Identifying businesses that are capable of rapidly expanding sales and earnings over the ultra-long term is no easy task, but picking just a few companies that succeed on that level tends to have a performance-defining impact on an investment portfolio.
With that in mind, we put together three Motley Fool contributors with an eye for growth investing and asked each panelist to profile one top pick. Read on to see why they think Boeing (BA -3.39%), Netflix (NFLX -1.78%), and Baidu (BIDU -0.20%) are stocks primed for incredible growth over the next half-century.
Boeing: 103 years young, and growing
I know. You're wondering: How can Boeing be a growth stock? Boeing's been around for 103 years. Boeing has a market capitalization of $240 billion -- nearly a quarter of a trillion dollars! Something that big already can't possibly grow more, right?
Large caps, after all, aren't supposed to grow rapidly. They're supposed to sit on their laurels and pay steady dividends. Yet that's not what Boeing is doing.
Building on the base of its nearly 50% market share in assembling traditional passenger airplanes, Boeing is expanding its interests, exploring new ground, and growing. In just the past few months, Boeing has won contracts to build a new fleet of patrol helicopters to protect U.S. Air Force missile silos. It won a Navy contract to build a fleet of carrier-based refueling drones for the Navy in September -- and an even bigger contract to build T-X training jets for the Pentagon in October. In the water, Boeing is building a new drone submarine for the Navy. And in the civilian market, Boeing owns a subsidiary company that's developing a vertical-launching, electric-powered air taxi.
The result: With all these irons in the fire, analysts polled by S&P Global Market Intelligence expect Boeing to grow at 15% or better over the next five years, and maybe longer. Sounds like a growth stock to me.
Decades of growth ahead
Demitri Kalogeropoulos (Netflix): With nearly 150 million subscribers already signed up for its service, Netflix has already seen much of its biggest user gains. Management's long-term target calls for the U.S. market to eventually reach between 60 million and 90 million members -– and it ended 2018 near the low end of that goal.
But it would be a mistake to assume that means Netflix's best growth days are over. There are still many millions of TV fans to reach outside its home market -- including in massively populated emerging markets such as India. A reasonable landing point for the company's global footprint would see about two-thirds of its user base located outside the U.S., and that would imply a long-term audience level of between 240 million and 360 million homes. It might take a while to get anywhere close to that goal, but internet TV appears to be an entertainment trend that's better measured in decades rather than years.
At the same time, Netflix will continue to lay the groundwork for rising monthly membership fees. The company earns this pricing power by attracting higher average streaming hours through improved content. In that way, there's plenty of room for daily streaming viewership to rise toward that of pay TV in the coming decades, suggesting Netflix could charge several multiples of its current rate for the much wider portfolio it controls in 2030 or 2040. Put it all together, and this streaming video giant has a bright long-term outlook.
All in one: AI, digital advertising, and media
Keith Noonan (Baidu): The idea of buying and holding a Chinese tech stock on a decades-long timeline might put some investors off from the get-go. It's not unusual to have less visibility into the operations and accounting practices of Chinese companies, and a slowdown in the country's economic growth has highlighted other elements of uncertainty that could factor into performance.
While the Chinese economy could be somewhat stop-and-go, the long-term outlook remains very promising. The country's 6.7% growth rate was still second only to India's in 2018, and there's still huge expansion potential in its tech sector. China is already the world's largest internet market -- with roughly half of its 1.4 billion population connecting to the Web, and Baidu is well positioned to benefit from some of the biggest trends that will shape and power the Middle Kingdom's technology and content industries over the next half-century.
Baidu continues to lead the country's search engine market -- positioning it to benefit from the ongoing growth of digital advertising. Having roughly 70% of China's search market share also gives the company advantages as it makes its big push into artificial intelligence, and partnerships with the Chinese government on initiatives such as autonomous vehicles and smart city technologies suggest that Baidu is a top player in what could be the 21st century's most important tech shifts. The company also owns a roughly 60% stake in iQiyi, a streaming video company that it spun off last year that's seeing rapid subscriber growth.
Shares trade at roughly 17.5 times this year's expected earnings and roughly 13.5 times trailing earnings -- levels that look cheap on a historical basis and leave lots of room for upside.