Just because a company has a leading market share in its core business doesn't mean its growth potential is limited. Just look at Facebook (META 1.70%). It's been the dominant social media player for a long time and has managed to generate 800% gains for investors over the past decade.
With that in mind, there are some much smaller companies that are leaders in their respective core businesses. In this Fool Live video clip, recorded on July 2, Fool.com contributor Matt Frankel, CFP, and Chief Growth Officer Anand Chokkavelu discuss two of their favorite industry leaders with 10X return potential on a recent episode of The Rank that featured 11 of their favorite companies.
Anand Chokkavelu: Speaking of which, let's talk about the most likely to 10x. You named some companies there. Which ones do you think are the most likely to?
Matt Frankel: With the possible exception of Bed Bath and Beyond (BBBY 21.82%) and Wells Fargo (WFC 1.52%), I think, all of the stocks in this list are capable of 10x-ing. That's a stretch for a company like Alphabet (GOOG 2.36%) (GOOGL 2.39%), I'd say most likely to 10x, I would put between Pinterest (PINS 2.49%) and Zillow (ZG 2.61%) (Z 2.96%). I think GM (GM 2.65%) has the capability to 10x, that's one I specifically called out. A lot needs to go right for that to happen. It's a lot of competition. Risk needs to be dealt with before that can happen. I think, Zillow and Pinterest, they're both businesses in a category of their own. Zillow is, like you said, the Amazon of housing. There is no direct competitor for Zillow's agent services business. Pinterest, there is no social media platform that is focused on things, not people that is anywhere near the size of Pinterest. I think both of those have the ability to own their markets. If they can capitalize and monetize them correctly, I think they can easily 10x.
Chokkavelu: Something like CRISPR (CRSP 1.55%) and Clover (CLOV 6.11%), have that potential to maybe much more than 10x but the expected value as you get out, the probability of them doing that, that's a lot harder to predict, and I guess, much lower than some of these.
Frankel: Clover is small enough. It could 100x if things go perfectly right. But that's not the most likely outcome. Most likely to 10x are the ones I said, it's not the most potential. CRISPR could 100x in the right circumstances. Peloton (PTON 13.60%), I think it easily 10x or more, if things go well and if it plays its cards right. Other than Bed Bath and Beyond and Wells Fargo, I can make a case for all of them to 10x. If a few of Google's Other Bets pay off big, then Alphabet could be easily 10x even from this level. That will be a big company. I think it would probably spin something off before it got to $10 trillion valuation.
Chokkavelu: Sure. We count all the companies though.
Frankel: Right. Those are my 10x stocks.
Chokkavelu: For me, I think number one would probably be Zillow. That $30 billion could be $300 billion, I think so. MercadoLibre (MELI 4.71%) is interesting as well in that realm. I was very heartened by you saying Pinterest, it's where my favorite businesses is, I think similar to you, I have similar cost basis where you've seen it grow and you're, well, $50-$500 billion. I'm more confident in Zillow just from the market opportunity, but I just love Pinterest and certainly, I thought it was not a no brainer at all last year. I think both of us love that. When you can get the value side and the growth side, and they're both in the mix, and you don't have to choose one or the other.
Frankel: I would say, out of the 11 stocks, Pinterest, Zillow, and Alphabet are the three that don't have any direct competitors. Alphabet is, I think, what almost 100 times Zillow's size. Close to it. It makes it less likely to 10x.