The U.S. stock market has been very volatile in the past decade and has been influenced by factors such as economic releases, geopolitical tensions, and technological advancements. With the market constantly cycling through bull and bear phases, long-term investors need to pick stakes in stocks with sustainable competitive advantages. Companies that are flexible and resource-rich enough to adapt to changing market conditions fare better than those with rigid business models.
With this in mind, let's look at the three stocks that should be at the top of a long-term investor's buying list.
1. Palantir
The first stock to add to your buy list is data mining and artificial intelligence (AI) specialist Palantir (NYSE: PLTR), a company known for its advanced capabilities to sift through huge mounds of unstructured and complex data and derive actionable insights for governments and enterprises.
Historically, Palantir has been famous as a major technology vendor for government agencies, helping them thwart terrorist attacks and identify malicious actors. Recently though, the company's U.S. commercial business has also started picking up steam, mainly by increasing interest and adoption of its new product -- an artificial intelligence platform (AIP). In the first quarter of fiscal 2024, U.S. commercial revenue rose 40% year over year to $150 million, while U.S. commercial customer count increased 69% year over year to 262.
AIP has also become a major growth catalyst, as it helps clients implement AI applications quickly and effectively. AIP can also work with the clients' messy and unstructured data to derive actionable outcomes. This is a major competitive advantage since competitors are generally able to work with only "AI-ready" data.
With global data creation expected to grow over 180 zettabytes by 2025, Palantir is a solid buy since there are still many government agencies and companies that can benefit from its exceptional offerings.
2. Oracle
The second phenomenal stock in your buy list can be database specialist Oracle (NYSE: ORCL). The company is witnessing robust growth in its cloud business, especially Oracle Cloud Infrastructure (OCI). This has been mainly driven by explosive demand for AI-optimized data center infrastructure for training and inferencing large language models. Piper Sandler has also included Oracle in its "highest conviction ideas" despite the weakening macroeconomic environment.
Oracle's cloud infrastructure is considered faster, more cost-effective, autonomous, and secure compared to competitors in running complex AI and machine learning workloads, particularly training and inferencing large language models. The company is constructing small, portable, and affordable data centers as well as massive data centers equipped with liquid cooling to manage the power-hungry and thermally intensive AI workloads. Oracle is thus benefiting dramatically from the long-term trend of enterprises migrating from on-premise infrastructure to the cloud.
Oracle Cloud Services' remaining performance obligation (order backlog) grew by 44% year-over-year to $98 billion at the end of fiscal 2024 (ended March 31, 2024). Management expects revenue from cloud infrastructure services to grow year over year by more than 50% in fiscal 2025. The company is also guiding for double-digit percentage revenue growth in its fiscal 2025.
Against this backdrop, with Oracle trading at just 17.78 times forward earnings, it looks like a great bargain.
3. Confluent
The third stock in the list is the data streaming platform player Confluent (NASDAQ: CFLT). Although Confluent surpassed revenue and earnings estimates in the recent quarter (second quarter of fiscal 2024, which ended June 30, 2024), investors were disappointed with increasing volatility in consumption patterns for the company's services among its large digital native customers. While the company witnessed stable demand in the first quarter and healthy demand in the early second quarter, customers have been increasingly focusing on controlling short-term cloud costs in June 2024. This has affected the expansion of Confluent in new use cases.
Confluent's share prices have plunged by over 25% since it came out with second-quarter fiscal 2024 earnings results. However, this pullback seems exaggerated, especially since Confluent is one of the leading players enabling enterprises to analyze and process data streams in real time. This is particularly important amid the increasing prevalence of AI and machine learning applications, which depend extensively on large amounts of real-time data flows. Confluent's data streaming platforms are already used in generative AI applications requiring contextual, secure, and trustworthy data streams, such as voice bots and personalized customer experience management.
Confluent has almost completed its transition to a consumption-oriented business model and has added new capabilities such as stream processing, connectivity, and governance to its data platform. These moves have been quite successful, considering that the company added 320 new customers in the second quarter to reach a total customer count of around 5,440, the largest sequential growth in the past two years. Confluent has noted that the customers using both the cloud version and the platform version of its data streaming offerings are stickier and have a higher net retention rate (how much existing customers spend as compared to the previous year) than that of the overall company.
Confluent can be a volatile stock and can fall even more amid the current uncertain macroeconomic environment. However, considering its solid growth catalysts and important role in the ongoing AI revolution, you can consider picking up at least a small stake in this compelling stock.
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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Confluent, Oracle, and Palantir Technologies. The Motley Fool has a disclosure policy.
3 Stocks to Keep High on Your Buy List was originally published by The Motley Fool