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After years of frantic growth, cloud computing adoption has taken a breather over the past year or so. There's little doubt that last year's downturn -- accompanied by the worst stock market performances in over a decade -- was a contributing factor as businesses reined in spendi
After years of frantic growth, cloud computing adoption has taken a breather over the past year or so. There's little doubt that last year's downturn -- accompanied by the worst stock market performances in over a decade -- was a contributing factor as businesses reined in spendi
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For Immediate ReleaseChicago, IL – July 27, 2023 – Today, Zacks Investment Ideas feature highlights the Apple AAPL, Palo Alto Networks PANW, Microsoft MSFT, Fidelity Contra Fund FCNTX and Amazon AMZN.
Britain's GMB trade union said on Thursday more than a thousand workers at two Amazon fulfilment centres in England would take strike action in early August in an ongoing pay dispute.
Investing doesn’t always need to be complicated, and investors don’t necessarily need to use complex strategies to be successful. Take, for example, the
Vanguard Total Stock Market ETF (
NYSEARCA:VTI)
, a simple, uncomplicated ETF that has produced excellent returns for its investors for many years. Let’s take a closer look at this long-term winner.
What is VTI's Strategy?
VTI is a popular ETF from low-cost index fund pioneer Vanguard that boasts a massive $318.5 billion in assets under management (AUM). This AUM makes VTI the fourth-largest ETF in the stock market today. As the name suggests, VTI seeks to track the performance of the entire U.S. stock market (by investing in its underlying index, the CRSP U.S. Total Market Index).
So, rather than investing in one theme or sector of the market, or even one major index like the S&P 500 (
SPX
) or the Nasdaq (
NDX
) for that matter, VTI goes a step further and invests across the entire spectrum of publicly-traded U.S. companies. This means that VTI holds over 3,800 U.S. stocks, including small-cap, mid-cap, and large-cap companies.
What I like about this strategy is that VTI leaves no stone unturned, and it gives investors the ability to harness the power and innovation of the entire breadth and depth of U.S. publicly-traded companies in their portfolios using one vehicle.
VTI has been around since 2001, so it has had plenty of time to compile a consistent track record, which we will cover later in this article.
Over 3,800 Holdings
As alluded to above, VTI holds an incredible 3,837 stocks, making it incredibly diversified. Furthermore, its top 10 holdings make up just 25.9% of the fund, adding to this diversification. Below, you’ll find a table of
VTI’s top holdings using TipRanks’ holdings tool.
As you can see, Apple (
NASDAQ:AAPL
) is VTI’s largest holding, with a 6.5% weighting, which makes sense, as Apple is the world’s biggest company by market cap. As you can surmise from this overview, VTI’s top holdings currently look somewhat tech-centric, although this isn’t by design. These were already some of the largest companies in the market, to begin with, and after the incredible gains that many of these companies have posted so far in 2023, they are back to dominating the market.
That’s why the so-called "magnificent seven" of Apple, Microsoft (
NASDAQ:MSFT
), Amazon (
NASDAQ:AMZN
), Nvidia (
NASDAQ:NVDA
), Alphabet (
NASDAQ:GOOG
) (
NASDAQ:GOOGL
), Meta Platforms (
NASDAQ:META
) and Tesla (
NASDAQ:TSLA
) all rank in VTI’s top 10 positions.
However, unlike some tech or broader-market ETFs where these mega-cap tech stocks combine to make up half of the fund or more, they only account for just under a quarter of VTI’s assets, so VTI's positioning isn't exposing investors to undue risk in this handful of names.
VTI also goes well beyond these tech behemoths -- Warren Buffett’s Berkshire Hathaway (
NYSE:BRK.B
) and health insurer UnitedHealth Group (
NYSE:UNH
) take up the other two spots in the top 10, and beyond the top 10 holdings, the fund becomes much more omnivorous.
Energy giant ExxonMobil (
NYSE:XOM
), financials like JPMorgan Chase (
NYSE:JPM
), Visa (
NYSE:V
), and Mastercard (
NYSE:MA
), and additional healthcare names like Eli Lilly (
NY
S
E:LLY
) and Merck (
NYSE:MRK
) all occupy spots within VTI’s top 20 holdings.
