While I’m a big believer in portfolio diversification (I currently own around 50 stocks), I often like to think about what stock I’d own if I could only hold one for the next decade. This forces me to focus on my best investment ideas.
Recently, I was giving some thought to this hypothetical scenario. Lots of great companies, including the likes of Apple, Amazon, and Diageo came to mind. However, one company stood out as a winner. Here’s the stock I’d own if I could only choose one for the next 10 years.
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The 1 stock I’d own for the next decade
It’s Microsoft (NASDAQ: MSFT), one of the world’s largest technology companies. Why? There are a number of reasons.
Firstly, owning Microsoft shares would give me exposure to a number of high-growth markets including:
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Cloud computing. This industry is set to grow by around 16% per year over the next decade and Microsoft is the second largest player behind Amazon. Last quarter, growth here was almost 50%.
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Remote work. The pandemic has most likely changed the way we work forever. Microsoft offers a number of top products for the hybrid work environment including Teams and Viva.
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Video gaming. As the owner of Xbox, Microsoft is a major player in the gaming market. This market is projected to grow significantly over the next decade.
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Social media. Microsoft owns Linkedin, which is generating strong growth right now.
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Artificial intelligence (AI). MSFT is one of the biggest players in the AI space. This area of technology looks set for massive growth in the years ahead.
Given its exposure to high-growth markets, I think there’s a good chance Microsoft will be a lot bigger in 10 years’ time than it is today.
A top CEO
Secondly, Microsoft has a top leader in Satya Nadella. One thing I’ve learnt over the years is that company management – and the decisions it makes – can have a massive impact on investment returns. So if I could only choose one stock for the next decade, I’d want a company with a highly-skilled leader.
Since he became CEO in 2014, Nadella has transformed Microsoft by shifting its focus towards subscription products and the cloud. It’s fair to say this was the right move. Since early 2014, the stock is up about 750%.
A defensive company
Finally, while Microsoft has a lot of growth potential, it’s also a relatively ‘defensive’ company. Because so many businesses around the world use Office (which is now subscription-based), revenues are unlikely to tank in a recession.
And because MSFT has high-quality attributes such as a solid growth track record, a low amount of debt, and a high return on capital, institutions are likely to stay invested over the long run, supporting the share price.
So I think the chances of losing money here in the long term are quite low.
Risks
Of course, Microsoft shares aren’t risk-free. In the industries it operates in, competition levels are intense. Microsoft will have to keep innovating to maintain market share.
The stock has also had an amazing run in the last few years. So there’s always the chance of a decent pullback.
Overall, however, the long-term risk/reward proposition here is very attractive to my mind. That’s why I’d choose MSFT as my one stock to own for the next decade.
