Patience is one of the most valuable traits for investing. Without it, you might invest in, say, Amazon.com (AMZN 3.58%) in 2010, when it's trading for around $180 per share, and then sell it for around $400 per share three years later -- more than doubling your money but losing out on a lot, as the stock went on to surpass $3,000 per share.
The trick to making big bucks in the stock market is generally just buying into great companies and hanging on to them for a long time, through ups and downs -- because great companies will recover from dips and go on to reach new highs. You do want to keep up with them, to make sure their prospects remain rosy, but otherwise there's little to do.
Here are three growth stocks to consider for berths in your long-term portfolio. Each looks like it could reward shareholders well over the coming decade.
1. Veeva Systems
You may not have heard of Veeva Systems (VEEV 3.56%), but it's a sizable company, with a recent market value of $39 billion -- greater than that of Twitter, Ford Motor Company, Hershey, or Southwest Airlines. Veeva offers cloud-based technology and services that help companies bring new products and services to market while complying with industry regulations. This is especially useful in the pharmaceutical realm, where drugs in development must undergo rigorous rounds of clinical testing.
Interestingly, Veeva recently became a "Public Benefit Corporation," meaning that it's legally bound to consider the interests not only of shareholders in its decision-making and actions, but also of customers, employees, and other stakeholders. If you have any interest in socially responsible investing, this should please you.
So how is its business actually doing? Well, its most recent fiscal year results featured total revenue up 33% year over year and net income up 26%. Management noted that "Veeva ended the year with 993 customers, up from 861 the year prior." (That's a 15% jump.) Also: "Subscription revenue retention was 124% for the year" -- meaning that on average, customers not only stuck around, but spent more.
With a recent price-to-earnings (P/E) ratio of 109, Veeva Systems stock isn't cheap. But if you're planning to hold for at least 10 years, you're likely to come out OK. Or to be safer, add it to your watch list and hope for a pullback in price.
Netflix (NFLX 5.03%) needs little introduction as a widely used service and also as a stock. Over the past 19-some years, its shares have soared a total of 44,557% -- enough to turn a $1,000 investment into $446,287. That's an average annual growth rate of more than 38%! (For context, the overall stock market's average annual return over long periods has been closer to 10%.)
It's been one of the best stock market performers over the past decades. Netflix also serves as a terrific object lesson, showing how great companies can stumble and their stock can tank, and yet they can still recover and go on to great heights. In 2011, Netflix's CEO, Reed Hastings, saw that streaming video held much promise, so he announced plans to spin off Netflix's DVDs-by-mail business into one called "Qwikster," while having Netflix focus on streaming. The plan was widely mocked or scoffed at, customers were upset at the thought of paying for two subscriptions instead of one, and the stock took a big hit. The plans were scrapped, and Netflix's business resumed growing.
Today, it's a streaming behemoth, with a recent market value of $229 billion -- more valuable than Nike or PepsiCo. In its last quarter, Netflix added more than 8 million new subscribers, bringing its total to more than 200 million. Its revenue for the quarter popped 21.5% year over year, and another bit of great news was that the company said it doesn't plan to take on debt in order to fund its operations anymore. In other words, it has plenty of cash coming in -- and expects to break even with cash flow in the coming year.
Netflix's stock may look steeply priced, at a P/E ratio of 85 and a price-to-cash-flow ratio of 97, but both of those numbers are well below their five-year averages. For long-term investors, this seems a reasonable moment at which to buy shares. (If you're skeptical but you still like the company's long-term prospects, consider buying just a small position in the company, to start.)
Finally, there's Square (SQ 5.54%). You may know it as the company behind those little square credit card-readers attached to the smartphones some merchants use, but the fintech (financial technology) company is now about much more than that, as its recent $110 billion market capitalization suggests. (That price tag makes it more valued than American Express and FedEx.)
Square has two main businesses at the moment -- its "Seller" division, which helps merchants process credit card transactions via various devices, and its newer (and faster-growing) Cash App service, which is much like PayPal's Venmo. It has banking features, such as direct deposit, and allows users to send and receive money -- and even to invest in stocks.
Square has been challenged during the pandemic, as closed stores mean less business for it. But we're on our way to putting the pandemic behind us and fully opening our economy, and Square is likely to benefit from that. Meanwhile, the company is growing, boosting its active Cash App user base by 50% year over year in its last quarter. It has also entered the bitcoin world, with CEO Jack Dorsey noting on a recent company earnings call that "We believe it has the highest probability of empowering more people in the economy in a fair way."
Square is arguably the most steeply priced of these three portfolio contenders, with a recent P/E ratio of 550. (Its forward-looking P/E, though, based on next year's expected earnings, is a slightly more palatable 192.) Again, if after more research you're very bullish on Square, you might buy some shares now -- or buy a smaller position now, or just add it to your watchlist in case it pulls back.
If none of these companies have your interest sufficiently piqued, there are plenty of other fast-growing businesses to investigate and in which to possibly invest.