Since going public, shares of internet shopping giant Amazon.com, Inc. (AMZN +2.33%) are up an incredible 50,850%. For context, that means a $1,000 investment in Amazon on its first day of trading would be worth more than a half-million dollars today. Incredible.
Investments like that come along very rarely. And while it's crazy to expect any stock to generate that kind of life-changing return, it's still worth taking the time to identify characteristics that helped Amazon be so successful and look for stocks that could replicate at least some of that going forward. Our contributors see some parallels in lululemon athletica (LULU +0.96%), Tucows (TCX +2.07%), and BofI Holding Inc. (BOFI +1.02%).
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We aren't saying these stocks will turn a $1,000 investment into $500,000 -- but if they generate even a fraction of that, it could still be an incredible investing success. Keep reading to learn what sets these companies apart and why our contributors think they could deliver life-changing returns for investors going forward.
A global activewear juggernaut in the making
Steve Symington (lululemon athletica): It might seem strange to predict lululemon athletica, a yoga apparel specialist, might enjoy growth potential anywhere in the ballpark of Amazon.com. But if giant competitors like Nike (NKE +0.65%) -- with its $82 billion market capitalization as of this writing -- have proven anything, it's that activewear is an enormous opportunity for brands with the ability to scale and take market share globally.
And with a valuation of roughly $7 billion as of this writing, lululemon is doing exactly that. The company recently kicked off its first-ever global brand campaign, titled "This is Yoga." Through the campaign, lululemon is taking advantage of the power of social media to -- as CEO Laurent Potdevin puts it -- "recontextualize how the world sees yoga culture" and amplify visibility of its brand.
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More specifically, lululemon has taken aggressive action to optimize its website, improve visual merchandising, and bolster its social media engagement and digital marketing. It didn't take long for those efforts to bear fruit; last quarter, lululemon promptly saw digital comps improve from flat to low-double-digit percent growth. It shouldn't be surprising, then, that investors recently celebrated lululemon's forward-looking decision to close the majority of its physical kid-centric ivivva brand stores, opting instead to operate ivivva as primarily an online brand.
But lululemon is also methodical in finding balance between its online presence and physical locations; the company recently revealed it will accelerate its physical footprint expansion with plans to open 50 new lululemon stores internationally this year (from a global base of 411 locations last quarter), with a particular focus on high-performing areas in Asia and Europe.
In addition, lululemon expects its men's segment to eventually be as large or larger than the women's segment -- an encouraging goal considering men's accounted for just 20% of total sales last quarter. But it makes sense combined with the fact that men represented nearly 30% of all new guests for lululemon in the first quarter and delivered high-single-digit percentage growth in comparable-store sales for the company.
If lululemon can sustain this momentum going forward, I see no reason it can't eventually rival the size of today's global athletic apparel leaders.
A cash machine with a growth kicker
Brian Feroldi (Tucows): One reason Amazon has kept its revenue growth rate so high for years is that it has rapidly reinvested its retail profits to develop its other business opportunities. One company that is following a similar strategy -- albeit on a much smaller scale -- is Tucows.
Tucows is three businesses in one. Its cash cow is its domain name registry. The company earns a fee each time a consumer or business registers a domain name on its platform. Tucows currently services more than 29 million domains worldwide thanks to its recent eNom acquisition, which provides a recurring stream of cash flows.
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Tucows then uses those profits to fund growth in its two other businesses -- high-speed internet and mobile phone services, which are branded in the U.S. under the name "Ting." On the wireless side, Tucows is going after cost-sensitive customers. It claims that its average consumer's monthly bill is $23. This price is so low that the company had successfully attracted about 175,000 customers as of last quarter and is growing at a double-digit rate. Meanwhile, Tucows' internet fiber business is all about speed. It sells access to its 1,000 MB-per-second service at a competitive rate. While this business is still tiny overall, it is also growing quickly.
Having 175,000 wireless subscribers might sound like a lot, but in reality, this number is puny when compared to the more than 400 million mobile phone subscribers in the U.S. alone. Meanwhile, its fiber service is currently available in just three U.S. cities. These figures speak volumes about Tucows' addressable market opportunity, which makes this a great stock to get to know if you are after long-term growth.
Retail banking is not immune from the online trend
Jason Hall (BofI Holding, Inc.): It has taken a long time for Amazon to move from an online shopping upstart -- and one that was in the niche business of selling books -- to the biggest online retailer in America. And just as Amazon was a tiny niche retailer 20 years ago, BofI Holding is a small online banker, swimming in a sea of much bigger traditional retail banks.
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But that trend has already begun to shift, with millions of Americans taking advantage of technology to reduce their need to ever go in their local bank branch. Not only has this helped people feel more comfortable with online banking, but it's also opened a lot of eyes to the financial benefits of working with an online bank like BofI, which generally pays higher yields and charges lower rates than bricks-and-mortar competitors.
This has helped BofI deliver big growth. Over the past five years, its earnings per share has increased 225%, while its stock price has shot up 360%. But with a market cap of less than $1.5 billion at recent prices, BofI is still very small, with huge growth potential as more Americans make the move away from bricks-and-mortar banks that charge bigger fees and pay smaller yields to maintain those local branches that fewer and fewer customers even use.
Trading for 12 times trailing earnings and about two times book value, this growth-oriented bank is on sale. Now's an excellent time to buy what could become the Amazon of banks.
