You know how the saying goes. The best time to plant a tree, or build generational wealth, was 30 years ago. The second-best time is right now.
For those looking to pass something down to their grandkids, there’s always the question of what the best sort of investment is. Sure, bonds now carry yields we haven’t seen in quite some time. However, passing down a bond-filled portfolio that may underperform inflation in the long term doesn’t sound enticing.
Indeed, equities have been the best-performing assets over the very long term, for good reason. Those looking to build generational wealth generally do so in stocks and real estate.
Here are three growth stocks I think investors looking to create more than a nest egg should consider. These companies have the sort of growth characteristics and durable competitive advantages that are so rare in this day and age.
Let’s dive in!
Apple (NASDAQ:AAPL) is the world’s leading publicly-traded company, with a massive market capitalization of $2.6 trillion. Apple is best known for offering a wide range of tech gadgets – from smartphones to wearable tech. However, despite being ubiquitous, Apple’s future is likely to be marked by fierce competition. Indeed, considering Apple’s margins, many competitors will likely continue to pop up, looking to take share away from this leader.
That said, Apple’s iPhone has actually seen its market share expand globally. Recently, the iPhone took more than 50% market share in the U.S., with strong positions forming in other key international markets.
Much of this has to do with Apple’s world-class brand, strong customer loyalty, and product ecosystem. Customers come to Apple knowing they will get some of the highest-quality techs out there. And while innovation has slowed (there’s only so much you can do with a smartphone) in recent years, there are plenty of other exciting improvements the company has made to its other gadgets it hopes will catch on, as the iPhone has.
I think the macro environment will likely remain difficult for Apple and its peers. That said, there’s a reason why analysts such as those at Goldman Sachs are growing bullish on AAPL stock. Over the long term, I think this is the right call, no matter what happens over the next year or two.
Alibaba (NYSE:BABA) is a technology and marketing platform provider that operates through seven distinct segments. Its China Commerce segment comprises several retail commerce businesses, including Taobao, Tmall, Freshippo, and wholesale. Alibaba’s International Commerce segment includes AliExpress and Lazada, among other international retail and wholesale commerce businesses.
Notably, Alibaba has recently made a big move, announcing plans to break up its company into six smaller entities. This move appears to be a bid to appease Chinese regulators, who don’t really fancy monopolies or outspoken CEOs (as has been seen with the Alibaba/Jack Ma story).
It’s unclear how BABA shareholders will be compensated for this break-up and how everything will shake out. For now, I think this move is a smart one, as Alibaba’s management team looks to minimize its geopolitical risk, particularly among foreign investors.
My view is that Alibaba isn’t “uninvestable” due to its Chinese base. Quite the opposite – I think growth in China is likely to far outpace that of the U.S. for the long term.
Thus, for those looking to make a significant bet on the strength of the global tech sector, BABA stock is the way I’m playing this trend right now.
Among the best ways investors can build generational wealth has been Alphabet (NASDAQ:GOOG). This company, known for its core Google search business, has become a monster in other key segments. The company’s Google Cloud, YouTube, and “Other Bets” make Alphabet a well-diversified and vertically-integrated tech behemoth that’s more than just a search monopoly in most markets.
Of course, the company’s core search business is Alphabet’s core cash flow driver. The company has outperformed roughly 77% of its peers, with impressive growth in the past and a significant growth outlook moving forward.
The company’s growth prospects have been bolstered by increased capital spending last year. Thus, while many of its peers are cutting back, and Alphabet is likely to continue to trim around the edges, this is a company that appears to be invested in its long-term growth, particularly in the company’s Cloud segment.
Over the long term, I think Alphabet remains among the best tech options investors looking to build generational wealth can consider. Indeed, this is a top stock on my watch list right now. Accordingly, I plan on adding exposure to any material market weakness moving forward.
On the date of publication, Chris MacDonald has a position in AAPL, BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.