"Time is the friend of the wonderful company, the enemy of the mediocre."
-- Warren Buffett
Time isn't only the friend of the wonderful company, it's also one of the most powerful tools at the disposal of the individual investor. The best way to use your time is also the easiest way: Invest in those wonderful companies that Buffett alludes to in his quote above and let the businesses do all the work.
This has paid off incredibly well for American investors for decades, and you can continue to count on the best stocks generating the kinds of returns that will double your money every decade or so. Three Motley Fool investors particularly like the following companies right now: upstart car seller Carvana Co (NYSE:CVNA), specialty insurer and holding company Markel Corporation (NYSE:MKL), and apparel and footwear maker Under Armour Inc (NYSE:UA)(NYSE:UAA).
A unique concept
Daniel Miller (Carvana Co.): If you're looking for a stock that could double over the next decade, Carvana Co. should be high on that list, despite the pessimism surrounding the U.S. automotive market. For Carvana to double, it has to execute on two major strategies: differentiation and expansion.
There are plenty of ways to view vehicle pricing, availability, and all kinds of information on the internet or on smartphone apps, so being different and offering consumers unique options are important for companies to thrive. Carvana has achieved this so far by offering a unique vending machine in a handful of markets, and offers consumers a better experience with an online purchase that can take as little as 10 minutes, with a vehicle delivered as soon as the next day in certain markets. It even offers a seven-day money-back guarantee to help ease the concern of purchasing a vehicle online.
While differentiation will continue to be important for Carvana's success, it must continue to streamline its go-to-market strategy and expand into more markets. Management believes it has a proven strategy with each new market costing $500,000 for a delivery-only program and up to $5 million for a vending-machine launch. But with each new venture, Carvana is reducing time to cash generation, improving the cash burn on new launches, and improving its gross profit per unit (GPU).
There's plenty of growth on the road ahead for Carvana -- it's only in 44 markets as of the end of 2017 and is in the early innings of improving its brand awareness. As the company improves the profitability of its operations while expanding its network and reach, investors shouldn't be surprised if the stock doubles over the next decade.
A tried and true winner
Steve Symington (Markel): If I had to bet on any company whose stock could at least double in the next 10 years, it would be Markel. The specialty insurer, financial holding company, and so-called "mini-Berkshire Hathaway" follows a proven approach to consistently generate shareholder value. This value comes through a combination of its specialty insurance operations, enviable investment portfolio, and a diversified group of businesses acquired and operated under the Markel Ventures moniker.
Shares of Markel have soared more than 147% over the past 10 years as of this writing, helped by impressive 11% compound annual growth in its book value per share over the past five years.
The effectiveness of Markel's approach was arguably most evident in 2017, when the company grew book value per share by 12.7% despite incurring massive insurance losses from seven separate natural disasters during the year. For that, it credited the relative outperformance of its equities portfolio, which benefits from the investing savvy of Markel co-CEO and chief investment officer Tom Gayner.
A turnaround in the making
Jason Hall (Under Armour): Under Armour's U.S. business has been struggling. In the fourth quarter, the company reported a 4% decline in revenue in its North America segment, which, on the surface, looks terrible (and isn't great). But this represents a major improvement from the third quarter when sales fell 11%. But the market's focus on Under Armour's North American business -- and its very real struggles -- looks to be creating a solid opportunity for investors willing to take on a little risk.
This is because its international business continues to grow at an enormous rate, up 46% in 2017. But since it only makes up a small portion of total sales -- around 22% last year -- the market continues to weight the company's domestic struggles quite heavily. But the reality is, over time, international sales will become a bigger portion of the mix, and that will help offset weakness in any single geographical region.
Furthermore, Under Armour isn't as expensive as some analysts claim, with shares trading for 1.5 times sales. That's about half the sales multiple that competitor Nike's stock sells for today.
I won't go so far as to call Under Armour a value stock, but I think even a moderately successful turnaround in North America combined with steady international growth should be enough to see the company's share price more than double over the next decade. Frankly, my personal expectations are much higher than that.