Tech powerhouse

Let’s start with Microsoft (NASDAQ: MSFT), which was down 5.5% yesterday. It’s one of the world’s largest technology companies.

Microsoft is one of the first shares I’d buy if I was building a portfolio from scratch today. That’s because it offers both growth and defence.

On the growth side, the company has exposure to several high-growth industries including cloud computing, the metaverse, and video gaming. So, it’s well placed to increase its revenues and profits in the years ahead.

On the defensive side, many of its products are essential for businesses today. So revenues should hold up if economic conditions deteriorate.

Of course, there are risks to consider. If tech stocks continue to fall, returns could be disappointing.

However, with the stock now trading on a P/E ratio of 25, I like the long-term risk/reward skew here.

Brand power

Next up, athletic footwear and apparel giant Nike (NYSE: NKE), which declined 5.9% yesterday.

Nike has experienced some supply chain and cost challenges recently. And these issues may persist in the short term. However, given that the stock has fallen from around $180 in November to $106 today, I think a lot of the risk is now largely factored into the share price.

When these short-term challenges do subside, Nike should be well placed to grow its sales and profits. Not only is it likely to benefit from its shift to selling direct-to-consumer, but it’s also likely to benefit from the ‘casualisation’ fashion trend, which is showing no signs of slowing down.

Nike shares currently sport a forward-looking P/E ratio of about 28. That does look high at face value. However, given the company’s incredible brand power, I’m comfortable with the higher valuation.

Growth potential

Finally, I’d also buy shares in Lam Research (NASDAQ: LRCX), which fell 5.6% yesterday. It makes semiconductor manufacturing equipment.

This is a stock I’m quite excited about. In the years ahead, many countries are planning to build semiconductor manufacturing plants on home soil in an effort to avoid chip shortages. The US is one such country that’s set to increase domestic manufacturing significantly. Recently, it announced $53bn in government funding to get the ball rolling.

This ‘reshoring’ of semiconductor manufacturing should provide a huge boost for Lam as its technology is crucial for chip manufacturers. So, the future here looks very bright, to my mind.

It’s worth pointing out that the semiconductor sector, as a whole, is experiencing weakness now. This could persist for a few more quarters and potentially have a negative impact on this stock.

However, in the long run, I expect Lam Research to do well. With the stock trading at just 11 times this year’s forecast earnings, I see it as a bargain.

This pullback hasn’t deterred me from buying more stocks and funds in my ISA however, as investing within an ISA remains one of the best ways to build wealth over the long term. With that in mind, here’s a look at three moves I made in my account last week.

I’m still buying Big Tech stocks in my ISA

The first move I made was to buy more Microsoft (NASDAQ: MSFT) shares. I snapped up stock at the $244 level. The reason I added to Microsoft is that I think it should hold up relatively well if we see a recession. Businesses are not going to suddenly stop using Office.

Meanwhile, I think the company has considerable long-term growth potential, thanks to its cloud computing business, Azure. It’s worth noting that Credit Suisse analysts believe the cloud growth opportunity is not reflected in current estimates.

Microsoft shares could keep falling in the short term, of course. Especially if the technology sector continues to underperform. However, I’m bullish on the long-term story here, and with the stock now trading with a forward-looking P/E ratio of 23, I think the valuation is attractive.

I want inflation protection

I also bought more shares in payments giant Visa (NYSE: V) last week. I picked up stock near the $194 level. I like Visa right now for several reasons. Firstly, the company has built-in inflation protection. It takes a cut from every transaction, so price rises actually benefit.

Secondly, if economic conditions continue to deteriorate, I’d expect more consumers to turn to credit cards. This should benefit Visa (it doesn’t have any credit risk – it simply operates the payments network).

Meanwhile, the long-term growth story here is compelling. In the decade ahead, trillions of transactions will shift from cash to card.

One risk I’m monitoring here is the threat of new payments technologies (e.g. Buy Now Pay Later). These could potentially impact growth.

I’m comfortable with this risk, however. And with the stock trading at around 23 times next financial year’s projected earnings, I think I picked up shares at a reasonable valuation.

