A Bull Market Is Coming: 2 Trillion-Dollar Growth Stocks to Buy Before They Soar

History has shown that, given enough time, the stock market will always trend wide to new highs. That is an important lesson to remember in a year like this, where all the major US indices, of the S&P 500 to the Nasdaq-100tipped into bear market territory.

Rising inflation and rising interest rates were the key drivers of this latest decline, as retailers worried that consumers would have less spending power and affect the financial performance of many businesses. The market decline is unlikely to stop until these concerns ease. There are some early signs that inflation has peaked, which could be the first step in unleashing the next bull market.

Two of the highest quality stocks investors can own Microsoft (MSFT -1.74%) in the Apple (AAPL -1.46%). With both stocks trading up more than 20% this year, a buying opportunity ahead of an inevitable market recovery now presents itself.

1. Microsoft’s diversity makes it the ideal all-weather stock

One of the best attributes a company can have during tough economic times is a diverse revenue base because some industries simply hold up better than others. Revenue streams that depend on consumer spending, for example, are suffering the most right now and Microsoft is right there with them. But many businesses continue to invest in new technologies such as cloud computing, where Microsoft is a major player.

This year, Microsoft has seen a decline in revenue and engagement in its Xbox gaming ecosystem, as well as falling sales for its Surface line of notebook computers and devices. Plus, the US Federal Trade Commission is trying to block Microsoft’s blockbuster $69 billion acquisition of the game development studio Activision Blizzard. The deal would open the door to new opportunities for the Xbox platform, but the government is concerned that it will harm the competitive landscape in the gaming industry by making Microsoft too dominant.

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This is exactly why operational diversity is so valuable. Despite these challenges, Microsoft’s intelligent cloud segment, which is home to the Azure Cloud Services platform, continues to grow rapidly. Azure ranks only behind Amazon Web Services in the cloud industry and offers hundreds of products and solutions to help businesses migrate their operations online. Whether they require simple data storage or complex artificial intelligence powered tools, Azure has them covered.

The platform’s revenue jumped 35% year over year in the most recent first quarter of fiscal 2023 (ended Sept. 30), which was three times the rate of Microsoft’s companywide revenue growth of 11%. This outperformance has been a consistent trend in recent years, and therefore Microsoft CEO Satya Nadella wants to prioritize areas of the business that will benefit the most from the movement towards digital technology.

After all, according to an estimate by Grand View Research, the cloud is a $1.5 trillion annual opportunity by 2030. With Microsoft stock down 27.4% in 2022, this could be a rare opportunity to get a steep discount buy

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2. Apple is a great way to bet on a consumer comeback

While consumers suffer the most from high inflation, it means they are also the biggest beneficiaries when prices cool. Apple is a quintessential consumer product company, and so it is clear that the company could be one of the first to return under these circumstances.

Nevertheless, even in light of the broader economic weakness, Apple continued to generate growth. Its revenue expanded by 7.8% year over year during fiscal 2022 (ended Sept. 24), which was boosted by a strong fourth quarter after the release of a series of new products in early September.

The company unveiled its new flagship iPhone 14, its next-generation AirPods headphones, and its Apple Watch Ultra. But the Mac brand delivered the most positive result in Q4, with sales jumping a whopping 25% year over year.

These products should give Apple’s finances a boost during the important holiday season.

But in the longer term, investors are watching the company’s services segment closely. It is home to all of Apple’s subscription-based products such as Apple Music, Apple News, Apple TV, and Apple Pay, which is going after a global payments industry that will be worth nearly $20 trillion by 2026. The services business grew by 14.1% during fiscal 2022, more than double the pace of the product business, which expanded by 6.3%.

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But services make up just one-fifth of Apple’s total revenue, so why are investors so focused on them? It’s because they carry a gross profit margin of 71%, which is significantly higher than the 36% of Apple’s hardware business. They also offer predictable, recurring revenue streams that consumers are less likely to delay compared to, say, upgrading their expensive iPhone.

Apple stock is down 24.6% year to date, and while that’s a notable drop, it’s doing better than other consumer-focused companies like Amazon, which has lost 48% of its value over the same time frame.

Apple remains the largest listed company in the US, with a market value of $2.1 trillion, and discounts of this magnitude are relatively rare. That spells opportunity for investors before the next inevitable bull market.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the shares mentioned. The Motley Fool has positions and recommends Activision Blizzard, Amazon.com, Apple and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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