funds. The company owns shares in US-listed stocks such as Tesla Inc (NASDAQ: TSLA), Fox Corp (NASDAQ: FOX), and Trump Media & Technology Group Corp (NASDAQ: DJT).

Hancock Prospecting also has exposure in Australian markets. Hancock is a major shareholder in gold producer Ballard Mining Ltd (ASX: BM1), which floated on the ASX on July 14, 2025. 

Gerry Harvey

Australian entrepreneur and executive chairman of Harvey Norman Holdings Ltd (ASX: HVN), Gerry Harvey, backs New-Zealand based Briscoe Group Ltd (ASX: BGP). Briscoe comprises homewares stores and now Rebel Sports outlets. 

Bruce Mathieson

Bruce Mathieson is known for his influence in the Australian pub, hotel, and gambling sectors. 

According to The Australian, Mathieson has some of his fortune locked up in Endeavour Group Ltd (ASX: EDV) shares, shares in Star Entertainment Group Ltd (ASX: SGR), and shares in Mayne Pharma Group Ltd (ASX: MYX). He also has shares in RAS Technology Holdings Ltd (ASX: RHL).

Chris Morris

Chris Morris built share registry services firm Computershare Ltd (ASX: CPU) and maintains a large holding in the business. He also has shares in US data storage company Seagate Technology Holdings PLC (NASDAQ: STX).

James Packer

The Crown Resorts Ltd (ASX: CWN) king sold out of the business in 2022 and has since invested money into US technology stocks. His biggest holdings are in Nvidia Corp (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing Co Ltd (TPE: 2330), Shopify Inc (NASDAQ: SHOP), Spotify Technology SA (NYSE: SPOT), and Monday.Com Ltd (NASDAQ: MNDY).

Alan Rydge

Alan Rudge's wealth is mostly in two ASX-listed companies, which he has led for 45 years – Carlton Investments (ASX: CIN) and EVT Ltd (ASX: EVT). He is also a long-time stockholder of Harvey Norman shares.

Ed Craven

Ed Craven is Australia's youngest billionaire. He is well known for his cryptocurrency gambling empire Stake.com, and Kick streaming. He and his business partner Bijan Tehrani also have a 5% shareholding in Australian bookmaker Pointsbet Holdings Ltd (ASX: PBH).

Bruce Gordon

Bruce Gordon owns the Australian television network WIN Television through his ownership of WIN Corporation, the largest shareholder of Nine Entertainment Co Holdings Ltd (ASX: NEC). He also has shares in Singapore's mobile and telecommunication network Tuas Ltd (ASX: TUA).

Kerry Harmanis

Kerry Harmanis was the founder and executive chairman of Jubilee Mines NL, a highly successful Western Australian nickel miner which he established in 1987. Today, he still dabbles in mining shares, including Talisman Mining Ltd (ASX: TLM) and Centauras Metals Ltd (ASX: CTM).

Mark Creasy

Mark Creasy is one of Australia's most successful prospectors. He has a minority stake in nickel and lithium miner IGO Ltd (ASX: IGO), as well as a handful of other mining stocks. He recently invested into exploration company Lexington Gold Ltd (LON: LEX).

The post Australian billionaires: Which stocks do they own? appeared first on The Motley Fool Australia.

Frazis Capital specialises in "explosive" growth shares, predominantly on the US markets. While it almost doubled clients' money in 2020, the 12 months to October 2022 saw it lose more than 61%.

But in a memo to clients this week, founder and portfolio manager Michael Frazis was upbeat.

"Our strategy from here is to make sure this fund is the single best way to play a recovery in technology and growth," he said.

"Key companies are down 85% to 90%, are trading at 25% free cash flow yields, and are still posting solid revenue growth."

Still many growth stocks at all-time lows

The Nasdaq Composite (NASDAQ: .IXIC) has jumped almost 10% so far this year.

But Frazis believes many stocks are still going for an absolute bargain.

"Many companies are still at lifetime valuation lows," he said.

"At current trend lines, US CPI [inflation] will be sub 2% by May/June this year. This was a Fed-induced slowdown more than anything else. At some point, this headwind will become a tailwind."

Technology and life sciences, which were hammered over the past 12 to 14 months, make up much of Frazis' portfolio.

But recent headlines about ChatGPT demonstrate just how critical these industries are for the future.

"Professional and retail investors are significantly underweight on the sector that historically generates the most wealth, with recent advances in artificial intelligence a powerful reminder of why this is the case."

Cheap shares but the businesses are still growing

Frazis demonstrated how a couple of his holdings that performed poorly in 2022 are now looking healthy for those willing to buy in right now.

"Shopify Inc (NYSE: SHOP) continued to stack revenues throughout 2022 but this was overpowered by a >90% multiple contraction," he said.

"In January, Shopify broke above key moving averages for the first time in over a year. Since it has continued growing throughout this period, the stock can move to significant new highs without valuations ever approaching 2021 levels."

Electric car maker Tesla Inc (NASDAQ: TSLA) saw its shares halve over the past year on the back of worries about production, sales, and chief Elon Musk's distraction with Twitter.

So the stock can be bought on the cheap for a business that's still growing strongly.

"Company reports are still solid. Tesla, which lost ~75% of its value, reported EPS growth of 78% year-on-year, on a forward PE that got as low as 20," said Frazis.

"Tesla just reported Q4 37% revenue growth and 57% GAAP EPS growth."

There are a whole bunch of software companies in the US that are in the same boat.

"On a growth-adjusted basis, software is cheaper than at any point in the last decade," said Frazis.

"We've said this before, but that doesn't make it any less true today: US growth software is a screaming long-term buy."

Frazis reminded his clients that after the bear markets of 1973-74 and 1980-82, stocks posted their strongest-ever returns.

"There will be a point where fast growing tech companies transition from the very worst place to be invested to where they usually are: the very best. We will be there for it."

The post 'Lifetime lows': Expert reckons these shares are 'screaming buys' right now appeared first on The Motley Fool Australia.

