Opportunities in the Post-Hike Era: Microsoft & UnitedHealth

The US stock market has witnessed an impressive rally in 2023, with the S&P 500 and Nasdaq soaring over 18% and 36% respectively. As the Federal Reserve seemingly nearing the end of its rate-hiking cycle, the possibility of a soft landing becomes more optimistic, signaling potential opportunities for investors.

While the market may appear daunting due to its current high valuations, investors can still find compelling options if they view with a longer investment horizon. There are two promising stocks, $Microsoft(MSFT)$ and $UnitedHealth(UNH)$ , which are well-positioned to capitalise on their respective industries' growth trajectories.

Microsoft: Embracing the Future of Technology

Microsoft is a behemoth in the tech industry, boasting a diverse portfolio of products and services. Its uproductivity tools, such as Office 365 and Teams, are widely adopted by businesses and consumers globally. Additionally, Microsoft is a dominant player in the cloud computing sector, with its Azure platform capturing a sizeabld 23% global market share, second only to Amazon Web Services.

Microsoft has demonstrated its strong commitment to innovation, investing heavily in Artificial Intelligence (AI). AI-powered products like Copilot and Azure Bot Service have garnered interest among businesses seeking enhanced productivity and efficiency. As the digital transformation trend continues, the demand for intelligent cloud services will continue to remain robust, putting Microsoft in a favorable position to capitalise on this trend.

Over the last decade, Microsoft has achieved impressive revenue and earnings growth, boasting compound annual growth rates (CAGR) of 14% and 17%, respectively. This consistent growth, despite its already massive scale, corroborates the company's ability to stay competitive and fuel further growth through new product offerings and services, such as the recent AI innovations.

UnitedHealth: Leader in a Resilient Sector

UnitedHealth, the leading US healthcare company, offers a diverse range of services, from health insurance to pharmacy benefits management and medical technology. As the largest Fortune 500 healthcare company, UnitedHealth has exhibited remarkable financial strength, with CAGR growth of 12% and 15% in revenue and earnings over the past decade.

The company maintains a robust balance sheet, having a low debt-to-equity ratio of 0.3. Furthermore, it has consistently increased its dividends over the 10 years. While dividends may not be as appealing to most Singapore investors due to attractive S-REITs options, the steady capital appreciation coupled with additional dividends makes UnitedHealth an appealing investment opportunity.

The healthcare industry is known for its resilience during economic downturns, as the demand for healthcare services remains relatively inelastic. This sector's growth is further bolstered by the aging population in most developed countries as there is a growing need to address chronic and age-related health issues. UnitedHealth's leadership position within the healthcare industry, particularly its fastest-growing segment, Optum Health, ensures it will benefit from increased healthcare spending and growing demand for value-based care and health services.

Adopting a long-term investment lens

Despite the current high valuations in the US stock market, there are still opportunities for those willing to adopt a longer-term perspectivE. Microsoft's leadership in technology, coupled with its continous innovation in AI, and UnitedHealth's dominant position in the recession-proof healthcare industry, make both stocks attractive picks for investors.Their consistently strong track records and ability to leverage evolving industry trends may provide the potential to deliver good returns in the future.

What are the opportunities that you are looking at? Happy to hear your thoughts [Grin] 

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