Investors in their 30s have several decades ahead of them before they reach retirement age, which gives them a huge advantage over older investors. For that reason, they shouldn't shy away from adding a few high-risk growth stocks to their portfolios.
Knowing that, we asked a team of Fools to each select a stock that is a great choice for these investors. Read on to see why they picked TEVA Pharmaceutical Industries (NYSE:TEVA), Mastercard (NYSE:MA), American Tower (NYSE:AMT), Novocure (NASDAQ:NVCR), and CareTrust REIT (NASDAQ:CTRE).
Ride the tidal wave of global data use
Tyler Crowe (American Tower): As a person in my 30s, I find myself using my mobile devices more and more every day. Based on recent data consumption data, I'm not the only one. Between 2014 and 2015, total mobile data consumption doubled to 9.6 trillion megabytes in the U.S. alone. According to Cisco, this trend isn't going to slow down any time soon. Global data use is expected to grow 53% annually between now and 2021. That's a lot of data streaming, and it will take a lot of telecommunications infrastructure to make it happen.
This is where American Tower comes in. It is a real estate investment trust that owns and develops cellular data towers globally. Rather than a single telecom company owning the real estate and building the tower, it rents out space on a tower from American Tower. The benefit for the telecom company is it is less asset-intensive. The benefit for American Tower is that it can rent space on a tower to multiple clients and drastically increase rates of return. That's why one of American Tower's largest business opportunities over the past couple years has been buying towers from telecom companies both in the U.S. and internationally. The additional cash for the telecom companies allows them to invest in greater capacity and coverage for their networks, while American Tower can leverage the property into multiple tenants.
The combination of increased network capacity equipment and American Tower's acquisition strategy has led to 16% annual revenue growth over the past decade, and that is slated to continue as the company continues to acquire properties in fast-developing markets such as India, Tanzania, and Nigeria.
I think we can all agree that per-capita data usage will continue to increase as network providers roll out better capacity and coverage. That alone would suggest American Tower looks like an attractive long-term investment. When you couple that with the ability to invest in the rapid growth of emerging markets, you have a long-term investment anyone in their 30s should have on their radar.
An attractive alternative to chemotherapy
Brian Feroldi (Novocure): I don't think it's a bad idea for investors in their 30s to try and swing for the fences by buying small-cap companies that hold massive potential. If you agree, you might want to check out Novocure.
Novocure is a medical device company focused on cancer. The company created a product called the Optune system, which emits low-intensity electric fields and disrupts cell division in cancerous tumors. Patients simply wear the Optune system on their head like a hat, and the device does the rest.
What's so attractive about this therapy option is that it provides patients with a non-invasive alternative to chemotherapy. That's enticing since chemotherapy is well known for causing nasty side effects.
While investing in this company is still quite risky, I'm comforted by the fact that the Optune system has already received the regulatory thumbs-up in the U.S., Europe, and Japan to treat glioblastoma (brain cancer). Better yet, Novocure's top line is growing at triple-digit rates, though it's still not profitable.
Looking ahead, Novocure's plan is to expand reimbursement, launch in new markets, and grow awareness of the Optune system. A little bit further down the road, the company plans on seeking approval for other cancer indications such as ovarian, pancreatic, breast, lung, and more. If the company can succeed, it stands a good chance at meaningfully growing its top line for years to come.
In total, Novocure a high-risk, high-reward stock that has a real shot at providing investors with multi-bagger returns. If you agree, then buying a small position today could be a smart move.
This company is helping fill a major long-term need
Jason Hall (CareTrust REIT): One of the great things about investing when you're in your 30s is how much time you have to let great growth ideas play out. And one growth idea every 30-something should invest in is the aging of the baby boomer generation.
Between now and 2030, around 10,000 baby boomers will reach retirement age, on average, every single day. This major trend will drive significant dollars across a number of areas, particularly healthcare and senior housing, and CareTrust is on track to be a major player in senior care and rehab housing. It has already grown its property count significantly since it was spun out of Ensign in 2014.
In 2016, CareTrust acquired 33 new properties, increasing its property count 28% to 153 at year end. Net income increased 293%, while earnings per share was up 200%. Caretrust grew its FFO -- funds from operations, an important cash flow measure for REITs -- 20% in 2016.
The challenge for CareTrust will be how well management is able to allocate capital going forward. As a very small player in this industry, the company should be able to find a lot of acquisition opportunities that bigger competitors will overlook. However, as interest rates increase, getting fair value will be of utmost importance to generate reasonable rates of return. I have faith that CareTrust's leaders will be able to deliver value to shareholders and grow faster than the industry.
The demand for the services provided by the facilities CareTrust specializes in is only going to grow in coming decades. This is an ideal stock to buy -- and hold for many years -- if you're in your 30s.
A generic drug titan going through some troubling times
Chuck Saletta (TEVA Pharmaceutical Industries): TEVA is the world's leading provider of generic medications, and that position gives it some incredible long-term advantages. Success in that business requires two key things: Scale and know-how. Scale helps a generic manufacturer thrive despite low prices, and know-how helps the company navigate the patent law minefields and manufacturing process controls needed to get and keep the ability to make the generics.
Over time, those benefits should serve TEVA well, but right now, the company is facing troubles, largely of its own making, that have knocked its shares down. Last December, for instance, it paid over a half billion in a U.S. settlement based on allegations it violated the Foreign Corrupt Practices Act. And in its home country of Israel, it's now under investigation for the same potential acts of bribery that led to that giant settlement.
In addition, despite its strong position in generics, its operating finances are under pressure as it faces intensifying competition over its own patented powerhouse product, Multiple Sclerosis drug Copaxone. While TEVA should still be able to survive and profit once generic competition eats away at its Copaxone revenues, the near term may well be bumpy.
In addition to the loss of Copaxone, TEVA's legal troubles might cause problems in the near term. Still, for investors with a longer-term focus -- such as most 30-something investors -- the company's leadership position in generics should eventually enable it to again find its mojo. Because of the risks facing the company in the near term, I wouldn't make it a huge position, but TEVA might very well deserve a slot as part of a portfolio with a longer-term focus.
Profits from every swipe
Jordan Wathen (Mastercard): I truly think it's possible that payments companies have years and years of high single-digit top-line growth ahead of them, which could power double-digit earnings-per-share growth for years to come.
Mastercard is as best positioned as any to benefit from the shift from cash to cards. The company acts like a toll road for payments, collecting a small fee on every transaction on its network. It's no surprise the world is moving toward electronic payment platforms. Electronic payments are more convenient, they protect the vendor from employee theft, and they're easier for tax regimes to track than cash. Recently, Mastercard saw its processing volume leap more than 75% in India after the government discontinued high-denomination notes to crack down on corruption and money laundering.
Frankly, I think the biggest risk to Mastercard and other processors is that its business is too good, and that regulators may put limits on fees that banks and processors can collect from each swipe. In 2011, the Federal Reserve broadly capped fees on debit cards at $0.21 per swipe in the United States, but investors who held on have been rewarded. The card business is still plenty profitable, and it likely will be for a very long time to come.
Brian Feroldi owns shares of American Tower and Mastercard. Chuck Saletta owns shares of Teva Pharmaceutical Industries. Jason Hall owns shares of CareTrust REIT and Mastercard. Jordan Wathen has no position in any stocks mentioned. Tyler Crowe owns shares of American Tower.
The Motley Fool owns shares of and recommends American Tower and Mastercard. The Motley Fool has the following options: short April 2017 $110 calls on American Tower and long January 2019 $80 calls on American Tower. The Motley Fool recommends Teva Pharmaceutical Industries. The Motley Fool has a disclosure policy.