The stock market hasn't been an ideal place for investors to park their money in 2022 as major indices such as the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite are all in the red this year thanks to factors including a hawkish Federal Reserve, high inflation, and macroeconomic headwinds. But investors shouldn't forget that the stock market gives investors one of the best avenues to increase their wealth in the long run.

The average stock market return has been solid over the years and now may be a good time for investors to pick up some top stocks that have witnessed a brutal sell-off in 2022. If you have $500 to spare right now -- you don't need the money in the next few years, your high-interest debt is paid off, and you've got your emergency fund set -- then it could make sense to buy shares of Shopify (NYSE: SHOP), Snowflake (NYSE: SNOW), and Nvidia (NASDAQ: NVDA).

1. Shopify

Shares of e-commerce platform provider Shopify have dropped 73% so far in 2022, but investors have seen some respite of late thanks to impressive third-quarter results that were released last month.

Shopify's quarterly revenue jumped 22% year over year to $1.4 billion, driven by healthy demand for the company's merchant solutions. The merchant solutions business brought in $990 million in revenue last quarter, a 26% year-over-year jump and nearly 71% of total revenue. It's clear that online merchants are turning to Shopify's payments and shipping solutions to build their e-commerce businesses.

Shopify is looking to bolster its merchant solutions segment with the $2.1 billion acquisition earlier this year of Deliverr, which will help Shopify enhance its fulfillment network and allow merchants to manage inventories across multiple e-commerce platforms. Shopify also aims to offer two-day and next-day delivery options to its merchants in the U.S. following the Deliverr acquisition.

Shopify has reportedly gained access to 80 Deliverr partner-operated warehouses, and that number is expected to double by 2024. The company's move into e-commerce fulfillment could turn out to be a smart move in the long run. That's because the e-commerce fulfillment market is expected to clock nearly $200 billion in annual revenue by the end of the decade.

The pursuit of such lucrative markets helps explain why analysts are expecting Shopify's top line to increase substantially.

SHOP Revenue Estimates for Current Fiscal Year data by YCharts

With Shopify trading at 7.5 times sales right now, as compared to its 2021 price-to-sales multiple of 41, investors are getting a good deal on this e-commerce stock following its brutal sell-off.

2. Snowflake

Snowflake is another fast-growing company that has dropped big time in 2022, losing nearly 58% of its value so far this year. That's not surprising as richly valued growth stocks have fallen out of favor among investors.

Snowflake stock was trading at a whopping 97 times sales last year. Its sharp drop this year has brought the stock's price-to-sales ratio down to 27. While that's still rich, investors shouldn't forget that Snowflake is growing at a terrific pace to justify its rich valuation.

In the second quarter of fiscal 2023, which ended on July 31, 2022, Snowflake's revenue shot up 83% year over year to $497 million. The company also reported an extremely impressive net revenue retention rate of 171%, which indicates that Snowflake customers have increased their spending on the company's platform.

Another metric that points toward healthy demand for Snowflake's offerings is the massive growth in the company's remaining performance obligations (RPO), a metric that measures "the amount of contracted future revenue that has not yet been recognized." Snowflake's RPO shot up 78% year over year to $2.7 billion last quarter, which points toward a robust revenue pipeline.

It is not surprising that Snowflake's business is enjoying such solid growth. Snowflake's solutions allow customers to store data in a scalable manner across multiple cloud providers, keep the data secure, and generate actionable insights with the help of machine learning and artificial intelligence.

The company points out that its total addressable market could hit $248 billion by 2026, driven by growing demand for data warehousing, data science, and other applications. So, Snowflake is scratching the surface of a massive market, which explains why analysts are expecting its earnings to increase at an annual rate of nearly 296% over the next five years.

All this makes Snowflake look like an ideal bet for growth investors looking to buy a beaten-down company.

3. Nvidia

Graphics specialist Nvidia has fallen out of favor, down 46% over the past year. The chipmaker's decline isn't surprising given that it has fallen upon difficult times amid slowing personal computer (PC) demand.

Still, analysts are upbeat about Nvidia's prospects. The company's top and bottom lines are expected to start accelerating from the next fiscal year and it is expected to clock 23%-plus annual earnings growth for the next five years. A closer look at the markets that Nvidia serves will tell us why the chipmaker is expected to regain its mojo.

The first big opportunity for Nvidia lies in the data center accelerator market. Data centers require multiple accelerators such as graphics cards, server processors, and data processing units to operate in a fast and efficient manner. Nvidia is a key player in data center accelerators with its graphics cards powering the cloud offerings of top service providers.

The company has set its sights on the server processor market as well; its first data center central processing unit (CPU) is set to hit the market in 2023. Meanwhile, Nvidia is also finding traction in emerging applications such as the automotive market and "digital twins."

Investors shouldn't forget that the demand for graphics cards used in gaming PCs is expected to rebound in the long run, with Mordor Intelligence forecasting 14% annual growth in this space through 2026. So, savvy investors can consider capitalizing on Nvidia's drop to buy the stock before it flies higher.

Shares of the chipmaker have been in rally mode in recent days, sending the stock's earnings multiple up to 51, but that's still lower than its five-year average of 58. A strong set of results when it reports on Nov. 16 could give this semiconductor stock a shot in the arm.  

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

The post The best US stocks to buy with $500 right now appeared first on The Motley Fool Australia.

Bear markets can often feel like doomsday events for investors, but there's good that comes out of these healthy downturns. Bear markets separate the wheat from the chaff.

In other words, they make apparent the companies that are worthy of investor dollars, as well as those that probably should have never gone public in the first place.

There's one very distinguishable trait that nearly all bear market winners have in common: Healthy cash levels on their balance sheets.

Having a lot of cash allows strong companies to take advantage of cheap valuations in the form of acquisitions.

While cash-poor companies struggle to keep their boats afloat, those with strong balance sheets can bolster their businesses by buying out their competitors or acquiring entire new product lines.

How to identify a cash-rich balance sheet

If diving deep into financial statements isn't your thing, then you're in luck, because identifying a strong cash position is very easy.

Simply add the cash and cash equivalents and short-term investments/securities lines on the balance sheet, and you'll arrive at the company's total cash.

Comparing this number to the current liabilities (expenses the company will pay in the next 12 months) gives you a good idea of how cash-rich the business is.

