TTime and time again, Wall Street has shown that it generously rewards patient investors. Despite the reference S&P 500 losing 34% of its value in just 33 calendar days in the first quarter of 2020, the index took less than 17 months to double in value after its bear market bottom. In other words, buying large companies and allowing your investment thesis to unfold over time continues to be a successful wealth building strategy.
Even though the market is on the cusp of an all-time high, the following top five stocks can all be bought now and have the potential to turn $ 200,000 into $ 1 million (or more) by 2035.
Image source: Getty Images.
Singapore-based first title that could make patient investors much richer by 2035 Limited sea (NYSE: SE). Despite a market cap of $ 162 billion (as of August 17), it may well be on its way to reaching a valuation of $ 1,000 billion.
The secret to Sea’s success (say three times faster) lies in the company’s three rapidly growing operating segments. The gaming division is currently the best performing business in terms of generating positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Sea ended June with around 725 million active players, of which 92.2 million were paying to play. The fact that 12.7% of its active players pay is a significantly higher conversion rate than the industry average.
But as I noted before, it’s the Shopee company’s e-commerce platform that is the real long-term growth engine. Shopee has always been the most downloaded shopping app in Southeast Asia, and it is gaining ground in Brazil. With a focus on emerging markets, Shopee processed 1.4 billion gross orders in the second quarter and saw $ 15 billion in gross value of goods (GMV) flow through its platform. That’s almost 50% more GMV than it generated in 2018.
Finally, Sea’s relatively new mobile wallet services processed more than $ 4.1 billion in payments in the second quarter, representing an increase of almost 150% year-over-year. Since Sea’s targets emerging markets which are in many cases underbanked, mobile wallets can be a powerful solution for the middle class.
Image source: Getty Images.
Keep in mind that the best stocks don’t have to display large cap valuations. Cloud-based advertising technology company PubMatic (NASDAQ: PUBM) is the perfect example of a fast growing small cap that benefits from increasingly digitized content.
PubMatic is a sell-side platform in the programmatic advertising industry, which means it works with publishers to help them sell their display space to advertisers. The beauty of this cloud-based ad technology infrastructure is that it completely manages the buying, selling, and optimization of ads, while also allowing its customers to set parameters, such as lowest price. that they would accept to sell their poster space. This ensures that publishers remain satisfied, while maximizing the user experience.
If PubMatic’s latest quarterly report is any indication of how things are going, it has a bright future. Based on its 150% net dollar retention rate, existing publishers spent 50% more on the platform than in the second quarter of last year. While part of this increase is likely due to uncertainties surrounding the pandemic in 2020, PubMatic has consistently increased its revenue by 30% per year.
There aren’t many profitable small-cap stocks with the potential for sustainable double-digit growth, but PubMatic does the trick.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Another prominent stock that is consistently delivered to its shareholders and can turn an investment of $ 200,000 into $ 1 million or more by 2035, is the conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B).
You might be scratching your head that Warren Buffett’s company turns its market cap from $ 655 billion to $ 3.3 trillion by 2035, but it’s a lot healthier than you think. probably think. See, Berkshire Hathaway has an average …mean… an annual return of 20% between 1965 and 2020. For Berkshire to reach a valuation of $ 3.3 trillion, it would simply need an average return of just over 12% per year. This is entirely doable given Berkshire’s cyclical portfolio and its gigantic dividend income.
While there are a number of reasons Warren Buffett is a great investor, his love for cyclical companies stands out. Buffett is well aware that while recessions are inevitable, periods of economic expansion last much longer than recessions. He plays a simple numbers game that favors the patient.
Oracle’s Omaha company is also expected to receive more than $ 5 billion in dividend income this year, which is a nearly 5% return on costs. Since dividend-paying stocks are generally profitable and proven, they are ideal for an investor like Buffett who has a long-term view.
The SuperStore Planet 13 Las Vegas. Image source: Planet 13.
Planet 13 Holdings
Just in case I’m not clear with PubMatic, small cap stocks can also be top stocks. In the American cannabis space, Planet 13 Holdings (OTC: PLNH.F) has a good chance of providing a return of 400% or more for growth investors.
While you might think marijuana stocks are a dime a dozen, Planet 13 is a whole different beast. There are only two operating dispensaries, but they are nothing like any other marijuana retail store in the United States. The company’s 112,000 square foot Las Vegas SuperStore includes a restaurant, event center, and consumer fulfillment center, to name a few. Meanwhile, the Orange County SuperStore in Santa Ana, California will expand to 55,000 square feet, when fully constructed, and offer 16,500 square feet of retail space. These dispensaries are must-have experiences for cannabis enthusiasts, which will set Planet 13 apart in a crowded industry.
Additionally, while the pandemic has been devastating for a number of companies, it has ultimately been positive for Planet 13. It has forced the company to market to residents of Las Vegas and surrounding areas, which has broadened its reach. horizons beyond simple tourists. With a strong local audience, Planet 13 seems ready to move to recurring profitability.
Assuming its Las Vegas plan works in other major cities, Planet 13 could easily help patient investors become millionaires.
Image source: Square.
FinTech is a fifth and final title that has the ability to turn a $ 200,000 investment into life-changing money. Square (NYSE: SQ).
For more than a decade, Square’s fundamental operating segment has been its seller ecosystem. This is the division that provides point of sale devices, loans and analytics to merchants to help them grow their business. In some context, Square’s gross payment volume (GPV) has grown from $ 6.5 billion in 2012 to what could be north of $ 140 billion in 2021. And take note that the seller ecosystem no longer just for small businesses. In Square’s second quarter results, 65% of total GPV came from merchants with at least $ 125,000 in annualized GPV.
However, Square’s biggest long-term growth driver is the Cash app. In just three years (end of 2017 to end of 2020), its monthly active users have grown from 7 million to 36 million, with Cash App becoming the most downloaded payment app in the United States. It also earns $ 55 in gross profit per user, while spending only around $ 5 to attract each new user. These are margins that will enrich patient investors.
The icing on the cake for Square is that it acquires the Australian platform buy now, pay later After payment (OTC: AFTP.Y) for $ 29 billion in an all-stock transaction. While costly, this deal will tie together its ecosystem of sellers and Cash App, creating a closed ecosystem that could truly allow Square to thrive.
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Sean Williams owns shares of Square. The Motley Fool owns and recommends AFTERPAY T FPO, Berkshire Hathaway (B shares), Planet 13 Holdings Inc., PubMatic, Inc., Sea Limited and Square. The Motley Fool recommends the following options: $ 200 long calls in January 2023 on Berkshire Hathaway (B shares), $ 200 short buys in January 2023 on Berkshire Hathaway (B shares), and $ 265 short calls in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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