I’m investing with ‘Britain’s Warren Buffett’

Finally, I also added to my holding in Fundsmith Equity. This is a global equity fund run by Terry Smith – who is often called ‘Britain’s Warren Buffett’ due to his excellent investment track record.

One reason I bought more Fundsmith units is that it invests in high-quality, resilient businesses. Examples of stocks in the fund include Diageo, Estée Lauder, and PepsiCo. These are the kinds of businesses I want to own in the current environment, where economic uncertainty is high.

The fund also tends to invest in businesses that have high gross margins and pricing power. These kinds of companies should, in theory, be protected from inflation, to a degree.

One issue here is that a lot of Fundsmith stocks do have higher valuations. This could be a problem in the short term if investors continue to offload expensive stocks.

I’m thinking long-term here, however. And I’m convinced this fund will boost my Stocks and Shares ISA in the long run.

Cyber wars

You can’t open a newspaper nowadays without hearing of another high-profile cyber attack.

On Tuesday card retailer Funkypigeon.com announced it had to suspend orders following a “cyber security incident”. This was followed today by reports that personal data on UK government officials has been released following a cyber strike.

Such attacks are growing as the world becomes more digital and the number of individual and state-sponsored hackers multiplies. So the need for public bodies, companies and other organisations to have strong security is increasing rapidly.

A surging penny stock

This is why I think Corero Network Security (LSE: CNS) has a bright future. This tech-focused penny stock builds products that protect against so-called Distributed Denial-of-Service (or DDoS) attacks. Such strikes target a website with huge volumes of fake traffic designed to take it offline.

I think buying Corero could be a particularly good idea before it releases full-year financials on Tuesday (26 April). I’m expecting a positive trading update that could fuel fresh share price gains.

Corero’s share price has rocketed over the past year thanks to news of exceptional trading activity. In its most recent update in January Corero said it expected earnings before interest, tax, depreciation and amortisation (EBITDA) to be “materially ahead of market expectations” in 2021 and range between $3.8m and $4.2m.

Corero said that this would be driven by “continued strong demand for [our] market-leading DDoS mitigation solutions, coupled with ongoing margin improvement and controlled operating expenses”. The business recorded an EBITDA loss of $1.4bn the year before.

A booming market

The problem with buying penny stocks is that they can be prone to bouts of extreme price volatility. This is evident in Corero’s wild price swings of recent sessions and further heavy weakness could occur at any time.

However, as a long-term investor, the possibility of fresh volatility wouldn’t be enough to discourage me from investing. I believe Corero could deliver exceptional returns as demand for cyber security products lifts off.

Analysts at Grand View Research think this market will be worth more than half a trillion dollars ($500.7bn)by 2030. That compares with the $200.7bn it was valued at last year.

A great UK growth share

Buying Corero shares isn’t without risk, of course. It doesn’t have the brand recognition of trusted rivals like Microsoft and McAfee. And the penny stock doesn’t have the financial clout of these US heavyweights with which to develop its product suite.

Still, these are risks I’d be prepared to swallow given the rapid pace at which Corero’s business is growing. I think this tech darling could help me make a lot of money over the next 10 years.

However, there are certain companies that are so dominant they look set for strong long-term growth no matter what the future holds. Here’s a look at three such companies. I own all three stocks myself, and plan to hold them until at least 2030.

Amazon

Let’s start with Amazon (NASDAQ: AMZN), which is listed in the US. It’s the world’s largest online shopping business and also a major player in cloud computing.

One reason I see Amazon as a great stock for me to buy-and-hold for the long term is that the company now has over 200m users signed up to its Prime service. This is a huge competitive advantage. Prime members tend to buy goods repeatedly on the platform. Meanwhile, they also provide the organisation with reams of shopping data that it can use to enhance its artificial intelligence (AI) capabilities. So, it appears well placed to benefit from the continued growth of the e-commerce industry.

Additionally, Amazon has a market share of over 40% in the cloud computing industry. With this industry projected to grow by nearly 20% per year over the next decade, the company will have strong tailwinds behind it in the years ahead.

Now, it does have a high valuation. This adds some risk. I’m comfortable with the valuation though, all things considered. I’m convinced that by 2030, today’s share price will look like a bargain.