Take Shopify (NYSE: SHOP), for example. The company has nearly $7 billion in cash and only $700 million in current liabilities. Not only does that tell us the company is more than capable of self-funding its operations, it also has plenty of cash to deploy in this bear market.

Winners from past bear markets

Some of the most prolific and profitable companies today were built on tremendous acquisitions made when the market was selling off.

Had these companies not had adequate cash reserves during these periods, they would likely not be nearly as prominent as they are today.

Let's take a look at some examples:

Data source: Public company filings and box office data. Table by author. * Does not account for revenue from Disney Plus subscribers.

In the wake of the Great Financial Crisis, Disney made one of the most important acquisitions in film history, buying up a relatively obscure comic book company called Marvel. As we all know now, the Marvel Cinematic Universe is one of the world's most successful franchises, bringing in a whopping $2.8 billion in annual revenue for Disney.

That number is pretty astounding, considering the company only paid $4 billion to acquire Marvel. And the real annual revenue is likely much higher, since it's difficult to estimate how much of Disney's streaming revenue is due to its Marvel titles.

If the Marvel acquisition looks impressive, then the YouTube and Instagram buyouts are downright silly. Alphabet paid just $1.65 billion for YouTube in the years following the dot-com bubble, and today it accounts for $28 billion in revenue for the Google parent company.

Meta (at the time Facebook) might have made the greatest acquisition of all time when it bought Instagram for a ridiculously cheap price of $1 billion in 2012. Today, Instagram accounts for roughly 44% of Meta's total revenue. To call this acquisition a home run would be the understatement of the century.

All three companies owe a meaningful amount of their success to the high-quality acquisitions made in past down markets.

Cash-rich companies are uniquely positioned to prosper in recoveries

The examples above highlight just how important it is to have cash in bear markets. An abundance of capital not only protects the business from bankruptcy, it gives the company the ability to buy up cheap assets to strengthen its competitive advantages.

Very few acquisitions will be as dramatically important as the examples above, but the discounts created by bear markets can turn average buyouts into meaningful sources of revenue and income in the future.

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

The post Look for stocks with this balance sheet trait to outperform in the coming recovery appeared first on The Motley Fool Australia.

It's been a painful year for Shopify Inc. (NYSE: SHOP) and its shareholders. The company's coronavirus tailwind came to a screeching halt, leading to financial results that haven't been up to par. The e-commerce specialist's 10-for-1 stock split did little to improve its stock market performance; as things stand, Shopify is currently hovering near its 52-week low.

However, Wall Street has faith in the tech giant, and analysts' average price target of $79.45 is close to triple its $27.85 share price as of this writing. Is the Street right about Shopify?

What's wrong with Shopify?

Shopify has been the victim of various market-wide headwinds. Among these are interest rate increases that can impact the value of corporations. In an environment with higher interest rates, borrowing -- one of the main ways companies raise money -- becomes more expensive, and businesses tend to do less of it, leading to reduced investments and lower future earnings. 

Knowing this, investors are less likely to invest in stocks, especially those speculative growth stocks with high valuation metrics that aren't consistently profitable. That description fits Shopify to a T. Its net loss in the second quarter came in at $1.20 billion, compared to the net income of $0.88 billion reported during the year-ago period.

The company's current forward price-to-earnings (P/E) ratio is 220.5. Even given the premium growth stocks often enjoy, that seems too high. The S&P 500's forward P/E is just under 17. In that context, Shopify's performance on the market over the past year isn't too surprising, especially when you factor in company-specific issues. Notably, Shopify's revenue growth rates have slowed as well.

Data by YCharts.

Perhaps that isn't a "problem" -- at least not in a vacuum. Shopify benefited from the accelerated switch to e-commerce in the early days of the pandemic, and year-over-year comparisons were always going to be difficult as those tailwinds subsided. Still, when added to the overall challenging macroeconomic environment, that's not what investors want to see. 

Moreover, Shopify will likely continue to struggle, at least for a little while. There will probably be more interest rate increases in the near future. Shopify's stock performed exceptionally well between its initial public offering in May 2015 and the end of last year -- an environment marked by historically low interest rates. Moving forward, it will be harder for the tech giant. 

Are there any reasons to be optimistic?

Solid long-term prospects

There is more context to Shopify's relatively disappointing second-quarter financial results. As already mentioned, the slower top-line growth was partly a product of the company's abnormally strong performance in 2020 and 2021, when people were stuck at home and practically forced to shop online. This activity decreased somewhat once pandemic restrictions eased.

There is also more color to Shopify's red ink on the bottom line. For instance, in the second quarter, much of the tech company's net loss was due to unrealized losses in various equity investments. That includes Shopify's holdings in Affirm Holdings, Inc.(NASDAQ: AFRM) and Global-e Online Ltd. (NASDAQ: GLBE). That's not ideal, but at the very least, it reflects less poorly on Shopify's day-to-day operations.

The company's adjusted net loss during the second quarter -- which ignores the impact of unrealized losses and other items -- came in at $38.5 million, down from an adjusted net profit of $284.6 million in the year-ago period.

Importantly, Shopify's long-term prospects remain strong. There is still plenty of room for e-commerce to grow; as long as it does, merchants will look to open online storefronts. Some analysts see the industry expanding at a compound annual growth rate of 14.7% through 2027. It won't stop there. E-commerce penetration in many developing countries lags what it is in the U.S.

In my view, online shopping will continue growing for decades. Shopify's strength is that it gives merchants all the essential tools they need to run an online store. As a result, the company benefits from high switching costs. Building and customizing an online storefront is hard enough, and attracting loyal customers to it is even more challenging.

But having to restart the entire process from scratch is not something anyone wants to do unless necessary. That's why Shopify's merchants won't want to jump ship. As of last year, Shopify was No. 2 among companies with the highest retail e-commerce market share in the U.S. That, coupled with an estimated $160 billion addressable market and its solid competitive advantages, strongly suggests Shopify can turn things around.

