Maybe you've had some cash on the sidelines as major market indices have rebounded sharply from lows in March and feel like you've missed all the good investment opportunities. Or perhaps you've invested some money during the recent downturn but still have more you'd like to put to work in hopes that it can help grow your portfolio over the long haul. The big question, of course, is where to invest?
Consider buying shares of tech giant Apple (AAPL -0.11%), insurance and investment conglomerate Berkshire Hathaway (BRK.B -0.67%) (BRK.A -0.53%), and data-driven ad-buying specialist The Trade Desk (TTD 0.26%). Despite the market's move higher recently, there are still some good opportunities for patient investors -- and these three companies' stocks are great examples. Indeed, these three stocks collectively have the potential to double your money over the next five to seven years. This translates to an average return of about 10% to 15% annually.
Here's a closer look at each of these stock picks -- and why they have a good chance of outperforming the overall market in the years ahead.
One of the rare high-quality stocks still trading near the low it saw in March is Berkshire Hathaway -- the insurance and investment conglomerate led by famed investor Warren Buffett. Shares are the cheapest they've been in years, trading below 1.2 times book value.
Warren Buffett himself seems to think shares of Berkshire Hathaway are a good deal. Berkshire has spent more money buying Berkshire Hathaway stock over the past two quarters than it has spent buying any other stocks. It seems Berkshire is one of the Oracle of Omaha's best ideas.
Another investment to consider is Berkshire Hathaway's largest holding (by far), Apple. Berkshire's stake in the tech giant is currently valued at more than $80 billion. To put this wager into perspective, the amount of Berkshire's next three largest investments combined totals about $54 billion. Or here's another way to put it: Apple stock represents about 40% of Berkshire's total equity portfolio.
While shares of the tech company have surged recently, they remain compelling today. Apple boasts an installed base of active devices greater than 1.5 billion -- a figure that's consistently grown every quarter. Further, the tech giant is monetizing these users with services, evidenced by its fast-growing services business (which now accounts for about a third of total gross profit). In addition, Apple continues to demonstrate prowess in launching new products and becoming a market leader in those new categories. Both the Apple Watch and AirPods, for instance, are the leading products in their respective fast-growing categories.
Sure, at 25 times earnings, Apple stock isn't cheap. But sometimes, it's worth paying up for quality. The tech giant looks poised to grow both its hardware and services revenue in the coming years, and its higher-margin services revenue will likely grow as a percentage of total revenue.
The Trade Desk
To finish off this trio, investors should consider buying shares of The Trade Desk. This is the fastest-growing company of the bunch -- but investors will have to pay a steep price tag to get in on this growth story. The company trades at 116 times earnings.
In 2019, the advertising-technology company's revenue jumped by 35% year over year. Even more, its non-GAAP (adjusted) net income skyrocketed from $51.1 million in 2018 to $71.6 million in 2019 -- and that figure was on just $215.9 million in 2019 revenue.
The Trade Desk is early in its growth story. As the leading independent data-driven advertising platform, the company stands to benefit from the ongoing shift of ad spend from traditional TV to internet-connected TV, where programmatic advertising (The Trade Desk's specialty) has potential to dominate.
Analysts expect huge earnings growth in the years ahead. On average, analysts forecast The Trade Desk's earnings per share to grow at a compound annual growth rate of 31% over the next five years.
A bet that could double your money
While all three of these companies will have to work through near-term challenges associated with COVID-19's impact on the economy, they all look like promising bets for the long term. More importantly, all three companies have a track record of strong execution. Indeed, it wouldn't be surprising if the value of an investment in these three companies today could double over the next five to seven years.