VTI's top holdings feature some strong Smart Scores, as well as some less compelling ones. The
Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A Smart Score of 8 or better is equivalent to an Outperform rating.
Five of VTI's top 10 holdings feature Outperform-equivalent Smart Scores, while five feature neutral ratings. VTI itself features an ETF Smart Score of 8.
Is VTI Stock a Buy, According to Analysts?
Turning to Wall Street, VTI has a Moderate Buy consensus rating, as 60.49% of analyst ratings are Buys, 34.22% are Holds, and 5.29% are Sells. At $250, the
average VTI stock price target implies 10.1% upside potential.
Consistent Results
VTI has established a venerable track record over the years, proving itself to be a long-term winner for investors over a variety of time horizons. Over the past year, the fund has had a total return of 18.9%. Over the past three years, VTI has posted a total annualized return of 13.8%. Its five-year annualized return of 11.3% and 10-year annualized return of 12.3% are impressive as well. Investing in an ETF that has generated double-digit returns for an entire decade is a great way to build long-term wealth.
Since its inception in 2001, VTI has had an annualized return of 8.1%. Cumulatively, an investor who put $100,000 into VTI 10 years ago would now have $218,590 today, and an investor who put $100,000 into the ETF at its inception in 2001 would have $456,230 today, showing the power of long-term compounding.
Minimal Fees
In addition to this strong performance and comprehensive portfolio, VTI is also an appealing investment because of its minuscule fees. VTI’s rock-bottom expense ratio of just 0.03% is among the cheapest you will find with ETFs. An investor allocating $10,000 to this long-term winner would pay just a paltry $3 in fees in year one for their investment -- less than a cup of coffee at many places nowadays.
Assuming the expense ratio remains consistent over time and that the fund gains 5% per year, after three years, this same investor would pay just $10 total in fees; after five years, they will have paid just $17, and after a decade their total fees would amount to just $39. Investing in ETFs with low fees like this is an important consideration because it helps investors to preserve the principal of their portfolios over time.
While it may not sound like much at first glance, the difference between VTI and its 0.03% fee and that of an ETF with a fee of 0.35%, or 0.75%, for example, is massive when compounded over time. Assuming the same parameters, an investor putting the same $10,000 into an ETF with an 0.35% expense ratio would pay $443 in fees after 10 years, while the investor putting $10,000 into the ETF with a 0.75% expense ratio would pay a whopping $871.
A Viable Cornerstone for Portfolios
It’s not overly fancy or complicated, but VTI has given its investors great returns for a long time. The ETF offers plenty of liquidity, with an average daily volume of over 2.7 million shares over the past three months, and it also offers a dividend yield of 1.5%.
With its comprehensive portfolio that gives investors exposure to the entire U.S. economy, its proven track record, and its minimal fees, VTI continues to be an attractive investment opportunity that investors can consider building their portfolios around.
Disclosure
Macro headwinds have taken a bite out of the top e-commerce stocks over the past year. However, despite recession fears and retail woes, Wall Street analysts are still upbeat about some of the larger players in the space. As the Federal Reserve does its best to put a "soft landing" pad into place, digital retail may be the corner of the tech sector with the most room to run.
Therefore, let's use
TipRanks' Comparison Tool to check in on three Strong-Buy-rated e-commerce stocks, AMZN, JD and MELI, to see how the risk/reward stands.
Amazon (
NASDAQ:AMZN)
Despite mega-cap tech's impressive run,
Amazon stock remains down just over 30% from its all-time highs of around $186 hit back in mid-2021. Undoubtedly, the "roaring 20s" spending spree seems to be over, but Amazon has other drivers that could help it keep the recent momentum going for a while longer before cloud and retail have a chance to heat up again.
As the market continues rewarding AI stocks, I do think Amazon could have a pathway to new highs, given its skin in the AI game. Further, Amazon looks like a company with the most to gain from the rise of automation robotics. All things considered, I'm staying bullish on Amazon stock.
The company is slated to reveal its second-quarter results on August 3. Should AWS (Amazon Web Services) and e-commerce growth top the modest slate of estimates, I'd look for the stock to extend its rally. That said, I wouldn't get my hopes up going into the number, as it could take another few quarters for meaningful growth re-acceleration.