Don't lose perspective 

Will Shopify meet Wall Street's expectations within the next 12 months? Probably not. But more importantly, the company still has solid prospects, especially when you put its recent struggles in context. For those focused on the long game, Shopify is worth holding onto. The company will likely deliver solid returns in the next decade and beyond.

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

The post This US growth stock could double, according to Wall Street appeared first on The Motley Fool Australia.

Amazon (NASDAQ: AMZN) and Shopify (NYSE: SHOP) are leading players in the online-retail industry, and both companies have also seen substantial share price declines across 2022's turbulent trading. Which of these e-commerce stocks is the better buy at today's prices? Read on to see why two Motley Fool contributors disagree on which company you should put your money behind. 

Amazon has incredible competitive advantages

Parkev Tatevosian: Amazon has expanded from a tiny online book retailer to the everything store it is today. The company has made this leap with its focus on the customer experience. With every step in its progress, Amazon has worked to improve the customer value proposition. 

This wasn't an easy task. It required years of experience and billions of dollars of investments in warehouses, logistics, web servers, and more. The effectiveness of those capital investments has helped Amazon grow from $107 billion in sales in 2015 to $470 billion in 2021. 

Moreover, the massive capital investment makes it difficult for any competitor to encroach on its business. Amazon can offer free two-day shipping to Prime members for millions of items on its platform, and even next-day shipping in select cities. When people consider buying something online, the delivery window is a significant selling point. Therefore, Amazon's lead in this arena is a competitive advantage that could serve it well for years.

As Amazon's revenue grows, it leverages its fixed costs across a broader sales base. In other words, Amazon's business model demonstrates economies of scale. Between 2015 and 2021, Amazon's operating profit margin grew from 2.1% to 5.3%.  

Of course, Amazon faces headwinds in the near term as consumers decrease online spending and look to spend money on away-from-home experiences they missed out on during the earlier stages of the pandemic. However, online spending as a percentage of overall spending is forecast to continue rising over the next several years.

That longer-run trend is unlikely to reverse because of the fundamental advantages e-commerce offers. Amazon, the largest e-commerce retailer, benefits from that trend.

Shopify's beaten-down stock has huge potential upside

Keith Noonan: Amazon's massive scale and infrastructure advantages probably make it more protected from competition compared to Shopify and its merchant-platform services model. The tech giant's hugely successful cloud services business also looks poised for more strong growth over the long term. I wouldn't have any qualms with anyone stating that Amazon is the better company, but I also think there's a strong case that Shopify is the better stock and offers a more attractive risk-reward profile at current prices. 

Shopify has admittedly seen growth slow dramatically as it's lapped periods of blockbuster performance and seen pandemic-related demand tailwinds recede. After posting 57% year-over-year sales growth in the second quarter of 2021, Shopify's Q2 revenue growth came in at just 16% this year.

Despite the substantial deceleration, the company still has plenty of room for long-term sales and earnings expansion as it attracts new merchant partners, paves the way for increased spending from those already using its services, and builds out supply chain management and fulfillment services that increase the value of its platform.

Shopify's share price is down roughly 78% year to date and 83% from the lifetime high that it hit last November, and the big sell-off has presented an attractive buying opportunity. 

SHOP data by YCharts

Amazon stock has been punished in response to bearish shifts in the broader market and slowdown sin the e-commerce space as well, and I expect that it will eventually bounce back and go on to reach new highs.

Still, Shopify's pullback looks even more overdone. The company's market capitalization of roughly $38 billion also represents just a small fraction of Amazon's $1.3 trillion valuation, and the size difference suggests the smaller company could have an easier time moving the needle and delivering big gains for shareholders. 

So which of these e-commerce companies is the better buy?

If you're bullish on the long-term outlook for the e-commerce space, investing in both Amazon and Shopify could be the best play. Both companies are leaders in their respective service categories, and both companies are on track to play important roles in driving the growth of the overall online retail market. 

If you're only interested in owning one of these stocks, go with the one that best suits your risk tolerance and portfolio goals. While both companies have growth-dependent valuations, Amazon's business is larger, sturdier, and significantly more profitable thanks to its cloud services segment. But for those investors who see promise in Shopify's business and are willing to take on more risk, the smaller e-commerce player may have the potential to deliver superior returns. 

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

The post Better buy: Shopify vs. Amazon stock appeared first on The Motley Fool Australia.

Amazon.com (NASDAQ: AMZN) just had a great quarter, and its stock is rising as a result. Although shares are still down 16% year to date, Wall Street expects the e-commerce giant to keep growing because its business model seems to show resilience even during recessionary times. 

Yet, as good as business was for Amazon, there are warning signs too that should give investors pause. Maybe now isn't the best time to buy its stock.

E-commerce slows as cloud services soar

Amazon's growth rate is slowing. While revenue of $121 billion was up 7.2% year over year, that was actually down sequentially and represents its slowest growth in 20 years. It also lost $2 billion in the period, with both domestic and international retail showing operating losses.

The core retail business continues to face a number of headwinds right now, including rampant inflation, energy costs that remain historically high, elevated transportation costs, and rising labor costs. 

While much of Amazon's net loss can be blamed on the continued downward spiral of electric truck maker Rivian Automotive Inc. (NASDAQ: RIVN) in which Amazon has a big investment and caused a $3.9 billion pre-tax valuation loss, those macroeconomic inputs are also impacting Amazon's margins. 

But what's keeping the e-commerce company's financial position looking better than it otherwise would is the cloud services business, Amazon Web Services (AWS), which showed solid, double-digit growth of 33% in the quarter. AWS revenue hit $19.7 billion, generating operating income of $5.7 billion, also up 36%.

Trimming the fat and then some

And that may be masking a deeper issue. Amazon shed almost 100,000 workers in the quarter, or about 6% of its workforce, and they are the largest cuts it has made in a single quarter. 

CFO Brian Olsavsky said they added employees in the first quarter due to the omicron variant of the coronavirus, but they essentially became redundant afterward. It was able to get rid of most of those let go through normal attrition, and Amazon still has over 188,000 more workers than it did last year. He also said Amazon would likely increase staffing levels for the holidays again.

