The stock market is arguably the greatest creator of wealth on the planet. Although there have been short periods in history where investment vehicles, such as commodities or housing, have outperformed the benchmark S&P 500, nothing can match the long-term return potential of stocks.
It is also impossible to keep a good market down. Despite 38 stock market crashes or corrections since early 1950, the S&P 500 has finally erased each of these declines.
The point is, the stock market is a slot machine that can give patient investors financial freedom. That is, of course, if they own large companies. The following five foolproof stocks have all the qualities needed to help long-term investors build game-changing wealth.
For a quarter of a century, we’ve watched online businesses and businesses focused on social media launch out of the door and then hit a wall of growth. Social media platform Pinterest (NYSE: PINS) has most certainly do not is one of those companies.
With the coronavirus pandemic keeping people at home over the past year, Pinterest recorded Monthly Active User (MAU) net gains of 124 million in 2020 (up 37%). The point is, Pinterest’s MAUs increased an average of 30% in the three years leading up to the pandemic. The platform has resonated with users for years and showed no signs of slowing down.
In particular, Pinterest has done a remarkable job in attracting new users from international markets. While the average revenue per international user is significantly lower than in the United States, the potential to double revenue per international user multiple times over the next decade is precisely why Pinterest could be one of the stocks of fastest growing social media of the 2020s.
Pinterest is also fair scratch the tip of the iceberg with regard to its e-commerce potential. With users willingly sharing the products and services they love, Pinterest simply needs to keep those users engaged to connect them with companies that can meet their needs. It can be a real wealth generator for patient investors.
Companies that can give investors financial freedom generally offer lasting competitive advantages. This is precisely what you will get with the developer of robot-assisted surgical systems Intuitive surgery (NASDAQ: ISRG).
There are two things that make Intuitive Surgical so special. First, it has an appearance insurmountable lead in robot-assisted surgical systems. Since 2000, the company has installed just under 6,000 of its da Vinci systems worldwide. Comparatively, that’s more than all of its peers combined. His relationship with hospitals and surgical centers has probably made him lifelong clients.
Second, Intuitive Surgical’s operating model (pardon the pun) improves with age. In its early years, most of its income came from the sale of its expensive, but expensive to build, da Vinci surgical systems. Today, the bulk of its revenue comes from the sale of instruments and accessories to each procedure, as well as from the maintenance of its systems. These segments generate much juicier margins for the company. As the installed base grows, Intuitive Surgical’s margins are expected to increase.
The da Vinci System still has many opportunities to engulf stakes in thoracic, colorectal and general soft tissue procedures, and the company remains innovative (e.g. the Ion platform for minimally invasive lung biopsies). Therefore, the sky is the limit.
Like its peers, Cresco establishes a healthy commercial presence. It has about two dozen open locations and is in the process of making a few acquisitions that will further expand its business footprint. Notably, Cresco has the maximum authorized retail outlets in Illinois (10) and Ohio (5). By focusing on states that limit the number of dispensary licenses issued, it gives itself an excellent opportunity to minimize competition, grow its brands and retain its audience.
What separates Cresco from the pack is its industry leading wholesale segment. Even though wholesale cannabis produces lower margins than retail, the company generates such massive wholesale volume that this margin difference is easy to ignore. This is because he has a lucrative cannabis distribution license in California, the world’s largest pot market.
With the ability to bring its branded and third-party products to more than 500 dispensaries statewide, Cresco’s wholesale business is expected to play a key role in pushing the company’s total sales beyond that. ‘one billion dollars in 2022.
Long-term investors can also gain financial freedom by pulling Fido’s costs towards big payouts. Pet-focused health insurance company Trupanion (NASDAQ: TRUP) has all the necessary tools to enrich investors.
Over the past two decades, Trupanion has established clinical-level relationships with veterinarians, their staff and animal owners. The company ended 2020 with almost 863,000 pets enrolled and has a decent chance of reaching the psychologically significant figure of one million pets enrolled this year.
The opportunity for Trupanion is that it is only entered about 1% of the US pet market. If the company achieved a 25% penetration rate, which happens to be the UK pet insurance enrollment rate, Trupanion would envision a total addressable market of nearly $ 32 billion. For the background, the company achieved sales of $ 502 million last year, up 31% from the previous year.
Apart from the Americans willingly spend a lot of money To keep their four-legged family members healthy, Trupanion is also the only major pet health insurer that provides software to clinics to manage cash payments. It is a story of practical and logical growth that has a long track.
The beauty of Visa’s payment processing model is that it is based on the idea that the US and global economy will continue to grow. Although contractions and recessions are a natural part of the business cycle, most recessions subside within months. In comparison, periods of economic expansion tend to last for years – or in the case of the latest bull market, more than a decade. Buying Visa is like playing a numbers game where the odds are extremely good.
Visa has a 53% market share in the purchase volume of the credit card network in the United States. That’s over 30 percentage points higher than the next closest competitor, which is an enviable place in the world’s largest economy.
Investors will also note that Visa does not interfere with loans. While this could likely add significant revenue during times of expansion, the business would be hit with bad credit during inevitable recessions. Not having to set aside capital for loan losses is precisely why Visa’s margins are so high.
Given the portion of the world that remains underbanked, Visa’s growth opportunities remain strong.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.