The stock market provides a pathway for tens of millions of Americans to work their way toward financial freedom. Although big gains don't happen overnight, patience pays off when it comes to investing in great businesses.
For example, the broad-based S&P 500, which is home to 500 of the largest multinational companies by market cap, has generated an annual average total return, including dividends, of more than 10% for the past four decades. People who chose to reinvest their dividends could double their initial investment in an S&P 500 tracking index in about seven years.
There's zero shame in pacing the market and building wealth. But there are also plenty of companies worth buying that can handily outpace the S&P 500 over the longer term. If you were to invest $100,000 into these five stocks right now, it's my belief you'll have $400,000 or more by the end of the decade.
First up is cloud-based customer relationship management (CRM) software provider salesforce.com (CRM -1.04%). CRM software is used by consumer-facing businesses to log customer info, resolve service and product issues, manage marketing campaigns, and provide predictive sales analyses for existing customers, among other things.
CRM software is an annual double-digit growth opportunity throughout the decade, and salesforce is the lion that sits atop this growth trend. In the first half of 2020, salesforce controlled 19.8% of all global CRM revenue, according to IDC. Comparatively, the next four companies behind it in global share don't add up to 19.8%.
Salesforce is also in the midst of acquiring enterprise communications platform Slack Technologies for $27.7 billion in a cash and stock deal. If completed, this purchase will allow salesforce to use Slack's platform to cross-sell its CRM solutions, as well as reach smaller (but often fast-growing) businesses.
With CEO Marc Benioff setting a target of $50 billion in sales five years from now after reporting $21.25 billion in revenue in fiscal 2021, salesforce projects as one of the decade's fastest-growing megacap stocks.
It's no secret that marijuana stocks have the potential to be one of the decade's top-performing industries. U.S. cannabis multistate operator (MSO) Cresco Labs (CRLBF -0.48%) has all the tools necessary to deliver a 300% or greater gain for investors by 2030.
Like other MSOs, Cresco has a burgeoning retail segment. It has 24 operational stores at the moment, with an additional five retail licenses in its back pocket. However, it has two pending acquisitions that'll bolster the total number of retail stores it can eventually open to closer to four dozen.
What's interesting about Cresco's retail presence is that it's chosen a number of states where license issuance is limited. It's maxed out its retail footprint in Illinois and Ohio with 10 and five stores, respectively. By choosing states where license issuance is limited, Cresco is assuring itself a healthy share of cannabis revenue.
However, the real allure of Cresco is its wholesale operations. As one of only a handful of companies with a cannabis distribution license in California, it's able to place its proprietary and third-party products into more than 575 dispensaries throughout the state. Despite wholesale margins being lower than retail, Cresco has the volume to make a fortune off of wholesale.
Social media up-and-comer Pinterest (PINS 1.02%) is another company that can turn $100,000 into $400,000 this decade.
Pinterest was a clear beneficiary of the coronavirus pandemic. With people stuck in their homes, they turned to social media for engagement. For Pinterest, this resulted in 124 million net new monthly active users (MAU), representing a 37% increase. Understand, though, that Pinterest's MAUs grew by an average of 30% annually in the three years preceding the pandemic.
What makes Pinterest such a growth powerhouse is its allure outside the United States. On one hand, the average revenue it generates per user is a lot lower outside the U.S. Then again, this also gives the company the opportunity to double its average revenue per international user many times over this decade.
Additionally, few if any social media platforms provide a more targeted audience to advertisers than Pinterest. This is a platform where users willingly post about the things, services, and places that interest them. This makes all Pinners potentially motivated shoppers for merchants that specialize in their desires.
Northern Star Acquisition
Even though special purpose acquisition companies (SPAC) have been clobbered of late, the opportunity is simply too great to pass up with Northern Star Acquisition (STIC). The SPAC is in the process of merging with dog-focused products and services company BarkBox, which should close sometime this quarter.
Companion-animal spending might take a back seat to fast-growing trends like cannabis and social media, but it's about as surefire as it gets. It's been over a quarter of a century since spending on companion pets declined on a year-over-year basis. Time and again, pet owners have shown their willingness to spend freely to keep their four-legged friends happy and healthy. That's where BarkBox comes in.
BarkBox is a technology-driven dog-focused company that's amassed 1.1 million subscribers, and its gross margins are north of 60%. It's recently been registering its highest monthly "product retention" rate since inception and has forecast a near doubling in sales between 2021 and 2023 to more than $700 million. In short, it's one of the fastest-growing pet stocks, yet is valued at one of the lowest sales multiples.
BarkBox is also using innovation to drive sales growth. The introduction of Bark Home, which offers essentials like collars and dog beds, and Bark Eats, which provides a personalized dry-food diet to dog owners, can boost ticket size and bring in new customers.
Last but certainly not least, fintech stock Square (SQ -2.00%) has all the tools necessary to shake things up in the financial services space and become an absolute giant. A 300% gain to $400,000 from $100,000 is probably undercutting its potential this decade.
For nearly a decade, Square has been generating big bucks from its seller ecosystem. This segment, which provides point-of-sale devices and analytics to small businesses, has seen gross payment volume (GPV) surge from $6.2 billion in 2012 to $112.3 billion in 2020. Not counting the pandemic year, Square's seller ecosystem has grown GPV by an annual average of 49% since 2012.
Equally exciting is the fact that Square's seller ecosystem has begun appealing to larger businesses. Whereas 24% of all GPV originated from merchants with at least $500,000 in annualized GPV in the fourth quarter of 2018, 30% of GPV in Q4 2020 came from merchants with annualized GPV over $500,000. Since this is a payment-driven segment, having bigger businesses using its platform can only pump up gross profit.
However, the most exciting growth driver is peer-to-peer payment platform Cash App. In three years, Cash App's user base has more than quintupled to 36 million. Further, the company is bringing in $41 in gross profit per user and spending less than $5 to acquire each new user. With Bitcoin trading and investing exploding on Cash App in 2020, it has all the look of a game-changing platform for young investors.