The stock market is arguably the greatest wealth creator on the planet. Though there have been short periods throughout history where investment vehicles, like commodities or housing, outperformed the benchmark S&P 500, there's nothing that can match the return potential of equities over the long run.
It's also impossible to keep a good market down. Despite undergoing 38 stock market crashes or corrections since the beginning of 1950, the S&P 500 has eventually erased each and every one of these declines.
The point is this: The stock market is a money machine that can grant patient investors their financial freedom. That is, of course, if they own great companies. The following five surefire stocks all have the qualities needed to help long-term investors build game-changing wealth.
For a quarter of a century, we've watched no shortage of online businesses and social media-geared companies launch out of the gate and then hit a growth brick wall. Social media platform Pinterest (PINS 1.49%) has most certainly not been one of those companies.
With the coronavirus pandemic keeping people in their homes for the past year, Pinterest saw net monthly active user (MAU) gains of 124 million in 2020 (up 37%). The thing is, Pinterest's MAUs grew by an average of 30% in the three years preceding the pandemic. The platform has been resonating with users for years and has shown no signs of slowing.
In particular, Pinterest has done a remarkable job of bringing in new users from international markets. Although the average revenue per international user is considerably lower than in the U.S., the opportunity to double revenue per international user multiple times over the next decade is precisely why Pinterest could be one of the fastest-growing social media stocks of the 2020s.
Pinterest is also just scratching the tip of the iceberg when it comes to its e-commerce potential. With users willingly sharing what products and services they like, Pinterest merely needs to keep these users engaged to connect them with businesses that can meet their needs. It can be a true wealth builder for patient investors.
Businesses that can give investors their financial freedom typically offer sustainable competitive advantages. That's precisely what you're going to get with robotic-assisted surgical-system developer Intuitive Surgical (ISRG 0.42%).
There are two things that make Intuitive Surgical so special. First, it has a seemingly insurmountable lead in robotic-assisted surgical systems. Since 2000, the company has installed just shy of 6,000 of its da Vinci systems worldwide. Comparatively, that's more than all of its peers combined. The rapport it's built with hospitals and surgical centers has likely made them customers for life.
Second, Intuitive Surgical's (pardon the pun) operating model gets better with age. In its early years, most of its revenue was derived from selling its pricey, yet costly to build, da Vinci surgical systems. Nowadays, most of its revenue comes from selling instruments and accessories with each procedure, as well as servicing its systems. These segments generate much juicier margins for the company. As the installed base grows, so should Intuitive Surgical's margins.
The da Vinci system still has plenty of opportunity to gobble up share in thoracic, colorectal, and general soft tissue procedures, and the company is remaining innovative (e.g., the Ion platform for minimally invasive lung biopsies). Therefore, the sky's the limit.
This may well be the decade that we see marijuana stocks shine. Though they won't all be winners, U.S. multistate operator Cresco Labs (CRLBF -1.08%) has stood out as a game changer for all the right reasons.
Similar to its peers, Cresco is establishing a healthy retail presence. It has in the neighborhood of two dozen open locations and is in the process of closing on a couple of acquisitions that'll further expand its retail footprint. Notably, Cresco has the maximum allowable retail locations in both Illinois (10) and Ohio (5). By focusing on states that limit the number of dispensary licenses issued, it's giving itself an excellent opportunity to minimize competition, build up its brands, and create a loyal following.
What separates Cresco from the pack is its industry-leading wholesale segment. Even though wholesale cannabis produces lower margins than retail, the company is generating such massive wholesale volume that this margin difference is easy to overlook. That's because it possesses a lucrative cannabis distribution license in California, the largest pot market in the world.
With the ability to get its branded and third-party products into more than 500 dispensaries statewide, Cresco's wholesale business should play a key role in pushing total company sales beyond $1 billion in 2022.
Long-term investors can also earn their financial freedom by riding the coattails of Fido to big gains. Companion animal-focused health insurance company Trupanion (TRUP 1.89%) has all the tools necessary to make investors rich.
For the past two decades, Trupanion has been building up its rapport at the clinical level with veterinarians, their staff, and pet owners. The company ended 2020 with almost 863,000 enrolled pets and has a decent chance at hitting the psychologically important 1 million enrolled-pets figure this year.
The opportunity for Trupanion is that it's only penetrated about 1% of the U.S. companion-animal market. If the company were to hit a 25% penetration rate, which happens to be the pet insurance enrollment rate in the U.K., Trupanion would be staring down a total addressable market of close to $32 billion. For context, the company brought in $502 million in sales last year, up 31% from the previous year.
Aside from Americans willingly spending big bucks to keep their four-legged family members healthy, Trupanion is also the only major companion-animal health insurer that provides software to clinics to handle payments at checkout. It's a convenient and logical growth story that has a long runway.
The beauty of Visa's payment-processing model is that it's built on the idea that the U.S. and global economy will keep growing. Even though contractions and recessions are a natural part of the economic cycle, most recessions resolve in mere months. By comparison, periods of economic expansion tend to last years -- or in the case of the last bull market, more than a decade. Buying Visa is like playing a numbers game where the odds are overwhelmingly in your favor.
Visa holds 53% of the credit card network purchase-volume market share in the United States. It's more than 30 percentage points higher than the next-closest competitor, which is an enviable place to be in the world's No. 1 economy.
Investors will also note that Visa doesn't dabble with loans. Though it could probably add significant revenue during periods of expansion, the company would be hit with credit delinquencies during inevitable recessions. Not having to set aside capital for loan losses is precisely why Visa's margins are so high.
Considering how much of the world remains underbanked, Visa's growth opportunities remain robust.