The unprecedented coronavirus disease 2019 (COVID-19) pandemic has made this a trying year for Wall Street and investors. Though the broad-market S&P 500 is actually up for the year, it experienced its quickest bear market decline of at least 30% in history during the first quarter. You could rightly say investors have had their resolves tested like never before.
But as investors, we also know that operating earnings growth tends to push equity valuations higher over the long run, and all stock market corrections/crashes are eventually erased by bull market rallies. In other words, it pays to be bullish and buy into innovative and game-changing businesses.
If you want the opportunity to build serious wealth the right way, consider taking $10,000, putting it to work in the following 10 stocks, and hanging onto those investments for the next 10 years (if not longer).
Cashless transactions are the future, and Square (SQ 3.19%) is on the cutting edge of innovation in the payments space. Prior to 2020, Square's seller ecosystem, which provides point-of-sale devices and analytics tools to small businesses, had grown by 49% on a compound annual basis since 2012. More recently, it's seen a significant uptick in usage by larger businesses, which is good news for this merchant-fee-driven segment.
But it's the company's peer-to-peer payment platform Cash App that'll shine. Cash App has more than quadrupled its monthly active user count since the end of 2017, and is on track to become Square's leading generator of gross profit by next year. Look for Square to deliver some of the fastest growth among fintech stocks.
2. Intuitive Surgical
Speaking of innovation, surgical system developer Intuitive Surgical (ISRG 0.53%) offers a virtually flawless business model. Over the past 20 years, it's installed 5,865 of its da Vinci surgical systems worldwide, which is far more than all of its competitors combined. It's the clear go-to for assistive robotics in the operating room and has cemented its competitive advantage for a long time to come.
Intuitive Surgical is also built to improve its margins over time. Selling its da Vinci system generates quite a bit of revenue, but these are costly and intricate machines to build. Where Intuitive Surgical generates to bulk of its margins is from selling instruments and accessories with each soft tissue procedure, as well as in servicing its systems. The more systems installed, the greater the percentage of revenue derived from these higher-margin segments.
Another great stock to buy into is e-commerce giant Amazon.com (AMZN 1.21%). According to a March 2020 report from eMarketer, Amazon is on track to gobble up 38.7% of all U.S. online sales in 2020 and 39.7% of U.S. e-commerce in 2021. For some context here, the 38.7% share of domestic online sales places it 33 percentage above its next-closest competitor. Retail margins may be mediocre, but Amazon has been able to use its retail popularity to keep its users within its product and service universe.
Amazon is also benefiting from a surge in cloud infrastructure demand. Amazon Web Services (AWS) offers an annual run-rate of over $46 billion in sales, and its growth is the key to Amazon potentially tripling its operating cash flow over the next four years.
4. Alexion Pharmaceuticals
Although most drug stocks are dart-throws, that's not the case with Alexion Pharmaceuticals (ALXN). Alexion is a profitable rare-disease drug developer that has little in the way of competition for the indications it targets, and faces virtually no pushback from health insurers for the high list price of its blockbuster drug, Soliris.
However, innovation is Alexion's true secret to success. The development and approval of Ultomiris, a next-generation therapy that'll replace Soliris over time, ensures that Alexion's cash flow will remain safe from generic competitors for a long time to come. Strong pricing power and a single-digit forward price-to-earnings ratio are an intriguing combination.
Edge cloud computing services provider Fastly (FSLY 0.92%) should also thrive in investors' portfolios if left alone. With businesses and consumers pushing online and into the cloud due to the coronavirus pandemic, Fastly has seen demand for its content delivery and security solutions skyrocket. Double-digit growth should remain the nom throughout the decade.
Even after losing top customer TikTok during the third quarter, Fastly added 96 new customers, saw its average enterprise customer increase their spending by $37,000 from the sequential second quarter, and delivered a dollar-based net expansion rate of 147%. In plainer terms, Fastly's existing clients are spending more, which is pushing the company's gross margin higher.
6. NextEra Energy
Electric utility stocks are typically tape-your-eyelids-up boring. This isn't the case with NextEra Energy (NEE 1.22%). NextEra differentiates itself from a crowded field of utility stocks by being the leading producer of solar and wind power. Investing in renewables isn't cheap, but it's paid off with low electricity-generation costs and a compound annual growth rate in the high single digits.
NextEra should also benefit from historically low lending rates. Since it often uses debt to finance its clean-energy projects, the Fed's desire to keep lending rates low will allow NextEra the opportunity to transition more of its electric-generating capacity to lower cost renewables.
7. Sirius XM
A potentially smart way to make money over the next 10 years is by purchasing a company with a legal monopoly: Sirius XM (SIRI -3.24%). Though satellite-radio operator Sirius XM does compete for listeners with terrestrial radio and other streaming platforms, it remains the only satellite-radio operator. This gives the company solid pricing power to supplement its subscriber growth.
Additionally, Sirius XM generates most of its revenue from subscriptions. Through the first nine months of 2020, less than 15% of its sales have come from advertising, with 81% of revenue tied to subscriptions. That's an important distinction from ad-based terrestrial radio, because ad spending is fickle and prone to reductions during recessions. Sirius XM's subscription-focused model ensures steadier cash flow.
8. Green Thumb Industries
Marijuana stocks could be serious moneymakers over the next 10 years, with U.S. pot stocks like Green Thumb Industries (GTBIF 0.68%) handily outpacing their Canadian counterparts. Green Thumb has just over four dozen dispensaries open in the U.S., but holds licenses to open as many as 96 retail locations in 12 states.
What's allowed Green Thumb to stand out is the company's focus on derivatives, such as edibles, infused beverages, concentrates, and vapes. With dried cannabis flower more likely to be oversupplied or commoditized, it's derivatives that are delivering the juiciest margins to cannabis producers. Approximately two-thirds of Green Thumb's sales are tied to derivatives, which should help it reach recurring profitability with ease in 2021.
As stated earlier, cashless consumption is on the rise, which is great news for payment facilitator Mastercard (MA 0.77%). Even though recessions are an inevitable part of the economic cycle, downturns are usually measured in months or quarters, whereas periods of expansion are measured in years. A bet on Mastercard is simply a bet on increased consumption over the long run.
Aside from holding the second-highest credit card network purchase share in the lucrative U.S. market, it's also important to recognize that Mastercard isn't a lender. Because it's avoided the temptation of lending, Mastercard has no direct liability when loan delinquencies rise during economic contractions. This is why its profit margin is regularly above 40%.
Last but not least, take some of that $10,000 and buy social media up-and-comer Pinterest (PINS -0.59%). Whereas most social platforms run into a user growth wall, Pinterest has not. It ended the September quarter with 442 million monthly active users and has been attracting new users from international markets at a rapid pace. Being able to grow its average revenue per international user is Pinterest's ticket to sustainable double-digit growth.
Pinterest is also a burgeoning e-commerce powerhouse. With its users willingly posting about the products, services, and places that interest them, Pinterest simply has to connect these users with the small businesses that specialize in their interests. Look for Pinterest to double its sales many times over this decade.