Every year is different in the stock market, but almost every investor has the same goal: to get richer. People don’t stick their money in a risky asset (at least riskier than letting it sit in cash) for no returns; they want to see their investments grow.
While I can’t guarantee that these three stocks will make you “rich,” I’m confident that they will make investors money over a long-term holding period of at least three years. Let’s review them.
Alphabet
Alphabet (GOOG -1.06%) (GOOGL -0.98%) is better known by its former name and ubiquitous search engine: Google. Alphabet is a leader in the artificial intelligence (AI) space, but most of its money comes from its advertising services, which accounted for nearly 80% of revenue in the third quarter.
2022 and 2023 were rough years for advertising as many companies were preparing for an economic slowdown. However, the market has started to lap that year-over-year comparison, so Alphabet’s growth looks much healthier. In Q3, its revenue rose 11% year over year, but that’s just the beginning.
As advertising revenue returns, it should continue to accelerate its growth. Alphabet also recently announced a reorganization of its advertising business to focus on more AI-powered models, which has the dual effect of boosting revenue and decreasing operating expenses.
Alphabet also has another growth segment in Google Cloud, which operates in a market estimated to be worth $1.27 trillion by 2028.
All of this upside can be purchased for a mere 21 times 2024 earnings — an incredibly low valuation, especially considering historical averages. This should set Alphabet stock up for not only a fantastic 2024 but for many years to come.
GOOGLE PE Ratio data by YCharts.
Autodesk
Autodesk (ADSC -0.05%) provides software that many engineers and architects use daily. Although the company has many more offerings, two of its main ones are AutoCAD and Revit. Without these two software programs, the building industry would be paralyzed, and construction projects would have difficulty getting started. As a result, clients are unlikely to switch away, which makes Autodesk a fantastic investment.
Autodesk isn’t a growth investment in the typical sense. It grows revenue at about market pace (revenue rose 10% in Q3 of its fiscal 2024, ended Oct. 31). However, its earnings increased much faster thanks to various efficiency improvements. In the same quarter, its earnings per share rose from $0.92 to $1.13 (a 23% increase).
Over time, this effect can create a market-beating stock. This is the same strategy that software giant Adobe has followed, and it has been a remarkable investment over the past decade.
Despite following this proven model, Autodesk trades at 29 times 2024 earnings. This makes the stock a solid buy right now to stash away in a portfolio and watch it grow.
Procure
Continuing with the construction theme, Procure‘s (PCOR 0.15%) construction-management software has quickly become the industry standard in its field. The software gives owners and contractors unparalleled visibility into the finances, status, and change orders in a project. By creating a single source information, it gets everyone on the same page, which helps reduce costly rework that causes projects to go late and over budget.
Procore has had a strong year, and Q3 was no exception. Its revenue rose 33% year over year to $248 million while retaining 95% of all spending on the platform from last year. One thing to note with Procore is that it is unprofitable. In Q3, its operating-loss margin was 20%. However, operating expenses only rose 15% — much slower than its revenue growth. This means Procore is on the right path to eventually breaking even.
Despite its growth and a clear path to profitability, Procore trades at a much lower valuation than many of its software peers.
PCOR PS Ratio data by YCharts.
Ten times sales is a bargain bin price for Procore (although it would have been better to scoop it up a few months ago). Still, there’s a massive market in front of Procore, and it’s slated to have a strong 2024 and beyond.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Autodesk, and Procore Technologies. The Motley Fool has positions in and recommends Alphabet, Autodesk, and Procore Technologies. The Motley Fool has a disclosure policy.
