Blue-chip stocks are large, well-known companies with excellent reputations. These stocks have a proven track record and a history of delivering solid returns over the long term.
Historically, these types of stocks would be companies with decades of dominance in their respective industries. However, as our economy goes through a digital transformation, a blue-chip can also be younger tech stocks with disruptive business models.
While blue chips are not immune to market downturns, they’ve shown a history of weathering storms and bouncing right back. That’s why they are so appealing to investors and why I recommend the following three industry leaders: Salesforce.com Inc (CRM – Get Rating), Alphabet Inc. (GOOGL – Get Rating), and Adobe Inc. (ADBE – Get Rating).
CRM represents one of the better long-term growth stocks in the software industry. The company has a 30% market share in the sales force automation space and is well-positioned to continue capturing more of the $130 billion market. The company is considered a leader in each of the markets it serves, and its customer retention has been improving over time.
CRM has been a primary beneficiary of the cloud migration and is benefiting from strong demand as customers are undergoing a digital transformation. In essence, the rapid adoption of its cloud-based offerings is driving demand for its products. The company has been adding more features such as customer service, marketing automation, e-commerce, analytics, and artificial intelligence, with each of them tightly integrated. Management has also emphasized expanding its margin in recent quarters.
The stock has an overall grade of B, which translates into a Buy in our POWR Ratings system. The company has a Growth Grade of B, which isn’t surprising as revenue is expected to rise 21.5% year over in the current quarter. Earnings are forecasted to grow 25.7% in the same quarter. CRM also has a Quality Grade of B due to its healthy balance sheet. The company had $12 billion in cash as of the most recent quarter, compared to no short-term debt.
We also grade CRM based on Value, Momentum, Stability, and Sentiment. You can find those grades here. CRM is ranked #13 in the Software – Business industry. You can find other top stocks in that industry by clicking here.
GOOGL is the king of online search. It dominates the online search market with a global share above 80%. This generates strong revenue growth and cash flow. The majority of its revenue is derived from delivering online advertising and by selling apps on Google Play. The company is well-positioned long-term due to search, its Android software, and YouTube revenue.
The increasing adoption of mobile devices has been a boon for the company. Android’s dominant global market share of smartphones leaves the company well-positioned to grab market share as search traffic shifts from desktop to mobile. The company has also gained inroads into the growing cloud market. GOOGL has been able to…
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