How to Buy Stock In Top Companies Like Apple and Amazon

How to Buy Stock In Top Companies Like Apple and Amazon


Emily Flippen: Hi! I’m Emily Flippen,
an investment analyst here at The Motley Fool. On today’s FAQ, we’re going to answer the
age-old question of how we find and invest in really great companies like Apple and Amazon.
Now, there is no doubt that great companies continue to provide value for investors. Over
the past five years, the FAANG stocks — that’s Facebook, Apple, Amazon, Netflix and Google —
are up an average 219% vs. the market’s 48%. In fact, these large companies continue to
drive most of the growth that investors see in the markets today. Although these companies
are now household names, they weren’t always the golden child for investors. How do you,
as an average person, find great companies like Amazon early on, and enjoy
500% or 1,000% returns on your money? Well, to start, you need to remember that
you’re buying part of a business, not just the ticker. When you’re buying companies,
you should be looking to make long-term decisions. You should plan to be buying a part of a
business and holding it for years — preferably as long as possible, but at least five years.
For reference, Amazon shares lost more than 90% of their value during the .com bubble
at the turn of the century. But, long-term, buy-and-hold investors won out. If you had
bought Amazon right at this peak, right before the .com bubble crash, but held without selling,
you’d still be up nearly 1,600% today. So, when you think about buying businesses instead
of tickers, that leads you to look at important factors like management and sustainable competitive
advantages, instead of short-term market noise. That’s how you find great companies. 
Think about it this way. Would you ever give your money to a friend or coworker that you
didn’t trust? The same is true for investing. You should find leadership that’s trustworthy,
inspirational, and dedicated. Look for businesses with missions that you appreciate and management
teams that have their compensation tied to long-term business results. That way,
your incentives as an investor are aligned with theirs. In Amazon’s first shareholder letter, Jeff Bezos wrote, “We believe that a fundamental
measure of our success will be the shareholder value that we create over the long term.
This value will be a direct result of our ability to extend and solidify our current market
leadership position. Because of our emphasis on the long term, we may make different decisions
and weigh trade-offs differently than some other companies.” Amazon’s management made
its position and focus very clear. As investors, that kind of vision and transparency is precisely
what you want from a company’s leadership. Once you’ve found a company with management
that you like, you then have to evaluate their business. Here at The Fool, we look for a variety
of things, but the big one is businesses that are benefiting from long-term, undeniable
trends. When you think about the business, do you see it being bigger and more relevant
five years from now vs. today? If the answer to that isn’t a resounding yes, then you probably
shouldn’t be investing in the company. For example, Amazon has grown to nearly a
trillion-dollar valuation thanks to several huge trends. It’s benefited from the rise of e-commerce
and cloud computing. Investors that recognize those trends and Amazon’s growing market
leadership in the retail space, as well as a strength of its Web Services businesses, quickly realize
there’s still plenty of growth ahead for the company. Additionally, we look
for companies with a strong and solid financial position that will
allow them to continue to finance their operations far into the future. We look for businesses
that have reasonable levels of debt, strong operating cash flows, and high returns on
invested capital. These are the things that enable companies to continue to run their
businesses, which is vital for shareholder returns. Lastly, it’s so important
to invest in a company that has a special edge. This is a really
hard thing to quantify. In fact, with most great companies, you can’t find a competitive
moat in numbers alone. But what you should always know is what makes that company stand
out from its competitors. What does this company do differently that prevents anyone else from
taking over? In Apple’s case, it’s the company’s brand, its incredibly sticky ecosystem that
spans all of its devices. The company has engineered products that people love, and
once someone buys an i-device, they actually tend to be an Apple customer for life. 
Now, as you can probably tell, we’re looking for best-in-class companies. Those kinds of
businesses rarely look cheap. A great company will usually have a premium attached to it, which
is why we rarely let valuation alone prevent us from getting in early on a great company.
We hope this helps you get started on your investing journey. As always, thank you so
much for watching! If you have any thoughts about how you go about finding great companies,
please drop them in the comments section below. If you have an idea for another video,
do let us know. If you’re looking for more info on investing, check out our investing starter
kit at fool.com/start. It covers everything from saving money to buying your first stock,
and it even comes with a five-stock sampler to get you started. If you
enjoyed this video, give us a thumbs up and be sure to subscribe to get
more content like this from The Motley Fool.

14 Comments

  1. DayTrading Legend27 says:

    It's now FANGS You forgot SES. Jk only day trade that.

  2. Michael Sachs says:

    🇩🇪 Thank You!

  3. steve prichard says:

    4:30 Great point!
    The way I find great companies to invest in? I follow the MF Best Buys Recommendations that come by email by subscribing to MF. Fool on!

  4. GenExDividendInvestor says:

    Magic-8 ball mutters something about monkeys and a dart board of stocks…

  5. Threechlor says:

    remember when the "experts" were predicting Amazon's collapse due to lack of profits

  6. John Crossley says:

    Thanks Emily – great points

  7. Mike says:

    I recommend reading "The Motley Fool Investment Guide" or "Million Dollar Portfolio" by David and Tom Gardner.

  8. Investing Education says:

    Great share

  9. The Real Rosie Ruiz says:

    Emily your vocal fry and upspeak make you unlistenable. And, from this video, it's clear that you even struggle to read 5th-grade-reading-level copy without fucking up. Get off YouTube, get off the podcast, just go away. Nobody wants to listen to your vocal fry and upspeak. No offense.

  10. Michael F says:

    Emily is awesome. She is great on they're podcasts.

  11. LenNay says:

    Why does everybody use the bottom as the perfect buy point, so misleading.

  12. Moneyking Kevo says:

    Walmart will be big just like Amazon

  13. David Kingman says:

    I wish you had took your own advice when you recommended we buy BlackBerry. Yikes! What a stinker.

  14. Josh Buster says:

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