Without a doubt, the stock market is the most effective wealth-generating machine available to both everyday investors and professionals alike. But not all stocks are created equal, and you have to know where to look to find those riches.
To help get you started, we asked three top Motley Fool contributors to each discuss a stock they believe is poised to make investors rich. Read on to see why they chose Internet of Things pure play Sierra Wireless (SWIR), technology juggernaut International Business Machines (IBM -8.25%), and natural resource investment specialist Franco-Nevada (FNV 1.91%).
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A well-connected small-cap winner
Steve Symington (Sierra Wireless): Sierra Wireless has already skyrocketed more than 80% so far in 2017, including a nearly 30% single-day pop after the machine-to-machine communications specialist's stellar fourth-quarter 2016 report. But with shares still down nearly 40% since the beginning of 2015 -- when macroeconomic headwinds began to result in persistently soft demand from some of the company's existing OEM customers -- I think patient investors can still get rich buying and holding this promising small-cap stock.
After all, Sierra Wireless returned to profitability and year-over-year revenue growth in its latest quarter, thanks to a combination of expense management, contributions from new customers, smart strategic acquisitions, and demand that finally normalized at those troublesome existing OEM customers. Sierra Wireless also won is second 4G connected-car program during the quarter, adding Volkswagen to its customer list, while enjoying its strongest design win momentum to date from its new cloud and connectivity segment.
That's not to say its growth will look particularly impressive on the surface. Sierra Wireless also told investors to expect revenue in the first quarter of 2017 to climb in the modest range of 6% to 12% year over year, reflecting typical seasonality in its business. But in these early stages, it's most important that Sierra Wireless keeps effectively positioning itself to play a key role enabling cellular connectivity for the Internet of Things -- something the company's design win momentum proves it's doing very well. For investors who buy now and watch the bulk of Sierra Wireless' growth story continue to play out, I think the stock could still be immensely profitable over the long term.
Tortoise or the hare? Take the tortoise
Tim Brugger (IBM): No, it doesn't have the pizazz of some cutting-edge, high-flying tech upstarts, but IBM stock will make you rich, given time. Investors are already enjoying more than a 35% share-price jump in the past year, which may call into question what IBM is doing on a short list of up-and-coming stocks.
IBM, despite its stellar run of late, remains an absolute bargain that also delivers one of the tech industry's best dividend yields of 3.1%. At just 12.7 times future earnings, IBM represents a great value, and it's delivering on its core "strategic imperatives," which translates to nearly unlimited upside.
IBM CEO Ginni Rometty has Big Blue focused on the cloud; artificial intelligence, via its computing wonder, Watson; mobile; the Internet of Things; and data security. Each of IBM's strategic imperatives represent tremendous opportunity in the months and years ahead, and combined they translate to the stuff of dreams for long-term growth and income investors.
The cloud alone will generate some $1 trillion in IT spending by 2020, according to one study, and IBM is already at, or near, the top of the provider list. IBM ended 2016 with $13.7 billion in cloud-related revenue, more than half its $21.8 billion in total fourth-quarter sales. Virtually every other strategic imperative climbed again last year, including a surprising-to-some 34% jump in mobile revenue.
IBM isn't likely to lead the Dow in daily price spikes. But what it will do is consistently grow where it counts -- in some of the fastest-growing markets on the planet -- making patient shareholders rich along the way.
A golden opportunity
Dan Caplinger (Franco-Nevada): The gold and silver market has been extremely turbulent in recent years, and the decline in precious-metals prices from their highs in 2011 and 2012 has had a big impact on mining companies. However, Franco-Nevada has used a different approach toward profiting from the precious metals markets, and that has allowed it to grow even when many miners have struggled.
Franco-Nevada focuses on making streaming arrangements and taking royalty interests in natural resources companies. Rather than mining its own gold and silver, Franco-Nevada offers financing in the form of upfront cash to mining-company partners. In exchange, the mining company agrees to sell a certain amount of its gold and silver production to Franco-Nevada at discounted prices compared with those prevailing in the precious-metals markets.
Weak conditions in the mining industry have actually spelled opportunity for Franco-Nevada. For instance, the company made a huge agreement with ailing mining giant Glencore in early 2016, dramatically increasing its exposure to the gold and silver market and potentially benefiting from anticipated strong production at Glencore's Antapaccay mine in Peru. Franco-Nevada believes that more deals like that one are out there. If it can capitalize and precious metals prices cooperate by rising in the future, then Franco-Nevada's stock could produce even better results than it has recently.
