My Best Stocks Divided into Stocks You Can Buy and Hold Forever

A stock split does not fundamentally change the value of the corporation, but it has certain advantages. They can generate increased interest in a company, often resulting in a short-term increase in the share price, and give investors the opportunity to purchase one share at a lower price. Still, the long-term prospects of the business are more important than this bit of corporate engineering.

And among all the well-known companies that have split shares this year, in my opinion, one stands out as the most attractive. This company is nothing but Amazon (AMZN 2.07%)which completed a 20-for-1 stock split on June 6. Let’s take a look at why the tech giant remains a solid pick even with a market cap of more than $1 trillion.

AMZN data from YCharts.

Amazon’s cloud business solves immediate problems

As inflation drives up fuel and freight costs, it’s almost impossible for a company like Amazon not to be adversely affected. This is in addition to other economic problems such as labor shortages. Overall, Amazon handled these challenges quite well during the second quarter. The tech giant reported a net loss of $2 billion, but that was mainly due to non-operating costs of $3.9 billion related to its stake in the electric vehicle (EV) company. Rivian Automotive.

The company’s net profit for the same period of the previous fiscal year was $7.8 billion. Amazon is implementing ways to control and manage increased costs due to external factors, including improving the efficiency of its fulfillment network. These initiatives seem to have worked, at least according to management. On the top line, Amazon’s net sales rose 7% year over year to $121.2 billion. The company’s North American segment increased its revenue by about 10%, while the international division saw sales fall by 12%.

Once again, Amazon’s cloud business became the star of the show. Sales from Amazon Web Services (AWS) totaled $19.7 billion, a 33% increase over the same period last year. Also, while the e-commerce specialist’s other two businesses reported operating losses, AWS’s operating income jumped about 36% to $5.7 billion. AWS is practically a Fortune 500 company in its own right, generating significant revenues and solid margins. Amazon sees a lot of growth opportunities here.

CEO Andy Jassy says, “AWS continues to grow at a rapid pace, and we believe we are still in the early stages of cloud adoption in the enterprise and government sectors.” If Jesse is right that we are in the early days of the cloud business, this is an opportunity that Amazon can continue to take advantage of for more than a decade. And given how well it has performed even in the face of macroeconomic instability, imagine what it will look like when economic growth returns in the right direction, customers start spending more, and businesses look for ways to improve efficiency and productivity.

All of this will benefit Amazon.

Solid ditch and additional possibilities

The e-commerce industry is competitive and so is the cloud business. Amazon can remain a leader in both because it has the means to invest in expansion initiatives. In addition, the company managed to create a serious competitive advantage from many sources. For example, Amazon benefits from a strong brand — an intangible asset. According to Statista, Amazon is the second most valuable brand in the world. There is also the flywheel effect of the company’s e-commerce.

Its merchant network is so broad that it continues to attract customers, and the more people shop on Amazon’s platform, the more it attracts additional sellers. Additionally, AWS likely benefits from high switching costs. Businesses rely on the tech giant’s cloud solutions for their day-to-day operations, and trying to switch providers can cause business disruption. In every major industry in which Amazon competes, there is room for multiple winners. The company’s moat ensures that it will remain a leader and be one of those winners in the long run.

Finally, Amazon is looking to capitalize on other potential growth opportunities. In late July, Amazon announced the acquisition of tech-focused healthcare company One Medical in an all-cash transaction valued at $3.9 billion. One Medical provides primary care services both virtually and in person. Amazon’s acquisition of One Medical may signal a growing willingness to pour funding and investment into the lucrative healthcare sector, an effort that could pay big dividends down the road.

It’s not too late to buy Amazon stock

Over the past 20 years, Amazon’s profits have already been well above average. But the next few decades could also be great for the company and its shareholders. Its e-commerce business is feeling the effects of economic difficulties, but overall it is handling them quite well. Its cloud unit is firing on all cylinders and has a long runway for growth.

Among other things, Amazon has a strong competitive advantage and is looking to expand its empire. The company checks almost all points that indicate exciting prospects. Don’t let increased market volatility scare you away from this winning stock.

John McKee, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has a position on Amazon and recommends it. The Motley Fool has a disclosure policy.

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