One of the greatest secrets to making a fortune on Wall Street is that you don't have to be right often -- you just have to be really, really right once in a while. Buying into game-changing businesses early and allowing your investment thesis to play out over a decade, if not longer, is how fortunes are made.
While there are plenty of solid companies for investors to choose from, there's a much narrower field of game-changing stocks that can create significant wealth. The following three growth stocks all have the tools necessary to turn a $100,000 investment into $1 million or more over the next 10 years.
There arguably wasn't a stock that benefited more from the pandemic than leading telehealth provider Teladoc Health (TDOC 0.80%). With physicians wanting to keep at-risk and potentially infected patients out of their offices, many turned to virtual visits as a means to touch base with patients. Last year, Teladoc's total visits catapulted to almost 10.6 million from 4.1 million in 2019.
The big question that's being asked is this: Can Teladoc's growth continue long after the pandemic is over? I believe the answer to this is undoubtedly yes.
You see, telemedicine provides competitive advantages up and down the treatment chain. For instance, it's considerably more convenient for patients to consult with a physician or specialist from their home. As for physicians, they're able to regularly keep up with their most at-risk patients, which can lead to improved patient outcomes. Meanwhile, insurers are likely to love virtual visits since they're billed at a cheaper rate than office visits. If these telehealth visits also lead to improved outcomes, that's even less money out of the pockets of health-benefit providers. There's no question that telemedicine is a huge part of the future of healthcare in the U.S. and abroad.
Best of all, we're already seeing this play out in Teladoc's operating results. We're not out of the pandemic yet, but we've been seeing restrictions lifted as vaccination rates rise. Despite this, the company has lifted its revenue forecast for 2021 and sees a midpoint of 13 million total visits occurring on its platform.
And that's not all. Beyond telehealth, Teladoc differentiated itself by acquiring Livongo Health, a leader in applied health signals, in the fourth quarter of 2020. Livongo collects boatloads of patient information, and with the help of artificial intelligence sends its chronically ill members tips and hints to lead healthier lives. It was a profitable business when acquired by Teladoc, with sales growth of right around 100% per year. According to Teladoc's first-quarter report, it had approximately 658,000 enrolled members.
Teladoc has the potential to consistently grow by 20% to 30% annually for a long time to come. Assuming its cash burn ebbs over the next 12 to 18 months, it'll be well on its way to turning $100,000 into $1 million over the next decade.
Northern Star Acquisition
If off-the-radar stocks are more your thing, take a closer look at Northern Star Acquisition (STIC). Northern Star is a special purpose acquisition company (SPAC) that's involved in a pending merger with dog products and services company BarkBox. A shareholder vote on the merger is expected on May 28.
The "Why Northern Star/BarkBox?" question is really simple to answer: People love their pets, and they're willing to spend big bucks to ensure their well-being. The American Pet Products Association has estimated that total U.S. pet expenditures will hit nearly $110 billion in 2021. Furthermore, it's been well over a quarter-century since year-over-year pet expenditures have declined. In other words, companion animals are about as recession-resistant an industry as you're going to find.
What makes BarkBox so special is the company's focus on subscriptions and tech-driven innovation. Subscriptions are high margin, provide exceptional cash flow transparency, and do an excellent job of retaining existing clients. The BarkBox S-1 noted that monthly product retention rates were the highest in company history. BarkBox ended March with 1.2 million subscribers, representing 91% growth from the prior-year period.
This is also a digitally native platform, which is a fancy way of saying that it bypasses a lot of the high-overhead expenses associated with retail and store ownership. Although more than 23,000 retail outlets carry its products, BarkBox is predominantly an e-commerce product and service company.
But innovation might just be BarkBox's greatest asset. Aside from delivering toys and treats on a monthly basis to subscribers, the company introduced Bark Home and Bark Eats last year. Bark Home provides basic-need accessories like beds and collars, while Bark Eats works with owners to personalize a high-quality diet of dry food for their dogs.
BarkBox offers a gross margin around 60% and is likely on track to nearly double its sales between 2021 and 2023. After seeing how well other pet stocks have performed over the past decade, Northern Star (soon to be BarkBox) can be a millionaire-maker.
A third growth stock with the potential to turn $100,000 into $1 million over the coming 10 years is tech-focused real estate company Redfin (RDFN -0.15%).
Similar to Teladoc, things couldn't have been more perfect for Redfin over the past couple of quarters. The Federal Reserve's dovish monetary policy and ongoing bond-buying program have helped to drive interest rates (and in a roundabout way, mortgage rates) to historic lows. Homebuying and -selling demand has been off the charts, which has played perfectly into Redfin's hands.
What allows Redfin to stand out is the cost savings and personalization it brings to the real estate space. For example, traditional real estate companies charge a listing fee (i.e. commission) of up to 3%. Depending whether you're simply selling a home, or have purchased and sold a home through Redfin, listing fees range from 1% to 1.5%. With home values skyrocketing over the past year, the cost savings Redfin can provide with its lower listing fees has been magnified.
As with BarkBox, we're also seeing plenty of personalization take shape. RedfinNow, the service that purchases homes for cash without any haggling or hassle, is being expanded to new cities. Meanwhile, Redfin Concierge charges up to 2.5% of the selling price to work with owners on staging and upgrades that will maximize the value of their home.
The proof is in the pudding that this operating model is working. Between the end of 2015 and the first quarter of 2021, Redfin's share of U.S. existing-home sales has nearly tripled from 0.44% to 1.14%. Yet at 1.14%, we're seeing Redfin only scratch the surface of its potential.
Wall Street is looking for Redfin's sales to almost quadruple over the next four years. Assuming it builds on its share of existing-home sales and remains cash flow positive, a 900% gain over 10 years is achievable.