Making money in the stock market might look and sound complicated at times, but it really doesn't have to be. As long as you seek out innovative businesses and hang onto these game changers for long periods of time, there's a strong likelihood that you'll be able to build significant wealth over time.
Think about this for a moment: At no point between 1919 and 2019 has the rolling 20-year total return (i.e., including dividends) of the broad-based S&P 500 been negative. In fact, of the 101 years that could be arbitrarily chosen as the endpoint of a rolling 20-year period between 1919 and 2019, only two ended with an average annual total return of less than 5%.
The stock market is a millionaire-maker -- you simply have to be patient while it does its work.
If you have $10,000 in cash at the ready for investments and a long investing horizon, I'd suggest putting that money to work in the following four game-changing stocks, with the intention of never selling.
When the curtain closed on a challenging 2020, Facebook tallied 2.8 billion monthly active users to its namesake website. If you were to add unique visitors to the company's other owned platforms (WhatsApp and Instagram), this monthly active total increases to 3.3 billion.
Approximately 42% of the entire global population visits a Facebook-owned social media asset at least once monthly. That's what we call dominance in numbers, and it's a big reason why advertisers will pay through the nose to get their message onto Facebook.
What makes Facebook such an interesting growth story is that it generated more than $84 billion in ad revenue last year despite only monetizing its namesake site and Instagram. Neither WhatsApp nor Facebook Messenger -- two of the most-visited social platforms on the planet -- are contributing meaningfully to Facebook's top-line figure. When Facebook does greenlight an advertising or monetization strategy for these assets, you can rest assured that sales, cash flow, and income will all soar.
Yet investors can scoop up shares of a company slated to grow by 20% to 25% annually for less than 20 times forward-year (2022) earnings. That works out to a price-to-earnings-growth ratio (PEG ratio) of less than 1, which is exceptionally cheap.
Don't let Facebook's market cap fool you: This growth story is still in the early innings.
Although new technology takes time to develop, adapt, and mature, it's pretty evident that a war on cash is underway. Digital-payment providers like Square (SQ 8.52%) could be sitting at or near the top of the financial services industry in a decade or less.
Most people are familiar with Square because of its seller ecosystem. This is the operating segment that provides point-of-sale devices and an assortment of analytic tools to merchants (mostly small businesses) to facilitate transactions. Between 2012 and 2020, the gross payment volume (GPV) traversing Square's network catapulted from $6.2 billion to north of $112 billion.
As a merchant fee-driven operating segment, the ecosystem provides a nice foundation for Square to generate cash flow. It also doesn't hurt that bigger businesses (as measured by annualized GPV) are beginning to adopt Square's seller ecosystem.
However, the real selling point for Square is peer-to-peer digital payments platform Cash App. In three years, Cash App's monthly active user count more than quintupled to 36 million. It's an app that allows Square to generate revenue a variety of ways: merchant fees, bank transfer fees, investment fees, and Bitcoin exchange. In fact, Bitcoin revenue of $4.57 billion in 2020 was roughly nine times higher than the previous year.
The number that tells you everything you need to know about Square is its gross profit per Cash App user. Whereas the acquisition cost to bring in a Cash App user was less than $5 in the fourth quarter, Square is generating a gross profit of $41 per user. Those are tasty margins that long-term investors can appreciate.
Zoom Video Communications
To get the obvious out of the way, Zoom was a clear beneficiary of the coronavirus disease 2019 (COVID-19) pandemic. With the traditional workspace disrupted like never before, businesses were forced to turn to technology to get things done. According to Statista and Datanzyne, Zoom controlled nearly 43% of the U.S. web-conferencing market share, as of April 2020.
What's important to understand is that the end of the pandemic won't spell the end of growth for Zoom. COVID-19 pushed a modest work-from-home trend into overdrive, and that's unlikely to reverse course even after things normalize. Though some workers will go back to the office, businesses big and small now understand the capabilities of remote work and the cost savings it can provide.
If you need more evidence that Zoom is a keeper, look to its CEO and Founder Eric Yuan. At the end of 2020, Yuan held 43.28 million shares of Zoom stock, which works out to 21.78% of all outstanding shares. When executives and founders have a large vested interest in the success of their companies -- Yuan's position is currently worth $14.6 billion -- good things tend to happen for shareholders.
Zoom might be fundamentally pricey now, but a tripling in sales could be on the docket by mid-decade from where things stand now.
Finally, if you've got $10,000 at your disposal, consider buying robotic-assisted surgical system developer Intuitive Surgical (ISRG 2.62%).
Intuitive Surgical's claim to fame is its da Vinci surgical system, which helps surgeons make precise incisions during a variety of soft tissue procedures. The preciseness of robotic surgeries can reduce scarring, minimize complications, and shorten hospital stays, relative to traditional laparoscopic surgery.
Over the past two decades, the company has installed almost 6,000 of its da Vinci systems worldwide, with most being placed in hospitals and surgical centers in the United States. This figure is more than all of its competitors combined by a significant amount. With Intuitive Surgical's competitors running into launch snafus, it's looking like its competitive edge could grow even larger.
The reason investors are going to scoop up shares of Intuitive Surgical and never sell is because of the company's operating model. In its earlier years, most of its revenue was derived from selling its pricey surgical systems ($0.5 million to $2.5 million each). Unfortunately, these are intricate and costly machines to build, which means the margins associated with them are mediocre, at best.
But as the company's base of installed da Vinci systems has grown, a greater percentage of revenue has been generated from juicier margin channels (e.g., instruments and accessories sold with each procedure and system servicing). In short, the company's operating earnings growth should continually outpace sales growth.
Having already locked up the lion's share of urology and gynecology procedures, Intuitive Surgical is turning its attention to promoting its system for thoracic, colorectal, and general soft-tissue procedures. The growth runway for surgical assistive technology is huge, and investors aren't going to want to miss out.