If you're looking to build enough wealth to live on your own terms when you retire, stocks are one of the most powerful tools at your disposal. By taking a stake in leading companies, you get to sit back and let their efforts do all the heavy lifting, with steady earnings growth generating the returns that show up in greater wealth in your portfolio.
Furthermore, there are an infinitely variable number of paths to retirement wealth with stocks.
For instance, two companies in my own portfolio -- American Express (NYSE:AXP) and Solaredge Technologies (NASDAQ:SEDG) -- couldn't be more different. On one hand you have the credit card and business lending giant that's been in business for well over a century, while on the other you have a renewable energy component manufacturer that's too "young" to buy a beer in most countries.
Yet both represent tremendous long-term investments that can help investors of all stripes and ages reach their retirement goals.
169 years and counting
Founded in 1850, American Express today shares little in common with its roots as an express mail and package carrier. But if there is one common thread, it's that the company provides an important service to a burgeoning market, and its reputation makes it a valued partner for clients on both ends of the service it delivers.
The difference today is that the opportunity isn't just the growth of the American West, but the explosion of the middle class in markets all over the globe.
Simply put, American Express' lending and credit card business is hugely popular, and that's likely to remain the case with burgeoning middle class shoppers all around the world for years to come, as well as the merchants looking to attract those middle-class (and upper-class) spenders.
For a company of American Express' size, its growth prospects are very appealing. Last year, the company reported the number of locations accepting its cards increased by 1 million, matching the number it grew merchant locations by in 2017.
This growth in merchant acceptance helped AmEx increase billed business -- which measures spending volume on its network -- by over 7% for the full year, helping increase adjusted earnings by 11% per share.
Here's the big key: By most estimates, the global middle class is on track to continue growing, adding some 1.7 billion new members over the next decade alone.
Today, American Express shares trade for 13.9 times the midpoint of management's 2019 earnings guidance and 12.5 times analyst estimates. That's incredibly cheap, considering the long-term prospects to continue delivering double-digit earnings growth for years to come.
The future of energy and green transportation
SolarEdge is best known for its photovoltaic inverters and power optimizers, key components that convert power from solar panels to usable AC electricity and maximize how much power those panels can produce.
This business alone is immensely valuable, and SolarEdge is one of the biggest suppliers of these key components to installers and panel manufacturers. Since going public less than four years ago, SolarEdge has grown net earnings per share almost 360%:
And SolarEdge isn't just resting on its laurels and counting on the profits to continue rolling in as solar installations grow around the world. Instead management is putting its profits to work, both improving its current solar-focused offerings as well as taking action to expand into new market opportunities.
First, SolarEdge's big step into energy storage. The company recently acquired a battery supplier, and a company that makes uninterrupted power source -- or UPS -- systems. Going forward, SolarEdge plans to market a complete turn-key energy storage system for both residential and commercial applications, which is one of the fastest-growing segments of the renewable energy space.
If the company can pull off an effective launch of these new offerings, utilizing its existing network of dealer installers and potentially partnering with panel manufacturers it counts as panel-level electronics customers, this is the kind of savvy move that could simultaneously take some eggs out of SolarEdge's current basket, while also giving it an entirely new vertical market to deliver profitable growth.
There's more: SolarEdge also took a controlling stake in an integrated electric powertrain company earlier this year, positioning itself to expand even further outside the solar inverter business and into adjoining technologies like electric vehicle recharging.
Of course, there's going to be stiff competition from some of the biggest industrial conglomerates out there as the market matures and the opportunity becomes more apparent. But if SolarEdge can be one of the first movers into these spaces and establish itself as a leader, the returns could be enormous.
Think about it this way: SolarEdge's total sales last year were $937 million, and its market capitalization today is less than $1.9 billion. This is a small, yet well-known and trusted company in a very high-growth global industry, that's now planning to dip its toes into two related and even higher-growth segments.
American Express, SolarEdge is cheap, trading for less than 15 times 2018 earnings and 11.6 times 2019 earnings estimates, and a strong balance sheet with very little debt and $316 million in cash.
Picture the future: Invest in what you see
Looking out a decade and longer, we will see a lot more solar panels and electric cars than we do today, while nearly 2 billion more people will be added to the consumer middle class and using cashless tools like American Express to complete transactions.
And while American Express and SolarEdge alone might not make anyone rich, they're both set up for immense growth from the big tailwinds blowing in their favors. For investors looking to build a portfolio of long-term winners, they both look too good -- and too cheap -- to pass up today.