Understanding the longevity of the underlying industry is half the battle.
It's fun to make big gains in a short time. But let's be honest, that's not what investing is about. Smart investors understand that this is a long-term game, and that the winners are those who can find quality stocks and hold onto them for years. Slow and steady is the way to win.
With that as a backdrop, here's an overview of three blue-chip stocks that are not only performing well in the bull market, but are also expected to continue to do so in the coming years. Dow Jones Industrial AverageIn reality, this means they have already undergone a lengthy review.
JPMorgan Chase
JPMorgan Chase (JPM -0.60%) It's not just a big bank; it's the largest bank in the United States, with $3.5 trillion in assets. In theory, size shouldn't matter, but in reality it does. JPMorgan, along with its retail/consumer brand, Chase, enjoys enough scale to keep the company in front of potential customers while simultaneously keeping competitors in check.
Still, it's hard to get excited about the stock these days. Though sales and profits both rose last quarter compared with the same period a year ago, cracks related to the economic downturn are starting to show. For example, the company's credit card charges nearly doubled in the first quarter, and its 90-day delinquency rate soared.
Loan loss provisions are also increasing, ultimately hurting operating efficiency. Return on common equity declined to 17% this time around from 18% in the first quarter of 2023. Net interest income also declined for the three months through March, and the outlook for net interest income for the remainder of the year was disappointing.
As a result, the stock price fell.In banking, it's often these seemingly small things that end up becoming big deals.
But what's largely forgotten in all this noise is that none of the problems the bank and its peers currently face are unusual or permanent. Rising interest rates, the subsequent weakening of the economy, and subsequent loan losses are all part of a very predictable cycle that hits banks the same way over and over again. The best banks always emerge from their malaise.
That's likely to be no different this time around, which is why JPMorgan Chase shares are still within striking distance of the all-time high they hit earlier this month, despite their post-earnings slump.
Microsoft
You know Microsoft (MSFT 0.04%)In fact, there's a very good chance you're using it right now.
Similarly, they're likely to be regular users of productivity programs like Word and Excel. They're also likely to be Xbox video game console fans and users of the AI-powered Copilot assistant. And then there's the invisible Microsoft: Synergy Research Group, for example, suggests that Microsoft controls roughly a quarter of the global cloud computing market.
Of course, these are all good reasons to own Microsoft stock, and the fact that there are lots of them makes them even more so. But despite this week's record highs, the biggest reason to invest in Microsoft stock may be the way the company's business model is evolving.
The software giant no longer just sells software updates in a box: Much of its software is rented, meaning consumers and businesses can pay a small monthly fee for cloud-based access to tools like the aforementioned Word and Excel.
The company itself has been tight-lipped about how much of its subscription-based business it has developed lately, but it reported that it had $235 billion in “remaining commercial performance obligations” on its books at the end of last quarter, up 20% from a year ago. These are goods and services that have already been contracted for future delivery but have not yet been delivered.
So, this gives us an indication of the extent of the subscription-based business the company currently has. More importantly, these performance obligations are booked as revenue, providing a glimpse into how much business is already in the pipeline, setting the stage for steady revenue growth. For reference, Microsoft did $212 billion worth of business during the fiscal year that ended last June.
Of course, Microsoft still makes money from one-time purchases like Xboxes and video games, and from selling software to customers who don't want or need subscription-based access. But regardless of how it's generated, the need for software, operating systems, and cloud computing technology isn't going away anytime soon (and may never go away).
visa
lastly, visa (V -1.28%) Add this to your list of Dow Jones Industrial Average stocks to hold for the long term. Visa is the world's largest credit card intermediary. There are more than 4 billion Visa cards in the hands of cardholders, who use them at more than 130 million locations to make 276 billion purchases of goods and services each year, which equates to roughly $15 trillion.
The company isn't exactly a high-growth stock; last quarter's revenue growth of 10% was in line with the company's historical and projected growth. The payments market is already saturated and there are plenty of alternatives, so there isn't a lot of business for Visa to take from competitors to fuel its growth.
But it's entirely possible that Visa will continue to grow for a long time to come.
One aspect of this opportunity is the increasing shift away from cash to more convenient payment methods: According to a report from the US Federal Reserve, the use of cash in the US is declining from 31% of transactions in 2016 to just 18% by 2022. However, that leaves the remaining 18% that can be processed via card-based payments, and the 13% of payments that are currently processed via Automated Clearing House (ACH) transfers (directly from a bank account).
This trend is expected to continue as cash becomes less convenient and necessary. We are seeing similar trends overseas. This shift works to Visa's advantage because the company takes a small percentage of every transaction it facilitates.
In this regard, the Merchants Payments Coalition reports that the total amount of swipe fees collected by credit card intermediaries has increased from $160 billion in 2022 to a record-breaking $172 billion last year, reflecting the impact of this change. But again, there's plenty of room for this trend to continue.
Another tailwind working in Visa's favor is the ever-growing population of the planet, in addition to the growing number of businesses accepting card-based payments, the latter of which is simply a result of the proliferation of technology.
All of this makes Visa stock a strong performing stock in a bull market, and the underlying dynamics will continue to apply as long as commerce exists.