Still, after years of operating as a job-creation machine, the growth trajectory has suddenly come to an end. The reduction also likely helped Amazon save on labor costs in the quarter, something it struggled with during the so-called Great Resignation when people left their jobs and never returned to the market.

In last year's fourth quarter, for example, Amazon took a $4 billion charge mostly because of labor costs, and though Olsavsky said last quarter the company needed to improve efficiency while it increased staffing, it instead reduced employment levels.

The reduction comes as many other tech companies are also slashing their payrolls, including Microsoft (NASDAQ:MSFT) and Shopify (NYSE: SHOP), while Alphabet (NASDAQ:GOOGL) and Meta Platforms Inc. (NASDAQ:META) have eased back on hiring. 

Clouds on the horizon

Amazon's payroll cuts likely helped improve its financial picture for the period, but it hints that the recessionary winds blowing may not be so transient. If we enter a protracted period of economic contraction, Amazon may see e-commerce growth slow as consumers find it difficult to keep spending.

Amazon.com is no longer necessarily the place to find the best price on goods, though admittedly that may not have been the prime attraction for its service in a while. Breadth of product and delivery speed has been a bigger value.

In a recession, though, that might not be the case, and despite its cloud services' increasingly essential to the overall businesses as time progresses, online retail may hamper performance. The underlying message of the job cuts just might mean this is not the time to buy Amazon stock.

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

The post The 1 reason Amazon shares may not be a buy right now appeared first on The Motley Fool Australia.

During the peak pandemic years, e-commerce stocks could do no wrong. Now, they are entirely out of favor with the market. However, does this weakness present a buying opportunity?

Some of the top e-commerce stocks on my checklist are Amazon (NASDAQ: AMZN), MercadoLibre (NASDAQ: MELI), Shopify (NYSE: SHOP), and Etsy (NASDAQ: ETSY). Each is down significantly from their record highs. While all might be solid companies, are their stocks a buy? Let's find out.

The businesses

Each company operates in its own market niche:

• Amazon is the world's largest e-retailer and sells practically anything you could ever want. It also has a growing cloud computing business that diversifies the company.
• MercadoLibre is focused on Latin America and has an e-commerce platform, digital payments business, shipping logistics division, and consumer credit arm.
• Shopify isn't a direct e-commerce play, but it provides the software necessary for businesses to launch their e-commerce store.
• Etsy's site offers products that are often customizable and typically sold by individuals with a relatively small operation.   

All four companies saw massive sales growth during the pandemic, but only one has maintained its growth rate through 2022.

AMZN Revenue (Quarterly YoY Growth) data by YCharts

When the other businesses' sales growth fell dramatically, MercadoLibre's stayed steady at 63%. This was primarily due to 113% year-over-year (YOY) growth of its fintech revenue during the first quarter. However, its commerce revenue still grew a respectable 44% (which was higher than any of the other companies).

Both Amazon and Etsy had abysmal first quarters, and it won't get better for Etsy. Management projects Q2 sales to rise 7% at the midpoint, a metric that a weakening consumer could impact. Most of Etsy's goods are discretionary and nonessential during tough times. But this sentiment may be baked into the stock, which trades for 20 times free cash flow.

Amazon was propped up by its Amazon Web Services (AWS) cloud computing division in the first quarter as its sales rose 37% over the year-ago period. However, North American commerce sales only rose 8%, while international sales fell 6%. Additionally, Amazon's free cash flow slid further into negative territory, with Amazon burning an astounding $29 billion during the quarter.

Etsy and Amazon both had horrendous quarters, and besides AWS, there doesn't seem to be a light at the end of the tunnel. But what about Shopify?

Those who may not have checked on Shopify's stock lately may be wondering, "Why is this stock priced so low?"

As of June 28, Shopify split its stock 10-for-1, which means each share is now worth a tenth of what it used to, but investors who held the stock received nine additional shares to make up for the split.

As for the business, Shopify's sales grew a steady 22%. This rise was driven by a 29% increase in its merchant solutions segment, which takes a cut of each item sold through Shopify's platform. Because Shopify merchants have to pay a monthly fee to use its software, the company should be able to maintain a solid chunk of its business regardless of how the consumer is doing. However, it could see a material slowdown due to the weakening consumer because its merchant solutions made up 72% of Q1 revenue. 

Business outlook

Looking forward, it's hard to get excited about Etsy's growth prospects. It operates in a niche that thrives when the consumer is flush with cash -- something we are not experiencing currently. Amazon's only bright spot is AWS, which has massive tailwinds behind it. As for the e-commerce business, it's almost too big to grow rapidly anymore.

Shopify has a long way to go before fully deploying its vision for a complete e-commerce solution, but many stores have already taken the leap from brick-and-mortar to online with Shopify. Now, Shopify's growth will be driven by the growth of its clients, which could still be significant.

MercadoLibre has by far the best outlook. With its fintech divisions, there seems to be no sign of slowing down. Additionally, only about 4.9% of total retail sales occur online in Latin America versus 16.1% in the U.S. Latin America is home to more than 650 million people, giving MercadoLibre a vast growth runway.

Stock valuations

Comparing each stock directly from a price-to-sales ratio standpoint is dangerous as each has a different margin profile. However, examining where the stocks have traded historically can give investors insight into how cheap they are.

AMZN PS Ratio data by YCharts

From this chart, Amazon is returning to valuation levels last seen in 2016. On the flip side, MercadoLibre is valued the same as it was at the depths of the Great Recession. MercadoLibre isn't nearly as in trouble as it was in 2009 when the financial system was on the brink of collapsing. However, that is how the market values it. 

Both Shopify and Etsy are much younger, so investors don't have as much of a historical record on which to base their analysis.

SHOP PS Ratio data by YCharts

These two are returning to lows reached in 2016. However, growth prospects were greater back then because e-commerce wasn't as developed. Now that the largest e-commerce catalyst that will likely ever occur has subsided, the future growth story isn't as bright for Shopify or Etsy, leading to a lower valuation.

It's hard to ignore how superior MercadoLibre appears to be as an investment. It's growing the fastest, has a sizable market available, and is valued cheaply. That's not to say it is risk-free since operating in Latin America can be tumultuous with governments and economies.