Microsoft

Another stock I see as a great long-term buy-and-hold for me is technology powerhouse Microsoft (NASDAQ: MSFT).

What I like is that the company has ‘sticky’ revenues. All over the world, businesses use its Office product (now subscription-based meaning Microsoft can continually raise prices). They’re unlikely to stop using it.

I also like the fact that it’s a major player in video-gaming (it owns Xbox). This industry looks set for solid growth in the years ahead, and Microsoft’s dominance here could help it become a key player in the metaverse.

Like Amazon, it does have a lofty valuation. This means that if growth slows, the stock could underperform. I’m feel that by 2030 though, the share price will be much higher.

Alphabet

Finally, I also see Alphabet (NASDAQ: GOOG) as an excellent stock for me to hold for the long run. It’s the owner of Google and YouTube.

The reason I’m bullish here is that Alphabet is dominant in some of the industries in which it operates. In the internet search space, for example, it has a 90%+ market share globally. This is a competitive advantage. Thanks to its dominance here, it’s able to generate huge digital advertising revenues.

Alphabet is also one of the biggest players in the artificial intelligence space through its DeepMind division. AI is likely to have a big impact on the world over the next decade, so the company should benefit.

The biggest risk here, in my view, is regulatory intervention. If regulators were to make moves designed to reduce the company’s dominance, its profits margins could be impacted.

However, with the stock trading at just 22 times this year’s forecast earnings, I think a lot of risk is priced in here already.

One obvious way to get exposure to the metaverse, as an investor, is through buying shares in Meta Platforms, the company formerly known as Facebook. It’s currently spending around $10bn per year to build its metaverse. However, there are plenty of other stocks that offer exposure to this exciting growth story. Here’s a look at three I’d be happy to buy today.

Microsoft

One of my top stock picks for metaverse exposure is Big Tech giant Microsoft (NASDAQ: MSFT). As a major player in both video gaming and collaboration software, I expect it to be at the forefront of the metaverse revolution in the years ahead.

In terms of its plans for the metaverse, Microsoft CEO Satya Nadella has said that the group is currently creating an entirely new platform designed to bring people, places, and things together with the digital world. This will have applications in both the consumer space and the enterprise space. An important development here is its new Mesh product. This is a collaborative platform for virtual experiences that can be accessed from any device.

The risk here is that MSFT is likely to face plenty of competition from Meta Platforms in the years ahead. So, there’s no guarantee it will be a winner in the metaverse. I’m comfortable with this risk though, as Microsoft is a diversified company with exposure to a number of other high-growth industries.

Overall, I think it’s a great stock for me to own for the long term.

Nvidia

Another top metaverse stock, in my view, is Nvidia (NASDAQ: NVDA). It designs high-power computing chips that are used to power video gaming and artificial intelligence applications. Given the strength of its chips, I think Nvidia is likely to be a key ‘enabler’ of the metaverse.

Last year, Nvidia announced that it had developed its own metaverse-type platform, the ‘Omniverse’. This is an advanced technology platform that brings together the group’s expertise in AI simulation and graphics, and can be used to create virtual avatar characters, interpret speech, and create new 3D worlds. This platform appears to have a lot of potential.

Nvidia is an expensive stock that’s highly volatile. So, it’s not one for those seeking capital preservation. I’m willing to tolerate short-term share price swings, however. I think the long-term growth potential here is significant.

Roblox

Finally, I like Roblox (NYSE: RBLX) as a more speculative play on the metaverse. It’s a video gaming company with a platform that enables users to come together to play, learn, communicate, explore, and expand their friendships online. With over 50m daily users, you could say that Roblox has already created its own metaverse.

Roblox stock has underperformed recently, however, the company continues to grow at a rapid rate. Last year, for example, revenue increased 108% year on year to $1.9bn. Given the popularity of video gaming globally, I see plenty of growth ahead. This year, analysts expect revenue of around $2.9bn.

I’ll point out that Roblox is not a stock I’d load up on. The company isn’t yet profitable, so it’s a high-risk investment. I do see plenty of growth potential though. So, I’d be willing to take a small position here.

