It's been nearly four months since the benchmark S&P 500 hit an all-time high, and since then investors have received a crash course in... market crashes. It took less than five weeks for the broad-based S&P 500 to lose more than a third of its value, then another 11 weeks for the vast majority of these losses to be recouped.
While these wild vacillations in the stock market have undoubtedly shaken short-term investors to the core and cost option traders some valuable sleep, periods of panic and fear have historically been a great time for longer-term investors to put their capital to work.
But, you see, being a long-term investor isn't enough by itself to guarantee investors a healthy return. In order to become rich, you need to be willing to own a stake in revolutionary companies for long periods of time. Though the valuations of these revolutionary businesses often won't fit the historical standard of "value," their game-changing potential will more than make up for their near-term fundamental shortcomings. Here are three revolutionary stocks that, if held over the long run, can make you rich.
Even though it's a company that's been developing surgical systems for hospitals over 20 years, Intuitive Surgical (ISRG 3.95%) remains a driving force of innovation in the surgical setting.
The goal of Intuitive's da Vinci system is to make more precise incisions during soft tissue surgeries, resulting in faster healing times, fewer complications, and shorter inpatient stays. That's a win for the patient, and it's great news for insurers that are certainly eager to lower the cost of inpatient stays.
What you might not know about Intuitive Surgical is just how dominant the da Vinci system actually is. This is a company that ended March with 5,669 installed systems worldwide, which is far more than all of its competitors on a combined basis. This allows Intuitive to build a tightknit relationship with the medical community and virtually ensures that client churn is nonexistent.
Perhaps the best aspect of Intuitive Surgical is that it's built to grow its operating margins over time. While selling its da Vinci surgical systems generates quite a bit a revenue considering they run $0.5 million to $2.5 million each, these are intricate machines that are costly to build, and therefore produce only mediocre margins. The lion's share of margin growth derives from selling instruments with each procedure, as well as from servicing these systems. In other words, as the installed base of these systems grows, Intuitive Surgical will generate a larger percentage of its sales from higher-margin channels.
And as I'd stated above, Intuitive isn't done innovating. Aside from regularly updating its da Vinci system to broaden its scope of potential soft tissue indications, the company nabbed a U.S. Food and Drug Administration approval for its Ion lung biopsy system in February 2019. As medicine becomes more personalized, Intuitive Surgical stands ready to lead the charge on the surgical front.
Despite the financial services space being filled with veritable dinosaurs (albeit some of them are fast-growing), Square (SQ 1.44%) brings innovation to the table that's simply not seen often in the financial sector.
Square is probably best known for its seller ecosystem. This involves its point-of-sale systems installed in retailers and restaurants around the U.S., as well as lending services available to businesses of all sizes. What you might not know about Square is that its seller platform and lending services are growing increasingly popular with bigger businesses. Although its roots will always be with smaller-sized companies, the most recent quarter featured 52% of sales coming from businesses with more than $125,000 in annualized gross payment volume (a medium or large business, in the eyes of Square). Since we're in a consumption-driven economy, bigger businesses choosing its platform should lead to sustainable double-digit fee-based sales growth.
But Square's secret weapon is Cash App, which delivered 115% year-on-year gross profit growth in the coronavirus-impacted first quarter, and $458 million of the company's $1.85 billion in gross profit in full-year 2019. In just two years, Cash App's monthly active user count more than tripled to 24 million, and I wouldn't be surprised if it surpassed 30 million in the first-half of 2020 given the ability to send and receive money, as well as transfer to and from a traditional banking account.
Innovation within Cash App is liable to drive significant growth throughout the 2020s. Square has already enabled the ability to invest directly from Cash App, and is promoting Cash Card as a means of using a Cash App balance with a debit card in a more traditional setting.
A doubling in sales every four or five years for a long time to come is not out of the question for Square.
A third revolutionary stock that could generate riches for patient shareholders is healthcare solutions provider Livongo Health (LVGO). If the name doesn't strike a bell, it could because Livongo IPO'd less than a year.
Livongo's mission is pretty simple: it wants to reach patients with chronic illnesses and help them live healthier lives. Right now, it has a specific focus on diabetics, albeit with the expectation of branching out to include patients with hypertension, prediabetes, and weight management issues.
What allows Livongo to stand out from other medical solutions providers is the company's technology. Livongo gathers copious amounts of data on its clients and utilizes artificial intelligence to send them tips and reminders that'll have them changing their behavioral habits and living healthier lives. While the co-morbidities tied to diabetes are scary, the inability of diabetics to stay on top of their illness can be just as much of a problem. According to an investor presentation from last month, more than 40% of its Diabetes members have benefited from these "nudges," as the presentation put it.
Maybe the biggest eye-opener for investors is that Livongo has generated two consecutive quarterly profits despite only having a little over 328,000 Diabetes members enrolled. That's not even 1% of the 34.2 million people who have diabetes, according to the Centers for Disease Control and Prevention. With nearly 40 million people also having hypertension, Livongo has an immediately addressable market that tops $49 billion, based on its monthly subscription charge to diabetics and hypertensive members.
Livongo has the ability to forge partnerships and really engrain itself into health-benefit networks to drive enterprise adoption. In essence, it has the makings of an absolute juggernaut in the healthcare space.