Got $5,000? 3 Tech Stocks to Buy and Hold for the Long Term

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These companies have track records of success and should remain leaders in their industries for years to come.

Buying stocks in great companies and holding them for the long term is a recipe for investing success. The challenge is knowing what to buy and how to allocate the capital one has for investing. Luckily, many online brokerages offer fractional share purchases, which allows investors to buy parts of a share. This makes buying stocks that have a higher per-share price easier.

If you have $5,000 and are interested in tech stocks, here are three companies to consider. Each of these businesses has strong fundamentals and bright futures. There could be some volatility in the short term, but over the long haul, each has the potential to reward shareholders.

Confluent

Some of the best stock picks in the tech sector are companies that offer their products to other businesses, making them less well-known to everyday investors. Confluent (CFLT -5.19%) is one such business. Confluent sells software that helps businesses access important data in real time, allowing them to make critical decisions more quickly.

In the recently reported first quarter of 2024, Confluent grew its total customer count by 9% year over year. However, its number of largest customers grew more rapidly. Customers with $100,000 or more in annual recurring revenue (ARR) grew by 17%, and those with $1 million or more in ARR increased by 24%. Larger customer growth outpacing overall customer growth is a good sign for Confluent.

While not yet profitable, Confluent is making good progress on that front. In Q1 of 2024, Confluent’s net loss was $93 million, as compared to a loss of $153 million in the year-ago quarter.

Datadog

Another business-to-business software provider that should be on investors’ radar is Datadog (DDOG 2.67%). Its observability and security platform allows companies to see all the data they need to run the business in one place, removing silos and helping workflow. Datadog’s products have certainly proved to be valuable. Almost half of its customers use four or more products, and around a quarter of them use six or more.

This customer adoption has driven impressive revenue growth.

  • In Q1 of 2021, Datadog had $199 million in revenue. In Q1 of 2024, revenue was reported at $611 million.
  • Datadog has turned profitable over the past year. Q1 2024 net income was $43 million, compared to a net loss of $24 million in Q1 of 2023.
  • The cash flow statement has also improved, with the company generating a free cash flow margin of 31% in the most recent quarter, compared to 24% in the year-ago quarter.

The Trade Desk

All investors likely know someone who subscribes to one or more streaming services by now. This move to streaming allows advertisements to be more targeted to the specific person watching, providing a higher return on investment for the advertiser. The Trade Desk (TTD -1.59%) is the most important company in facilitating the placement of these targeted ads.

As the premier buy-side advertising platform, The Trade Desk has attracted more than 1,000 customers, and they stick around. The Trade Desk has had a retention rate of more than 95% for the past 10 years.

The Trade Desk’s revenue has come primarily from North America, but it also has a large international opportunity. Approximately two-thirds of all advertising spending takes place outside North America, and yet only 11% of The Trade Desk’s spending is international so far.

Q1 2024 results confirmed that the company is continuing to improve as a business. Compared to Q1 of 2023, revenue grew by 28%, while net income increased from $9 million to $32 million. Revenue for Q2 is expected to increase by 23% year over year.

Jeff Santoro has positions in Datadog and The Trade Desk. The Motley Fool has positions in and recommends Confluent, Datadog, and The Trade Desk. The Motley Fool has a disclosure policy.