Here, I’m going to highlight three top stocks in Terry’s Smith Fundsmith Equity fund I’d buy today. All of these companies are leaders in their industries and appear to have considerable long-term growth potential.

Microsoft

Let’s start with Microsoft (NASDAQ: MSFT), which is one of Fundsmith’s biggest holdings. It’s one of the largest technology companies in the world.

To my mind, MSFT has all the right ingredients to be a ‘core’ long-term holding. For starters, it has attractive long-term growth prospects. In the years ahead, it should benefit from the growth of the number of industries, including the cloud computing, remote work, and gaming industries. 

Yet at the same time, it’s a relatively ‘defensive’ company. People aren’t going to suddenly stop using Microsoft products like Office and Azure if there’s an economic slowdown. Meanwhile, the group has a strong balance sheet and generates an enormous amount of cash. 

Of course, MSFT is not risk-free. If we see further weakness across the tech sector, MSFT could underperform. With the stock now trading at 28 times next year’s earnings however, I think it’s a good time to be buying for my portfolio.

Estée Lauder

Next up is Estée Lauder (NYSE: EL). It’s one of the world’s largest skincare and make-up companies.

One reason I like this Fundsmith stock is that its brands provide a strong competitive advantage. When it comes to beauty products, people tend to buy the same brands over and over again.

Another reason I see appeal here is that the company looks set for growth both in the short term and the long term. In the short term, it could benefit as the world continues to reopen and people socialise more. Meanwhile, in the long run, the company looks set to benefit from the ‘premiumisation’ trend – where consumers are happy to pay more for premium products.

It’s worth pointing out that EL does have a relatively high valuation (the forward-looking P/E ratio is about 34). If future growth is disappointing, the stock could fall.

However, it has recently had a near-20% pullback. So I think it’s a good time to start building a position.

Intuit

Finally, I also like the look of Intuit (NASDAQ: INTU) right now. It’s a leading provider of accounting solutions, and the owner of QuickBooks.

There’s a lot to like about Intuit from an investment point of view, to my mind. One key attribute here is that its products are ‘sticky’. Once businesses sign up for an accounting product, they’re unlikely to switch to a competitor, due to the time and costs involved in switching. This means revenues are quite predictable.

Secondly, the company has a strong growth track record, and is very profitable. Over the last three years, revenue has climbed 60% and return on capital employed (ROCE) has averaged more than 30%.

Like MSFT, Intuit could underperform if sentiment towards tech stocks continues to deteriorate. In the short term, this is definitely a risk.

All things considered however, I see a lot of appeal here. After a recent pullback, the stock now trades at 35 times next fiscal year’s forecast earnings, which I think is a very fair valuation.

Fuelling my ISA

I’m looking for the best global shares I’d like to buy now for my Stocks and Shares ISA. First I’d consider oil major Shell (LSE:SHEL). Not only is it the largest company in the Footsie, but it also has the ninth largest turnover in the world. Shell shares are up by 20% so far this year. That follows a 34% gain in 2021. Its performance has been helped by a rising oil price. Crude oil prices have more than quadrupled since the lows of the pandemic back in April 2020. Oil prices climbed throughout much of 2021 as countries slowly opened up their economies post-pandemic restrictions. More recently, political disruption has also helped keep fuel costs elevated.

A word of warning though. Oil prices are notoriously volatile. At some point, they could just as easily tumble. If that were to happen, Shell shares could suffer in the near term.

But what I like about Shell as an investment is its cash flow generation and its discipline in returning cash to shareholders via dividends and share buybacks. It currently offers a dividend yield of around 4%. That’s not the highest among its Footsie peers, but I believe it’s reliable and stable.

Giant global shares

When I think of global shares I often think of the US technology giants like Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). Although listed in the US, they operate all over the planet and are amongst the largest companies in the world. Technology shares have taken a tumble so far this year. This can most clearly be seen by looking at the tech-heavy Nasdaq 100, which is down 15% year-to-date.

The reason for the weakness is mainly due to expectations that the US Federal Reserve will increase interest rates and remove quantitative easing with the aim of controlling inflation. Both measures have helped to propel tech stocks higher over several years so they could remain under pressure in the near term.

