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Warren Buffett, the Oracle of Omaha, is a famed advocate for concentrated investing, famously stating that diversification is a protection against ignorance. With just five stocks making up 75% of Berkshire Hathaway’s portfolio, he demonstrates the power of strategic focus.
Apple (AAPL)
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Apple (NASDAQ:AAPL), crowned as the first jewel on the breakout stocks punchcard list, embodies an unparalleled position in the consumer electronics market. With a seamlessly integrated ecosystem spanning hardware, software, and services, Apple’s products foster customer loyalty, steadily driving sales and profits.
The company’s services segment paints a rosy picture, with record-breaking revenues in the fiscal first quarter and a significant surge in paid subscriptions. Moreover, Apple’s smartphone sales are riding high, recently surpassing Samsung as the world’s largest smartphone retailer for the first time in 12 years.
Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA), the second star of the breakout stocks constellation, dominates the artificial intelligence market with its superior chips and the Cuda platform. Amidst competition, NVDA maintains its stronghold in AI and graphic processing units while eyeing expansive growth in the central processing unit market.
Though concerns loom over its valuation, the company’s robust performance indicates promising returns over the coming decade.
Costco (COST)
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Stepping into the consumer sector, Costco (NASDAQ:COST) shines as a beacon of long-term breakout growth. With a remarkable threefold increase in earnings over the last decade and a stellar 677% total return, Costco’s stock has outperformed the S&P 500. Anticipating future growth, the company stands ready to bolster its top and bottom line through membership fee hikes, amongst other levers of growth.
Microsoft (MSFT)
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In the tech realm, Microsoft (NASDAQ:MSFT) deserves a top spot on any investor’s buy list. By infusing AI into its products and services, Microsoft has positioned itself as a prime AI stock, witnessing significant growth in various segments. With Azure AI services and cloud computing at the forefront, Microsoft is set to thrive, coupled with lucrative shareholder rewards in the form of buybacks and dividend growth.
Ares Capital (ARCC)
High-Yield Stocks With Strong Growth Potential
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Ares Capital (NASDAQ:ARCC) stands as the largest, publicly-traded business development company (BDC) with ownership of over 500 middle-market businesses valued at almost $23 billion. Similar to real estate investment trusts, BDCs must pay out at least 90% of their taxable income as dividends to shareholders, resulting in high dividend yields. Ares’ dividend currently yields 9.5% annually. The base dividend has offered investors a decade of growth exceeding 26% a year.
What makes ARCC stock an intriguing long-term play is the BDC’s investment in private markets. While it spreads its investments across many industries and geographies, it leans heavily into software and healthcare companies, comprising over a third of the portfolio.
Despite the increased borrowing costs in a high-interest rate environment weighing on Ares Capital’s performance over the past year, the company remains in fine financial form. Its businesses are expected to continue providing stable returns, and their defensive, diversified nature suggests continued growth in the future.
The Unique Position of ASML (ASML)
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It’s hard to resist adding one more tech stock to this group due to its monopolistic industry position. ASML (NASDAQ:ASML) is the sole manufacturer of extreme ultraviolet light lithography machines essential for creating the world’s most powerful semiconductor chips.
The limited production equipment costs about $200 million each. Although ASML sold only 40 of them last year, demand is on the rise due to pressing chip foundry needs. Taiwan Semiconductor Manufacturing (NYSE:TSM), Intel (NASDAQ:INTC), and Samsung are all vying for them owing to AI demand.
In addition, ASML is developing next-generation high-numerical aperture lithography systems that enable customers to produce even smaller chips. It shipped the first one to Intel in December, and they sell for about $300 million each.
The demand for ASML’s equipment shows no signs of abating. OpenAI, for example, just introduced its latest AI advance, Sora, a text-to-video generator achieving hyperrealism that pushes the boundaries of generative AI and will spur the next level of chip development.
The power and complexity required to produce such scenes at scale will propel ASML to new heights over the next decade.
American Tower’s (AMT) Potential
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The last standout stock on this list may be somewhat overlooked by many investors as it’s not as flashy as AI chips and equipment. American Tower (NYSE:AMT) leases out space on its towers to telecommunication companies, radio and TV broadcasters, and the government.
The ongoing rollout of the 5G network infrastructure amplifies the relevance of AMT stock’s business. American Tower operates on long-term leases averaging five to 10 years, often including annual escalators to ensure stable revenue growth.
The tower company experienced a period of telecom industry consolidation that has since passed. Although the U.S. market is more mature, there is still plenty of growth ahead. Moreover, significant international expansion opportunities exist, especially in developing and emerging markets, with Latin America and Africa representing two of American Tower’s biggest opportunities.
AMT stock is down 13% year to date due to high interest rates, but the Federal Reserve is considering rate cuts, offering an extended buying opportunity at a discount.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.
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