We recently compiled a list of the Long-Term Stock Portfolio: Best Stocks for 10 Years. In this article, we are going to take a look at where Amazon.com Inc. (NASDAQ:AMZN) stands against the other best long-term stocks.

To select stocks with long-term growth potential, investors should focus on fundamental analysis, evaluating financial health through earnings history, revenue growth, and profit margins. Companies that consistently demonstrate earnings growth and possess a strong competitive advantage are more likely to thrive over time. Investing in dividend-paying stocks is also beneficial, as those that regularly increase dividends indicate financial stability. Identifying stocks in growing industries, such as technology, renewable energy, and healthcare, can further guide investment choices. Diversification across various sectors reduces risk, ensuring that underperformance in one area can be balanced by gains in another. By combining such strategies, investors can improve their chances of finding promising stocks that align with long-term financial goals.

On December 26, Drew Pettit, Director at Citi Research, discussed his long-term investment strategy on CNBC as he looks ahead to 2025, emphasizing a “barbell” approach that balances high-growth stocks with lower valuation names. This is relevant for investors considering a long-term stock portfolio over the next decade. Pettit advocates for pairing mega-cap growth stocks with cyclical and defensive sectors, where fundamentals are expected to improve. He believes that adopting this barbell strategy can enhance portfolio resilience and capitalize on diverse market opportunities.

In the realm of AI, Pettit noted a growing enthusiasm among investors. He highlighted a shift in perception, moving beyond backend applications to include companies that are more customer-facing within the AI value chain. When it comes to specific investments within AI, Pettit expressed a preference for semiconductors over software at this time. He pointed to Marvell Technology as a standout choice, projecting that its custom AI chip business could experience remarkable growth, projected at 200% next year, followed by an additional 60% growth in the subsequent year.

Pettit also discussed his strategy for 2025 and outlined plans to reduce exposure to consumer stocks while focusing on attractive areas within the sector that are less sensitive to interest rates. He highlighted the potential of fintech and payment companies and said that they are well-positioned for long-term growth amid deregulation. Pettit emphasized that his firm’s focus is not on cryptocurrencies like Bitcoin but on traditional payment networks. He expressed concerns about consumer data trends and interest rate changes, advocating for a balanced approach by seeking high-quality stocks less affected by rate fluctuations and recommending key positions such Big Tech for long-term investment.

Methodology

We first sifted through ETFs, online rankings, and internet lists to compile a list of the top blue-chip stocks with a 10-year revenue compound annual growth rate of over 10%. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Amazon.com Inc. (NASDAQ:AMZN)

10-Year Revenue CAGR: 21.95%

Number of Hedge Fund Holders: 286

Amazon.com Inc. (NASDAQ:AMZN) is a technology company that has evolved from an online bookstore to a diversified conglomerate. Its core businesses include e-commerce, where it operates an online marketplace, along with cloud computing through Amazon Web Services (AWS), which provides a suite of services to businesses and individuals. It also offers digital streaming services and has expanded into areas like AI, advertising, and physical retail.

During Q3 2024, AWS led the charge in profitability, contributing $10.4 billion to the company’s total operating income of $17.4 billion. Its management team is focused on strengthening its cloud offerings through strategic customer-centric initiatives. A recent example is the launch of the Oracle Database@AWS service, which enables customers to migrate their Oracle workloads to AWS infrastructure with minimal modifications.

Amazon.com Inc. (NASDAQ:AMZN) also partnered with Databricks, a leader in data analytics and AI, to accelerate the development of custom AI models using Databricks Mosaic AI on AWS. These efforts are further complemented by signed agreements with major corporations like Booking.com, Capital One, and Sony. Due to the growth of its cloud computing division (AWS), the company is positioned for continued long-term success.

Despite near-term stock price weakness in the company, Montaka Global Investments strategically increased its holdings, recognizing its substantial long-term upside potential compared to other holdings in its portfolio. Montaka Global Investments stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:

“Secondly, in August, we sold some of our holdings in two tactical positions in the tail of Montaka’s portfolio – Advanced Micro Devices (AMD) and Kyndryl Holdings (KD) – to take advantage of a near-20% drawdown in the stock price of Amazon.com, Inc. (NASDAQ:AMZN).

We still see plenty of upside in AMD and KD, but Amazon has more substantial and higher-probability upside that demanded we allocate even more of Montaka’s capital to the online retailer.

Investment opportunities always compete for capital. Through this lens, Montaka’s largest investments act as a kind of ‘benchmark’: Any new investment must be more attractive than these holdings to get included in our portfolio.

Because we believe Montaka’s largest investments remain so attractive, our annualized portfolio turnover has been low for many years now – typically around 25%.

We continually identify quality global businesses with upside potential – but few new investment opportunities have greater upside than Montaka’s existing portfolio investments.

While Montaka is focused on investing over the long term, and most days don’t require any action on our part, paradoxically we need to be agile on a daily basis. That is, we must be ready to act if stock price changes throw up attractive investment opportunities.”

Overall AMZN ranks first on our list of the best stocks for 10 years. While we acknowledge the growth potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.