In the meantime, expect generative AI services, like Amazon Bedrock (a tool for developers), to drive the share price higher as pre-recession headwinds work their course. If Amazon drops more news on its AI innovations and perhaps more info on the pricing front, the stock may be able to score more AI upside.
Nevertheless, at over 300 times forward price-to-earnings, Amazon stock trades at a huge premium to the internet retail industry average of around 81 times, so this is something to consider.
What is the Price Target for AMZN Stock?
Amazon stock's a Strong Buy on Wall Street, with 37 Buys and one Hold assigned in the past three months. The
average AMZN stock price target of $145.77 implies 13.75% upside potential.
JD.com (
NASDAQ:JD)
JD.com is a Chinese e-commerce company that's really felt the weight of the weakening Chinese economy. At writing,
shares are down more than 63% from their 2021 all-time highs. The latest slip followed the release of some sluggish Chinese economic data.
As shares of JD fluctuate at multi-year lows, I do see deep value for those brave enough to step into a name that possesses more risks than that of a domestic e-commerce play. At these depths, I view JD as one of the best bargains in global e-commerce. For that reason, I am staying bullish on the stock.
If the weak Chinese economy isn't enough, there's the geopolitical risk involved with betting on any Chinese-listed company. For many, the risks are too massive, even given the potentially astronomical reward to be had. Though I wouldn't encourage anyone to take on more risk than they can handle, I do think moves made by The Big Short's Dr. Michael Burry are noteworthy.
Reportedly,
Burry's Scion Asset Management held 250,000 JD shares as of the end of the first quarter. Though it could take some time for Burry's bold bet to pay off, a rebounding Chinese economy could be more than enough to send JD rocketing higher. Of course, investors will need to brave the wreckage like Burry is to make the most of any such surge.
At 12.8 times forward price-to-earnings, JD stock certainly appears to be one of the cheapest of the internet retail batch.
What is the Price Target for JD Stock?
On TipRanks, JD is a Strong Buy, with 11 Buys and two Holds assigned in the past three months. The
average JD stock price target of $60.77 implies a massive 55.3% upside potential.
MercadoLibre (
NASDAQ:MELI)
MercadoLibre is a Latin American e-commerce company that's also well off (
around 40%) its 2021 highs. However, this year, the stock experienced considerable relief, thanks in part to recovering sales and payment volumes. Management is upbeat about growth prospects from here, noting its plans to hire 1,700 more engineers this year.
Undoubtedly, it's a good sign that MercadoLibre is hiring in an era of widespread tech layoffs. Though shares aren't cheap, I'm inclined to maintain a bullish stance as the company looks to beat on earnings for the fifth-straight quarter.
Up ahead, Bank of America (
NYSE:BAC
) warned that Brazil's new cross-border tax could impact the company’s coming results. Whether the headwind puts a stop to the streak of earnings beats remains to be seen, however. Following the bank's latest downgrade (to $1,350 from $1,680), I believe expectations are a tad too low going into the second quarter reveal slated for August 1.
The stock goes for 96.6 times trailing price-to-earnings, just slightly higher than the internet retail average. Still, for investors seeking growth in Latin American retail, MELI stock appears to be a great pick.
What is the Price Target for MELI Stock?
MercadoLibre comes in as a Strong Buy, with seven Buys and two Holds. The
average MELI stock price target of $1,536.11 implies a 30.6% gain from here.
Conclusion
E-commerce stocks still hold a lot of upside potential as the market looks past a potential recession. Currently, analysts expect the most gains (~55%) from the JD stock.
Disclosure
Macro headwinds have taken a bite out of the top e-commerce stocks over the past year. However, despite recession fears and retail woes, Wall Street analysts are still upbeat about some of the larger players in the space. As the Federal Reserve does its best to put a "soft landing" pad into place, digital retail may be the corner of the tech sector with the most room to run.
Therefore, let's use
TipRanks' Comparison Tool to check in on three Strong-Buy-rated e-commerce stocks to see how the risk/reward stands.
Amazon (
NASDAQ:AMZN)
Despite mega-cap tech's impressive run,
Amazon stock remains down just over 30% from its all-time highs of around $186 hit back in mid-2021. Undoubtedly, the "roaring 20s" spending spree seems to be over, but Amazon has other drivers that could help it keep the recent momentum going for a while longer before cloud and retail have a chance to heat up again.