Excellent companies

That said, both Microsoft and Apple are excellent and well-run companies. They offer double-digit profit margins and have enviable competitive advantages. They both churn out ample cash and have rock-solid balance sheets.

Popular investor Warren Buffett is known to like companies that have a moat. Like a moat protects a castle, a durable competitive advantage can protect a company. That’s why it’s encouraging to see Apple form 45% of Buffett’s investment firm Berkshire Hathaway‘s holdings.

Taking a multi-year view, I reckon both Apple and Microsoft will turn out to be excellent investments. They’ve both managed to churn out a phenomenal 25% annual return over the past decade. That’s enough to turn £10,000 into £93,000. Although the past can’t predict the future, and the coming months could be uncertain, I’d still buy both of these global shares.

If I was putting together a portfolio from scratch today, I’d start by selecting some rock-solid businesses to be the foundation of my portfolio. With that in mind, here are two stocks I’d go for.

This stock offers growth and resilience

One company I’d definitely invest in if I was starting out today is Microsoft (NASDAQ: MSFT). Listed in the US, it’s one of the world’s largest technology companies.

The reason I’d pick MSFT as a foundation stock is that the company is diversified in nature and has many growth drivers. One is the cloud computing market. This industry is expected to grow by nearly 20% over the next decade, which should benefit Microsoft as it’s currently the second-largest player in the industry.

Another growth driver is the expansion of the video gaming market. This industry is expected to grow by around 10% per year over the next decade. Microsoft is also a major player here due to the fact it owns Xbox and recently acquired Call of Duty publisher Activision Blizzard.

Microsoft is not just a growth play however. This company also has ‘defensive’ attributes. Not only does it have a strong balance sheet and high profit margins, but it also has many customers ‘locked in’. Businesses, for example, aren’t suddenly going to stop using Office if there’s a recession.

The downside to Microsoft is it’s not a cheap stock. Investors know this is a wonderful company, and it’s priced accordingly. Currently, the forward-looking P/E ratio is about 32, which adds a bit of risk.

A second risk I face as a UK investor is foreign exchange risk. If I was to buy shares today and the pound strengthened against the dollar, my investment would be worth less.

I’m comfortable with these risks however. I think this is a great stock to own for the long term.

The perfect core holding

Another stock I’d select if I was starting a portfolio from scratch today is Diageo (LSE: DGE). It’s a multinational alcoholic beverages company that owns a number of premium brands including Johnnie Walker and Tanqueray.

The reason I’d choose Diageo as a foundational stock is that the company looks well-positioned to benefit from a number of powerful trends in the years ahead. One such trend is ‘premiumisation’ – where consumers are willing to pay more for premium products. This is a major trend globally.

Rising levels of wealth is also a trend that could benefit Diageo. By 2030, millions more consumers in developing countries will be able to afford its products.

Like Microsoft, Diageo offers a nice mix of growth and defence. People tend to drink alcohol no matter what the economy is doing. This means the company is relatively recession proof.

One risk here though, is Covid-19 setbacks. If we see further lockdowns, Diageo’s sales from restaurants, pubs and bars are likely to take a hit. It’s worth noting that the stock’s valuation doesn’t leave much room for error. Right now, the P/E ratio is a relatively high 26.

I’m happy to pay a premium valuation however. To my mind, this stock is the perfect core holding.

Here’s a company I’ve got my eye on if stock markets do crash.

The investment case

The company is Microsoft (NASDAQ: MSFT), the software giant that’s listed in the US. Its products are used globally in most homes and businesses, which I think brings a considerable competitive advantage. For example, its Office suite of software is crucial for many companies, and it’s typical for job applications to list it as a required skill. Not many other software companies can boast that their products are so important for businesses.

Microsoft’s competitive advantage makes it a quality stock, in my view. It shows in the excellent financial metrics the business achieves. For example, in its fiscal year 2021 (the 12 months to 30 June 2021), it generated a huge operating margin of 42%. What’s even better is that this has increased every year since 2016 (when it was 30%).

