If you invested $1,000 in an S&P 500 index fund just 10 years ago, it would be worth over $3,700 today. This tells me two things: First, the stock market can be a great place to grow your wealth. And second, it doesn't matter how much you have to invest -- if you're patient enough, even $1,000 can still generate meaningful returns.
But I believe investors can do even better than the market average by finding great companies, buying their stocks, and giving them time to create shareholder value. With that in mind, here are three very different companies I think can beat the market.
Wix.com: Trying to build "half the internet"
Based in Tel Aviv, Israel, Wix.com (WIX 3.56%) isn't a company on many investors' radars. Here's a brief overview of what it does: Wix helps people build an online presence. Whether you're looking to start a blog, run an e-commerce operation, or upload podcast episodes, there's a Wix product for you. And the company removes barriers to help you get started as many products have a free version.
Then, if you find the success you're looking for, you can upgrade to one of the company's subscription services. By doing so, you can have ads removed from your site, enjoy more storage, and even get help developing a professional logo. Recently, the company shared an interesting statistic to demonstrate how this free-to-paid transition strategy is working: Since 2010, every cohort of Wix users (or group of users who joined in the same year) has increased their spending over time up to the present day.
In other words, Wix users tend to stick around and spend more over time. And if this trend continues, the company has already secured quite a bit of future cash flow. Over the next 10 years, management expects to generate almost $13 billion in collections just from its existing base of 200 million users, to say nothing of the new users the company hopes to attract going forward.
And speaking of future users, CEO Avishai Abrahami has high expectations. Five years from now, Abrahami believes half of all new websites could be built with Wix.
For 2020, Wix grew its top line 30% to $989 million, and that's not an outlier result. For 2021, the company expects between 29% and 30% revenue growth. Meanwhile, annual recurring revenue hit $848 million last year. Given its growth outlook and strong recurring cash flow, Wix is a stock worth considering for your portfolio.
Dollar General: One of the highest-quality value stocks
Shares of Dollar General (DG 2.81%) briefly sold off after the company reported full-year fiscal 2020 results on Mar. 18. The results were in line with expectations, but Wall Street was troubled with the company's outlook. In fiscal 2021, the company expects same-store sales to fall 4% to 6%. For context, Dollar General hasn't posted a single year of declining same-store sales in over three decades. So to an extent, I can appreciate the disappointment from investors now that this impressive streak is coming to an end.
But let's keep things in context. Dollar General's comps were up over 16% in 2020, and net sales grew almost 22%. That was an abnormally good year for the company, and it's hard to stack continued growth on top of such strong results. Nevertheless, it'll retain most of that business in 2021. So even with a pullback in the current fiscal year, I believe it's still fair to say Dollar General consistently grows its top line.
The retail chain is consistently profitable too, delivering earnings per share of $10.62 last year. And it's investing those profits into the business. Even though Dollar General already has over 17,000 locations, it plans to open 1,050 more in fiscal 2021. With a short payback period, these new locations will only add to the retailer's profits in time.
A steady track record and ongoing growth are reasons to like Dollar General. It's a high-quality business, and right now, quite a compelling value stock. Shares trade at under 18 times trailing earnings, which is one of the lowest multiples it has had in the last two years and in line with its historical range over the past decade. And that's significant considering the stock is up over 500% in the same decade, more than doubling the broad market's performance. In short, now is a solid opportunity to go long on Dollar General stock.
Teladoc: So much more than a pandemic play
Teladoc Health (TDOC 6.94%) offers remote healthcare, and with almost 52 million users, its services were in high demand during the pandemic. The stock more than doubled last year as investors scrambled to find companies benefiting from the crisis. But it has also stumbled in recent months as investors move on from so-called pandemic plays, not to mention selling off on fears that Amazon's new push into telemedicine could hurt its business.
Admittedly, member growth is expected to slow in 2021. It ended 2020 with 51.8 million paying members but only expects to end this year with 52 million to 54 million. That said, those members are expected to increase their spending thanks to the services that have been added to the platform via acquisitions. Management believes full-year revenue will grow at least 78% this year. That's an incredible figure for a company that only "temporarily" benefited from the pandemic.
Furthermore, I believe the fears about Amazon are overdone. Yes, it has incredible reach with consumers, but keep in mind Teladoc's clients are employers and insurance companies (the company currently serves more than half the Fortune 500). These corporate clients won't be looking to make a quick switch as long as Teladoc is working well for them. And it seems to be delivering, considering its net promoter score is over 90.
To me, if there's any takeaway from Amazon's entry into the business, it's that there's a legitimate opportunity in the space. If telehealth weren't a major trend, why would a trillion-dollar company even bother jumping in? It validates the long-term telehealth opportunity.
But fears of slowing growth and increasing competition have hit this stock hard. Shares now trade lower than they did six months ago, and they're down 35% from recent highs. In my opinion, this sell-off and the company's impressive outlook make Teladoc an attractive buy.
A final thought
If you already have a diversified portfolio of 15 stocks or more, I think investing $1,000 in any one of these three companies could be a great long-term move. But if you're still building your base portfolio, consider dividing your $1,000 among these three stocks. Many brokerages allow you to invest a dollar amount instead of buying whole shares, making diversification easier than ever.