Do you have $5,000 you can afford to invest, but aren’t sure which stock to buy? A couple of obvious stocks that are ideal buy-and-forget investments are AstraZeneca (AZN) 0.03%) Y Microsoft (MSFT 0.00%). They are leaders in their respective industries and have excellent financials behind them; they are not investments you need to worry about in the short term.
AstraZeneca is a strong healthcare company with a broad portfolio of assets that can deliver promising growth. In the first half of the year, the company reported $22 billion in revenue, which was up 48% year-over-year (excluding foreign exchange impact).
What makes AstraZeneca attractive to long-term investors is its diverse business, with the company generating billions in revenue from treatments focused on multiple therapeutic areas, including cancer, rare diseases, cardiovascular and respiratory diseases, vaccines and others. .
The company continues to create new products that should deliver fantastic growth, including the breast cancer drug Enhertu, which has been shown to be effective in treating both low and high HER2 levels. What that means is that the drug can treat more types of breast cancer. At its peak, it could generate $6.6 billion in annual revenue.
But even beyond that, there is more potential for business. The number of projects AstraZeneca has in the pipeline amounts to a staggering 184. The company’s diverse product mix and abundant opportunities mean that growth is likely to continue over the years.
And AstraZeneca has the money to balance both growth and its dividend, which yields 2.4% (better than the S&P 500 average of 1.7%). In the past six months, the company generated $4.5 billion in cash from daily operations, which is 50% more than the nearly $3 billion it paid out in dividends during that time.
With a forward price-to-earnings multiple of 15, the stock trades in line with the broader healthcare industry average. But given AstraZeneca’s above-average growth potential and dividends, I’d say it’s worth paying a premium and therefore a cheap buy at the moment.
Microsoft is another growth beast that should be an easy place to invest $5,000. The only thing I could see putting investors off about the stock is that its market capitalization is around $2 trillion and it is one of the most valuable companies in the world.
It’s hard to argue with that though, given how strong business is today. Microsoft is trading at 27 times its future earnings, and while that’s not cheap (the tech sector averages a multiple of 21), the stock would also be expected to trade at a premium.
Microsoft’s office products, its Azure cloud business, the Xbox gaming platform, plus the pending acquisition of the gaming company. Activision Blizzard are all examples of the different growth opportunities you can pursue. And nearly all of the company’s various business units generated 10% growth in their most recent quarter (ended June 30) when currencies were discounted.
During that period, total sales of $51.9 billion increased 12% and generated $16.7 billion in net profit. Over the course of the last 12 months, the company has also generated more than $89 billion in cash from operations. Those strong financials can go a long way in helping the business grow for years and years.
And it pays a dividend that yields 1%. It’s not huge, but it’s a plus for investors, and the company has room to add to it if it so wishes. The payment rate is only 25% of net income.
Despite its high price, Microsoft still makes sense as a long-term purchase. As Warren Buffett says, it is much better to buy a great company at a fair price than a fair company at a great price. In Microsoft’s case, it definitely comes first.
David Jagielsky has no position in any of the mentioned stocks. The Motley Fool has positions and recommends Activision Blizzard and Microsoft. The Motley Fool has a disclosure policy.