When investing, good things come to those who are patient. Over the past four decades, the benchmark S&P 500 has navigated its way through Black Monday in 1987, the dot-com bubble, the Great Recession, and more recently the coronavirus crash. Despite these drawn out and in some cases abrupt swoons, the average annual total return of the S&P 500, including dividends paid, is 11% over four decades.
However, this long-term buy-and-hold thesis has been put to the test in recent years by the rise of cryptocurrencies. In particular, there's an immense amount of buzz surrounding meme-based digital currency Dogecoin (DOGE 13.45%), which has risen by more than 100,000% since December 2013.
The Dogecoin hype train is going to derail
The so-called "people's currency" is lauded for its nominally low price point of $0.32 per token, as well as the perception that current investors are getting in near the ground floor, well before broad-based adoption. Enthusiasts also point to Tesla CEO Elon Musk's unwavering support of Dogecoin as a positive. While these catalysts might sound great on paper, they're often lacking in a big way if you dig below the surface-scratching social media hype.
For example, coin price isn't everything. Dogecoin might sound nominally inexpensive at $0.32, but it overlooks that practically 130 billion tokens are outstanding. This circulating supply is growing by approximately 5.2 billion tokens each year. This constant mining-based inflation modestly dilutes existing Dogecoin holders.
A much bigger issue can be seen on the utility front. Enthusiasts would like to believe they're getting in on the ground floor, but only an estimated 1,400 businesses are accepting Dogecoin worldwide, according to online business director Cryptwerk. Worse yet, it's taken eight years simply to reach a meager 1,400 businesses.
Dogecoin's blockchain isn't particularly efficient, either. While it does boast lower transaction fees than the Big Two of crypto (Bitcoin and Ethereum), there are a number of other crypto competitors that offer considerably lower transaction fees. Dogecoin also takes around 20 minutes to validate and settle transactions, which is longer than other popular cryptos.
It could also be argued that Elon Musk is more of a liability than a positive catalyst. Musk's about-face on Bitcoin should serve as a warning for Dogecoin enthusiasts. The simple fact that a meme tweeted out by Musk can move Dogecoin by 30% or more is a pretty clear indication that hype, not tangible catalysts, are driving this bus.
The thing about hype train is that is always eventually derails.
Dump Dogecoin for these moneymaking stocks
Instead of putting your money to work in a highly speculative digital currency with virtually no real-world catalysts, my suggestion would be to buy stocks that offer tangible long-term growth potential. The following trio of top-notch stocks could all make you a boatload of money.
Just as you shouldn't let Dogecoin's nominally low token price fool you into thinking it's in any way cheap, you shouldn't allow robotic-assisted surgical system developer Intuitive Surgical's (ISRG 0.26%) $864 share price convince you that it's pricey. Over time, Intuitive Surgical has all the tools (literally and metaphorically speaking) to make its shareholders rich.
Intuitive Surgical has been manufacturing and selling its da Vinci surgical system to hospitals and surgical centers for two decades. These systems allow for more precise incisions, compared to laparoscopic surgery, which can in turn lead to shorter hospital stays and fewer complications. Since 2000, more than 6,100 da Vinci systems have been installed worldwide, which is far more than any of its competitors on a combined basis. This suggests Intuitive Surgical's market share dominance in robotic-assisted surgery is likely insurmountable.
What's more, Intuitive Surgical's operating model is built in such a way that operating margins improve over time, which should lead to earnings growth outpacing sales growth throughout this decade. In its early years, selling its pricey da Vinci system made up the bulk of its revenue. But given that these systems are intricate and complex, the margins associated with selling these systems wasn't great. Nowadays, the bulk of the company's revenue comes from selling instruments and accessories with each procedure, as well as from servicing its da Vinci systems. These are considerably higher-margin operating segments. As the base of installed da Vinci surgical systems grows, the percentage of revenue derived from these higher-margin channels increases, too.
There's also plenty of opportunity for the company to expand its surgical focus. Da Vinci is a mainstay in urology and gynecology procedures, but can still gain abundant share in thoracic, colorectal, and general soft tissue procedures.
For all of these reasons, it's a company that can maintain a double-digit growth rate for a long time to come.
Another growth stock that can make patient investors a boatload of money is cloud-based ad technology company PubMatic (PUBM 0.52%).
People are consuming content from connected TV (CTV), over-the-top (OTT) media (i.e., media services offered via internet), and mobile in greater amounts. PubMatic aims to help publishers via real-time programmatic advertising transactions. Its cloud-based infrastructure can cover multiple ad platforms and devices, and it's exceptionally transparent from a price perspective. In other words, it's helping advertisers put their money to work in the most efficient way(s) possible.
During the first quarter, the company processed 18.5 trillion impressions (that was up 106% from the prior-year period), with a net dollar-based retention rate of 130%. In English, this means existing publishers spent 30% more in Q1 2021 than they did in the prior-year quarter (Q1 2020). While adding new publishers is helpful and essential, the bulk of future cash flow growth is going to come from existing clients spending more.
Just as impressive, mobile and omnichannel video (OTT/CTV) sales jumped 83% from the prior-year period and accounted for 63% of sales. Revenue growth was so robust in these segments that the company upped its full-year sales forecast range by $15 million on the low and high end to $195 million to $200 million.
PubMatic finds itself at the center of the fastest-growing trends within the advertising space. This should give it a good chance to make its shareholders a boatload of money.
A third top-notch stock that can run circles around Dogecoin and make investors filthy rich is Singapore-based Sea Limited (SE -2.35%). That's because Sea has a trio of rapidly growing operating segments.
For the time being, the company's gaming division is generating all of its positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Sea ended March with almost 649 million quarterly active users (QAU). But the far more impressive figure is that close to 80 million of these gamers were paying customers. Most gaming companies see a low single-digit percentage of gamers pay to play. In Sea's case, 12.3% of its QAUs are paying, up from 8.9% in the first quarter of 2020.
Looking further out, the company's e-commerce platform, Shopee, is far more exciting. Shopee has been an increasingly popular shopping destination for folks in Southeastern Asia and Brazil. By targeting regions with a burgeoning middle class, Sea has seen orders surge. In the March-ended quarter, gross orders were up 153% to 1.1 billion, with gross merchandise value effectively doubling to $12.6 billion. Shopee could help Sea double its revenue every two years throughout the decade.
Lastly, Sea's nascent digital financial services segment is making waves. Total mobile wallet payments topped $3.4 billion in the first quarter, with the company counting over 26 million paying users. Since some of the regions Sea is targeting are underbanked, digital wallets could provide a financial services workaround for consumers.
Suffice it to say, it offers a far more compelling long-term outlook than Dogecoin.