The Nasdaq index recently reached new highs, signaling the start of a new bull market. Despite a slight dip, the Invesco QQQ Trust, which tracks the Nasdaq, has gained 63% this year. This surge is fueled by investors eager to invest in the artificial intelligence boom and the impressive performance of stocks like Microsoft and Nvidia. However, some investors worry about overvaluation and a potential bubble in the market. For long-term investment strategies, focusing on stocks that generate significant free cash flow (FCF) can be a viable option. These companies create value for shareholders by having cash left after covering operating expenses and equipment costs. Two examples of such companies are Arm Holdings and Palantir. Arm Holdings plays a crucial role in the semiconductor market by designing chip architectures and licensing them to companies like Nvidia, Amazon, and Apple. They receive royalty payments for each unit sold. Arm's chips are widely used in smartphones, automotive technologies, data centers, and the Internet of Things (IoT) devices.

In the third quarter of fiscal 2024, Arm reported a 14% increase in sales and impressive market share growth. Their strong cash flow and significant remaining performance obligation indicate a promising future. Palantir Technologies, known for its data analysis software, has recently become profitable and expanded its commercial presence. While primarily serving government clients, Palantir aims to gain traction in other sectors. The company has proven its profitability with four consecutive profitable quarters and significant growth in commercial sales. Its software helps businesses and defense departments analyze data for better decision-making. Palantir's increasing customer counts, sales, and cash flow highlight its potential for further growth. Considering the limited comparable companies and the relatively short time since their IPOs, valuing Arm Holdings and Palantir stock can be challenging. Investors are advised to consider dollar-cost averaging or buying the stocks gradually to take advantage of potential price fluctuations. Both companies, with their profitability and positive cash flow, appear to be solid long-term investments and attractive opportunities to buy during market downturns.