One further exciting aspect of Microsoft’s business is the growth in its cloud services. A major part of this is Microsoft Azure, the company’s cloud computing platform that’s used for advanced analytics, storage and networking. In the most recent second-quarter earnings results for the fiscal year 2022, Azure and other cloud services revenue grew by an impressive 46%. I think this is an attractive growth market for Microsoft.

Risks to consider

The US government has concerns over the power of ‘Big Tech’ — the mega-cap technology companies. This presents a risk of tighter regulation for Microsoft, and may therefore stifle its growth plans. For example, the Federal Trade Commission was looking into unreported acquisitions of technology companies, which included Microsoft in its investigation.

Also this month, Microsoft announced it was acquiring Activision Blizzard. Any acquisition comes with risk as there’s no guarantee the two companies will integrate well together. This one in particular will be Microsoft’s biggest acquisition ever, at a value of $68.7bn. I do see this as a good move by Microsoft. However, I still need to monitor how the acquisition progresses given the issues that Activision Blizzard has been dealing with.

A stock market crash could be the opportunity

I view Microsoft as a quality company. But the valuation today is putting me off buying the shares. This is where a stock market crash comes in. I could buy the stock much cheaper if this happens.

As it stands today, the stock is valued on a price-to-earnings (P/E) ratio of 32. I think this is high compared to the historical valuation. For example, the average 10-year P/E ratio has been 23. I’d have to pay quite a premium today to buy it.

On balance, I’m keeping Microsoft at the top of my watchlist, but not buying yet. If there’s a stock market crash, however, I’d snap up some shares for my portfolio.

While I think we could see more volatility in the technology sector in 2022, some tech stocks are starting to look quite attractive in my view. With that in mind, here’s a look at two stocks I’ve had a nibble at in the last few weeks.

A defensive Big Tech stock

Given that there’s a bit of uncertainty as to the near-term outlook for the tech sector, my first buy was slightly defensive – Big Tech giant Microsoft (NASDAQ: MSFT). I picked up some stock for $307 per share – about 12% below the company’s 2021 highs (I bought a little too early, in hindsight).

Microsoft is one of my favourite tech stocks. In fact, last year, I wrote that if I could only own one stock for the next decade, it would be MSFT. Why do I like it so much? There are a few reasons.

For starters, it operates in a number of high-growth industries including cloud computing, video gaming, artificial intelligence, remote work, and more.

Secondly, it has a top CEO in Satya Nadella. Since Nadella took the helm in 2014, he has transformed the company into an absolute powerhouse of a business.

Third, the stock offers a nice mix of offence and defence. Because so many businesses rely on its products, revenues are unlikely to plummet any time soon.

Even after the recent share price pullback here, MSFT shares still have a relatively high valuation. For the year ending 30 June 2022, Wall Street analysts expect the group to post earnings per share of $9.22. That means I paid about 33.3 times this year’s forecast earnings for my shares.

This higher valuation does add some risk. However, I’m comfortable with it. To my mind, MSFT deserves a higher valuation due to its high-quality attributes.

A FTSE 250 tech company that’s growing rapidly

Turning to the UK market, I’ve also had a nibble at Kainos (LSE: KNOS). It’s an under-the-radar FTSE 250 company that specialises in digital transformation solutions. Its client list includes the NHS, the Home Office, and the Bank of Ireland. I paid around 1,600p per share for my shares. Late last year, this stock was trading near 2,100p.

The reason I like Kainos is that I’m very bullish on digital transformation as a theme. All over the world, businesses and government organisations are rushing to digitalise their businesses. In an effort to be more productive, they’re moving to the cloud, they’re automating processes, and they’re analysing their data more. This is providing massive tailwinds for companies like Kainos, which has seen its revenue jump 140% in three years.

Like MSFT, Kainos does have a high valuation. I paid around 39 times next year’s earnings for my shares. This high valuation adds risk – if growth slows I’d expect the stock to be volatile.

I’m willing to accept some volatility here, however. To my mind, the long-term growth prospects are attractive. It’s worth pointing out that only a few months ago, Chairman Tom Burnet bought a load of KNOS stock near the 1,800p level. I’m happy to have bought at a lower level than this top-level insider.