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All Contents © 2018The Kiplinger Washington Editors
By John Kilhefner
| January 10, 2018
In all the ruckus over bitcoin, everyone has forgotten about boring ol' stocks. Who cares about returns of 111% when you can make that in a day trading cryptocurrencies, they say. Sounds good on paper, sure. Those people, however, haven't heard of risk-adjusted returns.
I'm not here to pick on bitcoin speculators, who will probably be justified in the long run, but instead to point you back in the direction of investments that are just that—investments. If stocks continue to tack on record gains, as they did in 2017, then 2018 could be the year we see the first publicly traded trillion-dollar company.
In the race to one trillion, some stocks are more obvious than others. Tech stocks, in particular, are crowd favorites to join the four-commas club. And while it is that sector that will likely produce the first winner, each stock in this article has a chance to hit a trillion dollar valuation soon.
Buy all of them, buy a few or just buy the one you trust the most. No matter what you decide, you'll eventually have a trillion-dollar stock in your portfolio with these six.
Prices and data are from the original InvestorPlace story published on Jan. 3. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Market cap: $885 billion
2017 gain: 46%
Apple is the crowd favorite to join the trillion-dollar club, and with good reason. It's already the most valuable publicly traded company in the world, and AAPL continues to defy all odds with incredible growth year-after-year. This year, Apple stock only needs to gain 13% to hit a trillion.
But that growth is tightening as Apple's iPhone supercycle may not have been so super after all, so AAPL stock isn't the guaranteed winner. We should have a better idea after Apple earnings in a few weeks.
Many analysts project that while iPhone X sales disappointed, the premium price should still be enough to drive up the average selling price (ASP), leading to increased margins. And President Donald Trump's tax plan could help Apple repatriate its cash held overseas, making it rain on shareholders with dividends.
One thing investors should know by now is to never count out Apple.
Market cap: $575 billion
2017 gain: 55%
Amazon.com is going to take over the world. But will it get to "a trilly" (sorry) first? It's possible, considering the wide array of Amazon products infiltrating everyday life on a seemingly monthly basis. You can practically live your entire life within the Amazon ecosystem.
To dodge all of the Amazon headlines in 2017 would've been a commendable feat. Buying Whole Foods was a huge catalyst for AMZN, and we're still not even sure what's going to come of that purchase. Perhaps Amazon could gut the stores and instantly have warehouses around the country to take over the food delivery business.
Whatever Jeff Bezos has in store, it's big. The big rumor in 2018? Amazon could buy Target (TGT). While Amazon stock has a steeper climb than Apple to reach the trillion dollar mark (and it may not reach it in 2018), its growth rate is still phenomenal.
Morgan Stanley, though, doesn't just think Amazon has what it takes, it thinks it will hit the mark first, rising to as high as $2,000 per share by the end of the year, citing Amazon Web Services (AWS), advertising and Prime as fast-growing satellite businesses to its massive retail operation.
Ticker: GOOGL, GOOG
Market cap: $748 billion
2017 gain: 33%
Alphabet is in the vaunted "FANG" stock group, which is expected to rule 2018. It's not too far behind Apple, but it doesn't really get a lot of love in the media when it comes to hitting the trillion dollar mark.
I have no idea why. Alphabet has its fingers in practically every pie on the planet.
While it doesn't rule every business it gets into (Google Glass, anyone?), it manages to sneak out a major success here and there. But whether Google Home becomes the AI speaker adorning living rooms and kitchens everywhere isn't as major a driver of GOOG stock as Alphabet's fundamental business, which gives the tech giant its massive moat.
So long as Google has web traffic, it will be able to monetize it. With some of the most popular apps around, from Gmail and Maps to the Play Store and Chrome, Alphabet has a major conduit that continues driving growth to its most reliable source of income—advertising.
Market cap: $473 billion
2017 gain: 96%
Alibaba Group, often called the "Amazon of China," could beat America's Amazon to trillion-dollar status. At least, that's according to MKM Partners.
"We think that BABA may have the best chance among internet mega-caps," writes MKM in a note to clients. At a $473 billion market cap, it would have to grow 111% this year to meet the mark. That's not impossible.
But like Amazon, Alibaba has a hand in everything, even in territory we typically associate with Google—search. Indeed, a few emerging markets are choosing Alibaba's mobile browser over Google's, with India and Indonesia ceding 51% and 41% to Baba's UC browser, respectively, versus 30% and 34% to Chrome.
What it will come down to, though, is Alibaba's ability to beat earnings in a continued bull market. Increasing its ad load will go a long way toward accomplishing that.
Market cap: $534 billion
2017 gain: 53%
Facebook isn't just another FANG stock, it's one of the world's most recognizable brands. And despite a rash of "fake news" complaints, a slowing ad load and the GOP tax plan's alternative minimum tax muddying the waters, FB stock managed to gain an amazing 53%.
While you may recognize Facebook as the social network where your little cousin and grandmother both share the same memes, it's quickly fitting into Microsoft's (MSFT) role as an enterprise company. Workplace by Facebook, for instance, is used by 30,000 organizations, up from 1,000 in 2016. And if you use Facebook at all on mobile—and chances are you do—then you've also likely seen its Marketplace and Video tabs. Ad load may be slowing in the traditional sense of the News Feed, but the more verticals Facebook introduces to the network, the better its chances to monetize its users through various points.
There's also Instagram, a thorn in Snap Inc.'s (SNAP) side, Facebook Messenger and WhatsApp. Oh, and Oculus hasn't even begun to show its potential yet.
Surprisingly, Facebook stock's price-earnings ratio of 35.2 is below the industry average of 38. And it's forward P/E of 27 is low considering Facebook's long-term growth rate of 28.25%. As long as the bull market continues, it's just a matter of time before Mark Zuckerberg & Co. become a trillion dollar company.
Market cap: $615 billion
2017 gain: 114%
Tencent Holdings is probably the least recognizable name on this list, but not in China where it holds a Facebook-like status. That's an understatement, as Tencent stock is now bigger than Facebook. One could also compare Tencent to Alibaba, but not even Jack Ma is as rich as Tencent's Ma Huateng.
Tencent is now in a league of its own.
The Chinese technology company is known primarily for WeChat, which does the heavy lifting for Tencent revenue-wise, and sports just shy of a billion users. And that's primarily in China.
Outside of China, you may be using one of Tencent's products without even realizing it. The company has a foothold in the gaming market, owning companies such as Riot Games and Supercell, studios known for League of Legends and Clash of Clans, respectively. It also has investments in Gears of War studio Epic Games and Call of Duty, Destiny 2 publisher Activision Blizzard.
Once Tencent takes its main businesses worldwide, as some analysts believe, Tencent stock is likely to double in price.
This article is from John Kilhefner of InvestorPlace. As of this writing, Kilhefner did not personally hold a position in any of the aforementioned securities.
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