Optimal Stocks to ALLocate a $50,000 Investment in Presently
Leo Tolstoy might have penned, "All flourishing investment portfolios share common traits; every struggling one faces unique challenges."
The key distinction between prosperous portfolios and the remaining bunch lies in striking the right equilibrium between promising startups and stalwart performers. With this perspective in mind, let me sketch out a theoretical, tech-centric $50,000 portfolio.
Netflix
I'll kick things off by dedicating $20,000, or 40% of the hypothetical portfolio, to Netflix (NFLX 2.54%), a stock that has gained over 63% by the year's end, as per this point in time.
What appeals to me about Netflix is its grit.
In 2021, the competition was seemingly cornering Netflix. Various media giants were launching their own streaming services - Disney, Paramount, Comcast, and fresh entrants like Apple were pouring billions into fresh content, potentially eroding Netflix's market share.
However, three years on, Netflix appears as robust as ever. The company reported a striking quarter (spanning three months ending September 30, 2024), marked by:
- Revenue growth of 15%
- Operating margin of 30% (a new all-time high)
- Earnings per share of $5.40 (another all-time high)
The company possesses a wealth of content that's expected to keep viewers engaged in the upcoming months, including new offerings like live events. Netflix will live-stream two NFL games near Christmas, and the Jake Paul-Mike Tyson boxing match.
Netflix has weathered a tumultuous phase. Not only has the company survived, but it has also strengthened. Investors should take notice, making Netflix the initial pick for my theoretical portfolio.
Next, I'm allocating $5,000, or 10% of the hypothetical portfolio, to Reddit (RDDT 6.41%).
Let's get to the heart of the matter: Every portfolio needs a bit of panache, and, for me, Reddit is the stock that delivers it.
Reddit operates a digital message board forum. It offers subreddits for a wide variety of topics, such as car repair to plant care and everything in between.
The company has been around for years, but its stock made its debut via an initial public offering less than a year ago, in March 2024. At this juncture, the stock has soared by over 167%.
In many ways, Reddit resembles a smaller, newer version of Meta Platforms, particularly its flagship platform, Facebook. Reddit's granular nature, with subreddits focused on specific interests and communities, makes it a marketer's dream.
Marketers are gravitating towards Reddit as they seek to micro-target precise audiences. In its last quarter (spanning three months ending September 30, 2024), Reddit announced revenue growth of 68%. Daily Active Uniques (DAUqs) increased by 47%. The company reported net income of $30 million, shifting from a loss of $7 million in the same period a year prior.
While the numbers look promising, I'm only allocating 10% of the hypothetical portfolio to Reddit due to its limited track record of success. It's essential to temper expectations with unproven stocks. Nevertheless, investors should keep Reddit on their radar - this could be a breakout star in the coming years.
Amazon
Finally, I'm allocating $25,000, or 50%, of the hypothetical portfolio, to Amazon (AMZN 2.32%).
Simply put, I desire at least half of my portfolio invested in a proven winner - and without a doubt, Amazon is a top-notch stock.
Since its inception, Amazon shares have swelled by 200,000%. On a compound annual growth rate (CAGR) basis, they've yielded approximately 32% annually for nearly three decades.
To put it another way, a $10,000 investment in Amazon made in 1997 would be worth $20 million today.
Although it's unrealistic to anticipate that degree of growth from Amazon stock moving forward, that doesn't signify Amazon has hit its growth ceiling - far from it.
In its latest quarter (spanning three months ending September 30, 2024), Amazon reported revenue growth of 11%, which translates to a quarterly revenue of $159 billion.
What's more, the company's net income and free cash flow have surged to new heights under CEO Andy Jassy's guidance. Amazon's strategic investments in its fulfillment network, as well as its expanding advertising business, have contributed to its uptick in profitability.
All in all, Amazon embodies many qualities I seek in a major portfolio holding. It boasts impressive growth, strong profitability, ample free cash flow, and exceptional leadership. In a nutshell, it's a dependable anchor for my hypothetical portfolio in the years ahead.
In light of the success of Netflix and Amazon, it's crucial to consider the role of finance in creating a balanced portfolio. Investing a significant portion of the portfolio in reliable performers like Amazon can provide a solid foundation for potential growth.
Returning to the discussion of Netflix, its financial performance and resilience in the face of intense competition highlight the importance of investing wisely and understanding the financial potential of a company strongly.
