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Amazon.com, Inc. (NASDAQ:AMZN) is one of the best investing stories ever. To date, anyone smart -- and lucky -- enough to have bought shares the first day of trading and held them would be up a remarkable 45,900%. That's a life-changing investment, turning every $1,000 invested in the company into $459,000.
Investment opportunities like that don't happen very often. And while we'll be the first to admit that it's almost impossible to really know which stocks out there right now will deliver Amazon-like returns, that doesn't mean you shouldn't look for companies with the same kind of potential. And our contributors have identified three stocks with traits that could lead to life-changing returns for investors.
Keep reading to learn why e-commerce specialist Shopify Inc. (US) (NYSE:SHOP), online-only bank BofI Holding, Inc. (NYSE:AX), and senior housing and rehab property owner Caretrust REIT Inc. (NASDAQ:CTRE) have Amazon-like potential.
A company that battled Amazon -- and won
Brian Stoffel (Shopify): When I think about finding the next Amazon.com, I think about finding companies that share a few key traits:
- A founder/CEO with significant skin in the game.
- A wide-moat business that has several opportunities for growth.
- Sales -- though not necessarily profit -- that are growing at amazing rates.
In all three of those respects, Shopify fits the bill. Shopify is a leading provider of e-commerce solutions to small and medium-sized businesses throughout the world. The company offers up its platform with a software-as-a-service (SaaS) business model.
CEO Tobias Lutke founded Shopify in 2004. Combined with his leadership team, Lutke and company own 14 million shares of Shopify, worth about $1 billion and representing almost 60% of voting rights.
Furthermore, Shopify is a wide-moat business. Small and medium-sized businesses can't survive without an e-commerce presence in the age of the Internet. But these very same businesses can't afford to spend all their time worrying about e-commerce -- they need to focus on the things that make their products and services valuable and unique. That's why once a vendor is signed on to Shopify's platform, the switching costs -- in terms of money spent, downtime, retraining, and headaches in general -- are high.
Finally, the company is growing at amazing rates. Take a look at how sales and gross profit have jumped since 2012.
But perhaps most important, Shopify has gotten a huge vote of confidence from... Amazon. After trying to design its own e-commerce platform that vendors could use, Amazon decided it was best to partner with Shopify rather than compete against it. That speaks volumes.
This low-cost bank has room to run
Brian Feroldi (BofI Holding): There are plenty of numbers to watch in the banking sector, but one of the most important is the efficiency ratio. This figure measures the percentage of a bank's total revenue that's consumed by operating costs. The lower the figure is, the better.
In the banking industry, an efficiency ratio below 60% is considered to be good, while the best big banks regularly put up numbers in the low to mid-50s. However, those numbers are still not even in the same ballpark as BofI Holding's recent efficiency ratio of 36%.
How can BofI Holdings operate with such low costs? Because it's an online-only bank. That means BofI doesn't have to pay any costs associated with running brick-and-mortar branches, giving it a huge advantage over traditional banks.
BofI has used its extreme cost advantage to offer attractive rates to consumers -- I saw the difference myself when I recently refinanced my home mortgage. In turn, the company has grown at a breathtaking rate, taking shareholders on a profitable ride.
While BofI has grown like a weed, the company it still just a tiny player in the banking world. As of the end of 2016, BofI had about $8 billion in total assets. By contrast, a big bank like Wells Fargo has more than $1.9 trillion in total assets. To me, that speaks volumes about this company's room for future expansion.
In the right industry at the right time
Jason Hall (Caretrust REIT): Much of Amazon's success is a product of timing. Founder and CEO Jeff Bezos saw a tremendous opportunity to leverage the burgeoning internet as a marketplace, just as tens of millions of Americans were getting online for the first time. Fast-forward 20 years, and shopping online -- especially on Amazon -- has for millions replaced going to the mall.
Caretrust could be another company in the right place at the right time. Just as millions of people were first getting online 20 years ago, millions of Americans are reaching retirement age every year now -- a trend that's set to continue for decades, as we live longer and more active lives.
That's where Caretrust comes in. As a small operator with just over 150 properties, there's a significant opportunity to grow. The 65-plus population is expected to increase from around 47 million in 2015 to more than 81 million by 2040. Considering there are fewer senior nursing facilities operating today than there were in 2000, this is undoubtedly a growth industry.
And like Amazon, Caretrust is founder-led, with CEO Greg Stapley playing a key role in building Caretrust when it was spun out of Ensign Group (which he also co-founded) in 2014.
Furthermore, Caretrust offers something that even Amazon doesn't: a dividend that's set to grow steadily for years and years. So far, management has proved very good at growing per-share earnings, and therefore the dividend, as it builds a bigger property portfolio. While it may be a stretch to expect Amazon-like returns from any stock, Caretrust is in an excellent position to reward shareholders in a very big way for a lot of years to come.
Brian Feroldi owns shares of Amazon, BofI Holding, and Wells Fargo. Brian Stoffel owns shares of Amazon and Shopify. Jason Hall owns shares of Amazon, BofI Holding, CareTrust REIT, Shopify, and Wells Fargo. The Motley Fool owns shares of and recommends Amazon, BofI Holding, and Shopify. The Motley Fool has a disclosure policy.