However, with its wide footprint, it should be able to weather almost any storm it experiences. So of the four, MercadoLibre is my top e-commerce stock to buy, and it really isn't close.

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

The post Which e-commerce company is the best buy during this bear market? appeared first on The Motley Fool Australia.

In 2020, Morgan Housel released The Psychology of Money. I think it deserves to be on the Mount Rushmore of investing books, especially for folks who believe history and behavioral psychology are critical elements for investing.

In the book, Housel has a section describing the stock market as a field where multiple games that have nothing to do with each other are being played at once. To quote from the book:

Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.

Here's why this simple concept has lifelong impacts on your money and why it's the best investing lesson I ever learned.

Understanding a stock's price

A stock's price at a given time is merely a representation of the consensus value determined by buyers and sellers. But many of these players' motives and reasons for buying or selling the stock are completely different from yours.

For example, you have retail investors and institutional investors. Retirees and college kids. Long-term investors with multi-decade time horizons and day traders. Short-sellers and folks who only stay on the long side. Options and futures traders and those who only buy shares in stocks. The list goes on and on.

Housel's point is that many of these games have conflicting influences over the price action of a given stock. And for that reason, the price of a stock seldom resembles its long-term intrinsic value.

The tug-of-war between greed and fear

At certain times, the price of a stock can be dominated by greed and, at other times, it can be dominated by fear. In today's brutal bear market, that means you have some traders who may dump perfectly good growth stocks and move into value simply because they are fearful.

They decide they would rather own a stable business with a good balance sheet and positive free cash flow than take a risk on a company whose value comes from what it could be worth in future years and not what it is worth today. As a result, we continue to see exciting growth companies with a lot of potential get sold off heavily in the short term due to panic.

On the flip side, a lot of value stocks, and oil and gas stocks, were arguably underappreciated in 2020 and 2021, while some growth stocks saw their valuations get ahead of themselves. In those years, we saw investors take more risks and cast out companies with low growth. We saw a disregard for the geopolitical importance of utilities, energy stocks, and defense stocks in favor of bets on the next big thing.

Real-world examples

The point here is that you can gain clarity by remembering that a lot of the money in the stock market is playing a completely different game than you are. Once you understand that, it's easy to see why an excellent company like Amazon can fall by over 30% in a couple of weeks for little more than a mediocre earnings report and broader market volatility.

Let's take the example a step further with a stock like Shopify (NYSE: SHOP). Shopify closed the 2019 calendar year at just under $400 a share. It gained tons of momentum during the pandemic as e-commerce grew and the gig economy went into full effect. It ballooned to a market cap of over $200 billion and an all-time-high price per share of $1,762.92 on November 19, 2021; and has since slid to its current price of around $335 per share.

Shopify stock embodies several different games being played at once. On the one hand, you have long-term investors who believe in Shopify's ability to add new merchants, have existing merchants upgrade to more expensive plans, and have those merchants earn more money which benefits Shopify. Then you have a series of folks who were only buying Shopify as a short-term 'pandemic play' and don't care about the underlying business -- which was a big reason why Shopify stock ran up too far, too fast in 2021.

But today, you have yet another game being played -- the game of losing patience by selling growth stocks that make little to no profit and seeking cover in safer names. Once an investor realizes these conflicting games, it starts to make sense why a stock like Shopify can go from boom to bust. It doesn't make the price action in either direction right; it just helps explain why it happened in the first place.

A lesson from Warren Buffett

Warren Buffett is an excellent example of an investor who knows exactly what game he is playing. Buffett has repeatedly admitted he is unlikely to outperform a raging bull market because he doesn't invest in many growth stocks and sticks mostly to value. But he still believes he will outperform the S&P 500 over time -- which has been true over his long-term track record.

Berkshire Hathaway's portfolio may look overly conservative as it contains a lot of insurance companies, banks, oil and gas stocks, and consumer staples companies. But for Buffett, these are the kinds of businesses he wants to invest in. It's his game, and he's playing the stock market according to his own rules and risk tolerance.

An individual investor has no control over the broader stock market. So, imposing control over our investment decisions and style is the best way we can feel comfortable and achieve direction when stock prices seem to rise and fall randomly.

The silver lining

For long-term investors in stocks like Shopify, the whipsaw price action of 400% gains followed by 80% losses in just a two-year period can be confusing and annoying. It can be hard to know a fair price for a company when conflicting motives are tugging at its stock price. However, there is a silver lining.

Over time, fundamentals always win out. One look at the stock charts of successful companies like Nike or Apple, and you'll quickly see that sell-offs are simply par for the course for a successful long-term investment.

The beauty of long-term investing is that it is one of the few games where the odds are in your favor. The stock market tends to fall faster than it goes up but goes up more than it goes down. The average compound annual growth rate of the S&P 500 with dividends reinvested since 1965 has been around 10.5%. That's a massive tailwind for long-term investors to benefit from compound interest.

By investing in quality businesses that you understand and letting time be an ally, an investor stands a better chance of ignoring the noise of the market and focusing on what matters most.

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

The post The single greatest investing lesson I ever learned appeared first on The Motley Fool Australia.

Investors endured another round of selling in the stock market, piling on after last week's turbulent performance. For six months now, major market benchmarks like the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) have consistently lost ground. The S&P is inching closer toward joining the Nasdaq in bear market territory with a 17% drop from its highs at the beginning of the year.

Data source: Yahoo! Finance.

One area that has been hit especially hard lately is the e-commerce industry. Companies thrived in 2020 and 2021 as consumers had to resort to internet-based shopping during pandemic-related lockdowns. Now, though, reopening trade has many investors feeling like the heyday of these stocks is over. Moreover, with geopolitical pressures emerging onto the global scene, some believe that the factors that made e-commerce as lucrative as it was could be fading. Below, we'll look at some of the stocks seeing big losses and assess their longer-term prospects.

