Investing in stocks has consistently proved to be one of the best wealth-building tools people have access to. And while a lot of people make the mistake of trying to do it quickly and lose money when they sell at the first sign of a downturn, a patient approach built on buying great businesses and holding them for as long as possible has proved to work far better at generating life-changing returns.
Even in the current market, with stocks trading at premium valuations, we see great long-term opportunities to be had. Our contributors especially like the prospects for senior-housing upstart Caretrust REIT Inc (NASDAQ:CTRE), little-known drone and electric-vehicle industry leader AeroVironment, Inc. (NASDAQ:AVAV), and generic-drug maker Teligent Inc. (NASDAQ:TLGT).
One major trend driving huge growth for this company
Jason Hall (Caretrust REIT Inc.): One thing to look for when searching for stocks with real wealth-creating power, is big, long-term trends that are driving a major need. And there's little doubt that's happening for Caretrust REIT, which buys, builds, and owns rehab and senior housing facilities.
Between now and 2030, more than 3.5 million baby boomers will reach retirement age every year, creating the biggest population of retirees the U.S. has ever seen. And with this generation on track to live longer and more active lives than prior groups, the need for more elderly housing and rehab facilities is already on the rise.
The sad irony is that the total number of facilities serving seniors has declined over the past 15 years, even as the 65-plus population has increased:
This is creating a multiple-decade opportunity. As a very small player in its industry (Caretrust owned just 161 properties at last count), the company has focused on acquiring smaller properties that many of its much bigger competitors ignore. In 2016, the company invested $288 million to acquire 33 facilities and has already invested $55 million in 2017 to acquire seven more.
The biggest risks for Caretrust investors are that it will require a lot of debt and stock dilution to pay for much of its growth, and rising interest rates could make it more difficult to gain incremental per-share returns, so investors will want to keep a close eye on how well management allocates capital. But if management can continue to execute as well as they have, patient investors could do incredibly well to buy and hold Caretrust shares for many years to come.
Drones and EVs could be big business
Travis Hoium (AeroVironment): There's one company that's an industry leader in drones and has exposure to electric-vehicle charging, and you've probably never even heard of it. The company is AeroVironment, and it's the largest manufacturer of small military drones in addition to being a leading supplier of electric-vehicle chargers for home and commercial use.
In the drone market, the company has long been an industry leader in military drones, but it's now entering the commercial-drone market. Not with the small drones you may see at the park on the weekend, but with drones for commercial customers such as farmers and energy developers. The drones are also married with commercial information solutions, providing users with the data they need on the ground. This is a small business today, but if AeroVironment gets its strategy right, this could be a huge market in the future.
AeroVironment has built a number solutions for EV charging, from home plug-in solutions to fast chargers. It's also built partnerships with a handful of companies developing EVs and will be able to ride the industry's growth wave in the future. Again, the company needs to get its strategy right, but if EVs become a sizable share of the auto market, there will be a need for millions of chargers around the world, and AeroVironment is set to be a major supplier for those chargers. The combination of drones and EVs could make investors a lot of money.
Plenty of room for growth
Brian Feroldi (Teligent): I'm a big fan of buying shares of companies that have smart business strategies and a track record of success. If you are, too, then I'd recommend you give Teligent a closer look.
Teligent is a manufacturer of generic drugs, but with a twist. Instead of making small-molecule drugs, Teligent focuses exclusively on making copycat versions of products from the topical, injectable, complex, and ophthalmic markets. This includes a number of creams, lotions, and ointments that have lost patent protection. Teligent simply cranks out a generic, wins regulatory approval, and then sells it at a discount to grab market share.
This simple playbook is working like a charm. The company's stock has been on a tear over the past few years as revenue has soared. That strong growth continued in 2016, when total revenue grew by 51%. While the company's bottom line is still in the red, that's mostly owed to the company's decision to invest heavily in R&D to expand its pipeline of products. In light of the company's 35 new drugs currently pending FDA approval, I applaud management's decision to spend aggressively to drive organic growth. Investors won't have to wait long for this company to turn a profit, either. Market watchers are currently projecting that Teligent will become profitable in 2017 as its new products hit the market.
Overall, Teligent looks poised to continue to grow rapidly for the foreseeable future. If you're looking for a stock that could help you strike it rich, Teligent might be a fine choice.
Brian Feroldi has no position in any stocks mentioned. Jason Hall owns shares of CareTrust REIT. Travis Hoium owns shares of AeroVironment. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy.