Sprints can be exciting. At the Summer Olympics, you'll see far more headlines about the 100-meter dash than about the 1,500 meters or the marathon.
But if you're an investor, it's much cooler to see your stocks performing well over long periods of time. So we asked a few of your fellow investors here at The Motley Fool to share their best growth-stock ideas -- with a focus on the long term.
Read on to see why they're excited about the long-haul returns ahead for Nike (NKE 0.36%), Shopify (SHOP +0.46%), and Amazon.com (AMZN +1.44%).
Image source: Getty Images.
Make money from the internet
Dan Caplinger (Shopify): The success of the internet has largely derived from people being able to use it as an increasingly efficient way of doing business. E-commerce has been a huge growth driver for some of the largest companies in the market, but everyone down to mom-and-pop businesses is looking for ways to get in on the action.
Shopify aims to make it easier for business owners of all tech skill levels to use e-commerce, with tools that make it easy to set up a website and tap into the power of the internet.
Shopify has been on fire recently, riding the wave of increased interest in online shopping during the just-ended holiday season. It has even attracted attention from major players in Silicon Valley, raising the possibility of a buyout bid for the e-commerce facilitator.
Yet with the company primed to report earnings this month that could feature a 60% rise in revenue from year-ago levels, shareholders with long-term aspirations for market-crushing returns might prefer to see the rising e-commerce star stay independent for the foreseeable future in order to maximize the potential profits from their portfolio positions.
Don't bet against Prime and Alexa
Anders Bylund (Amazon): You already know Amazon as the king of online retailing. But in recent years, the company has also established a firm foothold in the exploding market for cloud computing services. In fiscal 2017, the Amazon Web Services division collected just 8.6% of Amazon's total sales -- but produced 64% of its operating income.
That one-two punch will keep Amazon's top and bottom lines surging for years to come.
In fact, the company that Jeff Bezos built isn't satisfied with just growing its sales and profits on a straight line. Both of these growth rates are actually accelerating:
AMZN Revenue (TTM) data by YCharts
That's not all.
Amazon isn't afraid to dip its toes into new growth-boosting markets. We don't quite know how many Alexa-powered Amazon Echo devices it has sold so far, since Bezos likes to keep proprietary data close to the vest. But we do know that Amazon's management was downright impressed by Alexa's success in last year:
"Our 2017 projections for Alexa were very optimistic, and we far exceeded them," said Bezos in a prepared statement posted in Amazon's Q4 earnings report. "We don't see positive surprises of this magnitude very often -- expect us to double down."
Then there's the whole entry into physical stores with the $14 billion Whole Foods Market buyout, the ever-expanding global reach of the Amazon Prime service, and I'm really just scratching the surface here.
Amazon's growth is powered by disruptive innovation and fearless investments in expanded operations. Not all of Amazon's gambles come up aces, but the company should get credit for taking these swings in the first place. That's how you build a giant with a $680 billion market cap and $178 billion in annual sales -- and the growth trajectory of a hungry little startup.
Lace up for a marathon
Demitri Kalogeropoulos (Nike): At first glance, Nike doesn't look like your typical growth stock today. After all, the sports apparel and footwear titan's expansion pace has dropped from double-digit percentage to the low single digits. Its profitability is headed in the wrong direction, too, as gross margin recently touched 43%, down from 44.2% in the prior year.
Nike's struggles are mainly confined to the U.S. market, though, where its network of retailers is still working through a glut of slow-moving inventory. That segment shrank 5% last quarter, while strong international demand, especially in China, pushed overall revenue higher by the same percentage.
The company believes trends will soon start improving in the U.S. as it floods the market with its most aggressive set of product introductions ever. At the same time, executives are positioning the business for long-term growth.
In the weak U.S. division, that means pouring resources into the profitable (and fast-growing) direct-to-consumer business. Internationally, Nike is building up its base in China, where management sees massive growth potential as its market base there heads toward being 10 times the size of its U.S. base.
But the best news for investors is that, because of its diverse global presence and market-leading brand strength, Nike could struggle with modest results from a few of these initiatives and still deliver healthy overall returns, just as it has over the past two years.