Big losses in internet retail

Today's session had some big losses, but many of the bottom performers were in the global e-commerce arena. Consider the following:

• Latin America's MercadoLibre (NASDAQ: MELI) fell 17%.
• In Singapore, Sea Limited (NYSE: SE) was down more than 15%.
• E-commerce supporter and buy now/pay later specialist Affirm Holdings (NASDAQ: AFRM) gave up more than 17% of its value.
• Canadian e-commerce platform provider Shopify (NYSE: SHOP) fell 10%.
• Online auto specialist Carvana (NYSE: CVNA) was down around 16.5% on the day.
• South Korea's Coupang (NYSE: CPNG) was one of the biggest losers, falling more than 22%.

As you can see, the selling was relatively indiscriminate and worldwide in scope. Even giants in the industry saw sizable declines, with Amazon.com (NASDAQ: AMZN) falling 5% and China's Alibaba Group (NYSE: BABA) posting a nearly 6% drop.

Most of these declines merely added to much more extensive drops over the past several months. The six stocks in the bullet points above are all down between 60% and 90% from their best levels over the past year, and even Amazon and Alibaba have fallen 40% to 60%.

The long-term picture for e-commerce

E-commerce has made itself an integral part of the overall retail industry, and its long-term prospects remain favorable. Industry watchers see e-commerce continuing to gain market share from brick-and-mortar stores, with one analyst seeing $17.5 trillion in global digital commerce taking place by 2030, up from just over $4.2 trillion in 2020.

But just because there's more e-commerce activity doesn't automatically mean that investing in the space will be equally lucrative. Greater competition could drive margins down, while higher logistics costs could weigh on profitability as well. However, if retailers try to take back some of the features that have made e-commerce popular, such as fast shipping at little or no cost, it could set back prospects for internet retail growth.

The wild card in e-commerce is the extent to which the industry has relied on functional global supply chains. If the free flow of goods comes to a halt, it will have ramifications for the entire retail industry, but e-commerce in particular could see its anticipated higher growth rates come to a standstill.

Lastly, investors need to remember that despite their recent drops, most of these stocks are still sporting solid gains. Amazon has doubled since late 2017, while MercadoLibre and Shopify have tripled and Sea is up nearly 300%. Those huge swings serve as a reminder that the price of extremely high returns from high-growth stocks can be massive volatility, making it essential to find the best stocks earlier rather than later.

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

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Shopify (NYSE: SHOP) just joined Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), and Tesla (NASDAQ: TSLA) in announcing stock splits. Shares of the e-commerce software company will undergo a 10-for-1 split, and a "founder's share" for co-founder and CEO Tobi Lütke is also being proposed (which would give Lütke 40% of total Shopify voting power).

Companies split their stocks for good reasons, like to better manage stock-based compensation to employees or share buybacks. However, a stock split by itself doesn't change a company's fundamental value, so business health should be assessed rather than stock price when contemplating a buy. With that in mind, here's why each of these stock split companies is a worthwhile long-term buy-and-hold right now. 

1. Shopify: A 100-year mission still early in its development

I'll start with Shopify, because this is my favorite company among the stock split candidates discussed here. I believe this stock also has some of the biggest upside potential in the next decade and beyond. 

Shopify is on a "100 year mission to make commerce better for everyone." Since its IPO in 2015, shares are up over 2,300%, and that's despite the recent 60%-plus sell-off from all-time highs. Suffice to say the journey has been highly profitable so far. Shopify's software suite helps aspiring entrepreneurs, small businesses, and fast-growing retail brands manage their sales online and via traditional in-person channels. Services include everything from website management to social media marketing to digital payment acceptance. 

Shopify's focus over the next couple of years will be scaling its Fulfillment Network, local warehouses from which Shopify users can manage inventory and quickly ship orders to customers. In an era of fast fulfillment, giving small merchants similar shipping options as bigger retailers will be a big challenge for Shopify -- but one that could be highly profitable if it can pull it off. 

Given the expectation for continued double-digit percentage growth, Shopify stock appears cheap at just 27 times trailing 12-month earnings. It isn't, especially considering Shopify Fulfillment Network is going to cost about $1 billion to build over the next few years. Nevertheless, this company has proven its worth in the retail world, and it has a mission that aligns with the benefit of its large and expanding user base. Shopify looks like a fantastic buy right now ahead of its proposed stock split.

2. Alphabet: The internet is a secular growth megatrend

In July, Google parent company Alphabet will undergo a 20-for-1 stock split. The last time the internet search leader underwent such activity was in 2014. Since then, Alphabet shares have risen over 350%.

There are plenty of reasons to believe Alphabet will continue to provide steady growth for many years to come. For one thing, its bread-and-butter business selling digital ads is still steadily gobbling up global market share of the overall advertising industry (on pace to reach $1 trillion a year in global spending). Digital ads have a lot of benefits for marketers, and they're highly profitable for Google. 

Alphabet is using those profits from its core Google business ("Google Services" generated an operating profit margin of 37% in 2021) to fuel lots of other projects. Google Cloud is chief among them. Organizations are migrating their IT workloads to data centers and adopting cloud-based services, providing Google with a second secular growth megatrend beyond just digital ads. Add in Google Payments, YouTube, various subscription services, self-driving cars, and more, and Google has no shortage of directions to take its business. 

Plus this is one of the deepest-pocketed organizations around. Alphabet had $140 billion in cash and short-term investments on hand at the end of 2021, offset by debt of only $14.8 billion. Trading for just 26 times trailing 12-month free cash flow, Alphabet stock looks like one of the best long-term values out there right now.

3. Tesla: Still massive upside for the EV market

Tesla had its last 5-for-1 stock split over the summer of 2020, and shares have doubled in value since then. In recent regulatory filings, the company has indicated it will put another stock split on the table for shareholders to vote on.

The real reason to invest in Tesla right now, though, is the massive consumer migration from traditional internal combustion engine vehicles to electric vehicles. Of the nearly-67 million vehicles sold worldwide in 2021, only about 6.5 million were electric vehicles (EVs). Tesla delivered just over 936,000 vehicles in 2021.

As legacy automakers and other EV start-ups fire up their assembly lines for next-gen cars, it isn't reasonable to expect Tesla to continue commanding such a large slice of the EV market share. However, management thinks it can continue growing sales at roughly the same rate as the EV space overall, about 50% per year, for the next few years. For an automaker that just cranked out over $45 billion worth of vehicle sales in 2021 (less environmental regulatory credits sold to other automakers), that's an ambitious growth rate.