As the market continues rewarding AI stocks, I do think Amazon could have a pathway to new highs, given its skin in the AI game. Further, Amazon looks like a company with the most to gain from the rise of automation robotics. All things considered, I'm staying bullish on Amazon stock.
The company is slated to reveal its second-quarter results on August 3. Should AWS (Amazon Web Services) and e-commerce growth top the modest slate of estimates, I'd look for the stock to extend its rally. That said, I wouldn't get my hopes up going into the number, as it could take another few quarters for meaningful growth re-acceleration.
In the meantime, expect generative AI services, like Amazon Bedrock (a tool for developers), to drive the share price higher as pre-recession headwinds work their course. If Amazon drops more news on its AI innovations and perhaps more info on the pricing front, the stock may be able to score more AI upside.
Nevertheless, at over 300 times forward price-to-earnings, Amazon stock trades at a huge premium to the internet retail industry average of around 81 times, so this is something to consider.
What is the Price Target for AMZN Stock?
Amazon stock's a Strong Buy on Wall Street, with 37 Buys and one Hold assigned in the past three months. The
average AMZN stock price target of $145.77 implies 13.75% upside potential.
JD.com (
NASDAQ:JD)
JD.com is a Chinese e-commerce company that's really felt the weight of the weakening Chinese economy. At writing,
shares are down more than 63% from their 2021 all-time highs. The latest slip followed the release of some sluggish Chinese economic data.
As shares of JD fluctuate at multi-year lows, I do see deep value for those brave enough to step into a name that possesses more risks than that of a domestic e-commerce play. At these depths, I view JD as one of the best bargains in global e-commerce. For that reason, I am staying bullish on the stock.
If the weak Chinese economy isn't enough, there's the geopolitical risk involved with betting on any Chinese-listed company. For many, the risks are too massive, even given the potentially astronomical reward to be had. Though I wouldn't encourage anyone to take on more risk than they can handle, I do think moves made by The Big Short's Dr. Michael Burry are noteworthy.
Reportedly,
Burry's Scion Asset Management held 250,000 JD shares as of the end of the first quarter. Though it could take some time for Burry's bold bet to pay off, a rebounding Chinese economy could be more than enough to send JD rocketing higher. Of course, investors will need to brave the wreckage like Burry is to make the most of any such surge.
At 12.8 times forward price-to-earnings, JD stock certainly appears to be one of the cheapest of the internet retail batch.
What is the Price Target for JD Stock?
On TipRanks, JD is a Strong Buy, with 11 Buys and two Holds assigned in the past three months. The
average JD stock price target of $60.77 implies a massive 55.3% upside potential.
MercadoLibre (
NASDAQ:MELI)
MercadoLibre is a Latin American e-commerce company that's also well off (
around 40%) its 2021 highs. However, this year, the stock experienced considerable relief, thanks in part to recovering sales and payment volumes. Management is upbeat about growth prospects from here, noting its plans to hire 1,700 more engineers this year.
Undoubtedly, it's a good sign that MercadoLibre is hiring in an era of widespread tech layoffs. Though shares aren't cheap, I'm inclined to maintain a bullish stance as the company looks to beat on earnings for the fifth-straight quarter.
Up ahead, Bank of America (
NYSE:BAC
) warned that Brazil's new cross-border tax could impact the company’s coming results. Whether the headwind puts a stop to the streak of earnings beats remains to be seen, however. Following the bank's latest downgrade (to $1,350 from $1,680), I believe expectations are a tad too low going into the second quarter reveal slated for August 1.
The stock goes for 96.6 times trailing price-to-earnings, just slightly higher than the internet retail average. Still, for investors seeking growth in Latin American retail, MELI stock appears to be a great pick.
What is the Price Target for MELI Stock?
MercadoLibre comes in as a Strong Buy, with seven Buys and two Holds. The
average MELI stock price target of $1,536.11 implies a 30.6% gain from here.
Conclusion
E-commerce stocks still hold a lot of upside potential as the market looks past a potential recession. Currently, analysts expect the most gains (~55%) from the JD stock.
Disclosure