While there are no guarantees when investing, one near-certainty is that patient investors will be handsomely rewarded.
Since 1950, the widely followed S&P 500 has undergone 38 corrections of at least 10%, which equates to a double-digit decline, on average, every 1.87 years. Despite these commonplace declines, the broad-based index eventually always pushes to new highs. As operating earnings expand over time for the S&P 500's components, it drives the index higher and puts corrections firmly in the rearview mirror. In fact, according to a report from Crestmont Research, the rolling 20-year total returns for the S&P 500, including dividends, has never been negative, no matter the period you select.
But you don't have to settle for market-matching returns. If you have $3,000 at the ready, which won't be needed to cover bills or emergencies, you have more than enough to buy the following trio of surefire stocks. These are companies that offer the potential to substantially outrun the S&P 500 over the long term.
Palo Alto Networks
Though there are a number of trends that can generate sustainable double-digit growth throughout the decade, cybersecurity might just be the safest of all. That's why I'd dub cybersecurity stock Palo Alto Networks (NYSE:PANW) as a surefire investment opportunity.
Businesses were already shifting data online and into the cloud long before the coronavirus pandemic. However, the pandemic rapidly accelerated this trend and has placed the onus of enterprise and consumer data protection on cloud-focused third-party providers like Palo Alto. Remember, hackers and robots don't take a day off just because Wall Street or the U.S. economy are down on their luck. That makes cybersecurity a basic-need service for businesses big and small.
What makes Palo Alto so intriguing is its shift to cloud-based solutions and its affinity for bolt-on acquisitions. Over the past couple of years, Palo Alto has been de-emphasizing physical firewall products in favor of its subscription-based cloud software solutions. Pushing cloud-based subscriptions is important for Palo Alto because it's a higher-margin service than physical firewall sales, and the revenue recognition will be less lumpy. Further, cloud-based solutions can respond quicker and more efficiently than most on-premises products. Thus, this shift is going to improve the company's operating performance over time, as well as do a better job of protecting its clients' critical data.
As noted, Palo Alto Networks has not been shy on the acquisition front. The bolt-on acquisitions being made are either expanding its existing software solutions or broadening its appeal to small and medium-sized businesses.
Ultimately, most cybersecurity stocks are valued at a multiple of 15 or more times forward-year sales. Investors can scoop up the sustainably fast-growing and profitable Palo Alto Networks for under eight times Wall Street's projected sales in 2022. That's a bargain.
Another surefire stock investors can buy right now with $3,000 is cloud-based customer relationship management (CRM) software specialist Salesforce.com (NYSE:CRM).
Without getting overly technical, CRM software is used by consumer-facing businesses to effectively manage their client lists. CRM software allows for the real-time access to client info and the oversight of service issues. It can also handle online marketing campaigns and provide predictive analyses with regard to which existing clients might purchase new products or services. In short, CRM software is designed to help businesses retain clients and boost their existing sales.
CRM software sales are expected to grow by a double-digit percentage globally, at least through mid-decade, and Salesforce stands tall as the most dominant company in the CRM space. When IDC took a closer look at CRM spending worldwide in the first half of 2020, it found that Salesforce brought in a 19.8% share of global revenue. That's more than the next four competitors on a combined basis, which means it's highly unlikely Salesforce loses its commanding lead in CRM software sales anytime soon.
Aside from organic growth and innovation, Salesforce, like Palo Alto, has not been afraid to pull the trigger on acquisitions. It recently closed a cash-and-stock deal to buy cloud-based enterprise communications platform Slack Technologies. While Salesforce will benefit modestly from a new sales channel, it's the ability to use Slack's platform as a jumping-off point for promoting its CRM solutions that's the real win for Salesforce.
Between organic and inorganic growth, CEO Marc Benioff predicts that his company can surpass $50 billion in annual sales by fiscal 2026, up from $21.3 billion in fiscal 2021. This implies a sustainable growth rate of around 20%, which is incredible for a company the size of Salesforce. It's a good bet to outperform the S&P 500 over the long run.
A third surefire stock that could make investors a lot richer over the long term is Singapore-based Sea Limited (NYSE:SE). Even though Sea has rocketed higher since the pandemic began, it has three ultra-fast-growing operating segments that can more than support aggressive valuation expansion over time.
For the time being, Sea's gaming division is generating all of its positive earnings before interest, taxes, depreciation, and amortization (EBITDA). With people staying home to reduce coronavirus transmission, it's not surprising to see that interest in mobile gaming is up. What is impressive is that of Sea's nearly 649 million quarterly active users, 12.3% were paying customers. This pay-to-play ratio is considerably higher than the industry average.
However, don't worry about the potential for slower gaming growth as the global economy normalizes once we're passed the coronavirus pandemic. That's because the more lucrative long-term growth driver for Sea is its e-commerce platform Shopee. Shopee is consistently the most downloaded shopping app in Southeastern Asia, and it's been gaining interest quickly in Brazil. By targeting a number of emerging market economies, Shopee has the potential to deliver sustainably high double-digit sales growth for a long time to come. For some context here, the $12.6 billion in gross merchandise value (GMV) that traversed its platform in the first quarter is more GMV than was sold in the entirety of 2018 on Shopee.
Although it's still nascent, Sea's third operating segment, digital financial services, is equally exciting. Since many of the regions Sea targets are underbanked, its ability to provide mobile wallet services could prove to be a game changer. As of the end of March, it had more than 26 million people paying for digital wallet services.
This trio of fast-paced operating segments could one day allow Sea to become one of the world's largest companies.