A few catalysts could help Tesla supercharge its way to $100 billion in annual sales and beyond. Its new Gigafactories in Berlin and Austin, Texas, are now live. Though temporarily shuttered due to a coronavirus outbreak, the Gigafactory in Shanghai will handle production in Asia. More factories are likely on the way, as are new models like the Cybertruck. At 71 times one-year forward expected earnings, fantastic execution of its expansion plans is already priced into this stock. But if you think the move to EVs will continue at a rapid pace for the next decade, there's a lot to like about Tesla even at these sky-high prices.

4. Amazon: A fantastic allocator of capital goes on a spending spree

For in-the-know investors, Amazon's mind-boggling run higher isn't simply a story of e-commerce expansion. It's true, Amazon used its early lead in selling online to its advantage, but that's not really what has made the stock move nearly 155,000% higher since its IPO in 1997. Rather, it's been the company's success in allocating capital to highly profitable new projects adjacent to its e-commerce empire that has been the key ingredient to its success. 

Amazon Web Services (AWS), the cloud computing segment that started simply by "renting out" extra data center capacity from the e-commerce segment, generated only 13% of all revenue last year. However, AWS operating profit accounted for 75% of Amazon's grand total. Other services like advertising on its merchant platform accounted for much of the rest of operating income. 

Amazon spent an incredible $65 billion on capital expenditures (property, plant, and equipment) to support its long-term growth last year. With infrastructure costs only increasing thanks to inflation, that pace of spending isn't likely to abate anytime soon. For reference, Amazon's capital expenditures were $20 billion in 2020. The explosion in spending in support of steady expansion has put pressure on the e-commerce giant's bottom line. Shares currently trade for 47 times trailing 12-month earnings, and 240 times trailing 12-month free cash flow.

However, if you believe Amazon will continue to be an excellent allocator of capital to the right projects at the right time, there's a lot to like about that explosion in capital investment. Amazon is also undergoing a 20-for-1 stock split in May, but there is a multitude of longer-term reasons to buy and hold beyond this one-time stock split event. 

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

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The "buy now, pay later" (BNPL) craze hit fever pitch this week with payments giant Square (NYSE: SQ) making a $29 billion play for the global leader in the space, Afterpay. The company's innovative twist on microlending is incredibly popular with young shoppers, making it prime real estate for companies that want to capture a slice of the future. 

The deal shines a light on other potential opportunities in the industry. E-commerce giant Shopify (NYSE: SHOP) has been working with BNPL provider Affirm Holdings (NASDAQ: AFRM) for the last year, and it owns 7.6% of the company's stock. They recently took their partnership to the next level after Shopify integrated Affirm's technology into its online merchant checkout process, allowing customers to directly finance their purchases. 

Let's consider three reasons for Shopify to take Affirm fully under its wing.

1. Stronger together

Over 5.4 million consumers are actively using Affirm across 12,000 integrated merchants. When shoppers check out with Affirm, their purchase is financed at an annual percentage rate of 0% to 30% depending on their credit, with the option to repay the money in three, six, or 12 months. 

Affirm's customer base is a drop in the bucket when you consider Shopify powers an estimated 1.75 million online stores, which are the primary focus of the partnership between the two companies. 

But focusing on the merchant side might be too one-dimensional. Affirm recently announced it will be launching the Affirm Card, a consumer-focused product that will allow shoppers to take advantage of BNPL anywhere they wish. It separates the Affirm experience from the shackles of its merchant system, and sets consumers free to take advantage of the same benefits at stores more suited to their needs. 

Shopify currently has 118 million registered users across its Shop virtual assistant platform and Shop Pay payments product, which is a substantial pool of consumers who might be enticed by the offer of a new-age replacement for their credit card. Square is already planning key Afterpay integrations with both its Seller platform (merchants) and its 70 million CashApp-using consumers, and this is a move Shopify could learn from.

2. Buy now, pay later drives sales

It probably comes as no surprise that financing consumer purchases with no fees and little interest encourages people to spend. But it might surprise you just how much.

Shopify is in the process of pitching its BNPL solution (powered by Affirm) to its merchants, and it has provided a series of selling points. The company claims it will increase conversion by 50%, reduce cart abandonment by 28%, and enable larger cart sizes because consumers have the flexibility to buy more.

Half of Affirm's customers are either millennials or from Gen Z, and the company notes that 79% of this cohort shop using a smartphone. Its BNPL product is driving engagement, with 64% of transactions in fiscal 2020 made by repeat customers who spend $2,200 annually on average.

If Shopify absorbed Affirm, it would have the opportunity to unleash this across its ecosystem of over 100 million users, providing incredible benefits to its merchant base. 

3. They're already partners

In July 2020, Affirm announced that it would partner with Shopify to power its new Shop Pay Installments feature, an attempt by Shopify to introduce BNPL to its merchants and customers. 

Affirm was still a private company at the time, and as part of the deal it handed over warrants that entitled Shopify to purchase up to 20.3 million shares in the company -- equivalent to about 7.6% -- for just $0.01 each. Affirm proceeded to list on the stock exchange in January this year, and Shopify maintains its stake worth about $1.3 billion today.

Since the two companies have been working on product integrations for the last 12 months, the merger into one company could be almost seamless. Shopify's merchants are already familiar with the new features powered by Affirm, so if Shopify views BNPL as a big part of its future, then absorbing Affirm feels like the smart way to go.

Shopify has a market capitalization of over $190 billion compared to Affirm's $17 billion, so an all-stock deal similar to the way Square acquired Afterpay would result in minimal dilution for shareholders, especially considering it already owns 7.6%. Shopify also has $7.7 billion in cash on its balance sheet, and although using it wouldn't be ideal, it puts some options on the table (like a part-cash, part-debt deal, or a part-cash, part-stock agreement). 

But the most important thing is that BNPL represents an opportunity to capture highly engaged young shoppers, and the company's merchants and shareholders alike stand to benefit greatly from that. 

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

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