For more than 125 years, the iconic Dow Jones Industrial Average (DJINDICES:^DJI) has served as a barometer for the health of the U.S. stock market. Comprised of 30 profitable and time-tested companies, the Dow Jones is the perfect example of how buy-and-hold investing can make investors rich.
Over the trailing 50 years, the Dow has averaged an annualized return of about 7.5%. On a compounded basis, this means the Dow Jones Industrial Average is doubling roughly every 10 years.
But investors may not have to wait a full decade to see their initial investment double in value. The following four Dow stocks all have the potential to double investors' money over the next seven years, or perhaps even sooner.
Of the Dow's 30 components, the one I believe offers the best chance to double investors' money in seven years or less is cloud-based customer relationship management (CRM) software provider Salesforce.com (NYSE:CRM). For those wondering, CRM software is used by consumer-facing businesses to enhance client relationships and boost sales.
The reason Salesforce is such a no-brainer outperformer has to do with its dominant market share in global CRM. When IDC analyzed global CRM spending in the first half of 2020, it found that Salesforce gobbled up just shy of 20% of all sales. That's more than its four closest competitors, combined. It's the clear go-to platform for CRM, which is a sustainable double-digit growth opportunity as businesses digitize their operations.
Salesforce has also done an excellent job of making earnings-accretive acquisitions. CEO Marc Benioff has overseen the buyouts of MuleSoft, Tableau, and most recently Slack Technologies. Buying cloud-based enterprise communications platform Slack gives Salesforce another jumping-off point with which to cross-sell its products and services, while exposing the company to a broader swath of small and medium-sized businesses.
If Benioff's projection is accurate, Salesforce will more than double its sales in five years to $50 billion.
The great thing about healthcare stocks is that they're highly defensive. No matter how well or poorly the U.S. economy is performing, demand for drugs, devices, and healthcare services remains relatively steady. That's why UnitedHealth Group (NYSE:UNH) is a good bet to double investors' money over the next seven years.
Most folks are probably familiar with UnitedHealth's insurance operations. Health insurance isn't necessarily a fast-growing segment, but it does provide strong premium pricing power and the ability to grow profitability by a mid-single-digit percentage over time. If Democrats were to remain in control of Congress for years to come, an expansion of healthcare coverage could be a boon to UnitedHealth.
However, the big-time long-term growth driver for UnitedHealth is its subsidiary Optum, which is a pharmacy-benefits manager and healthcare services company. Optum handles everything from pharmacy care services to data analytics for hospitals and healthcare organizations. Optum's sales are growing considerably faster than UnitedHealth's insurance segment, and its operating margins should be superior.
With sustainable sales growth of around 10% and a growing dividend, UnitedHealth Group could be just what the doctor ordered.
Walgreens Boots Alliance
Another healthcare stock with all the tools needed to double investors' money by 2028 or earlier is pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA). Even though Walgreens and its pharmacy peers were clobbered by reduced foot traffic during the pandemic, the company's multipoint turnaround plan should have its business humming along in no time.
According to management, Walgreens is ahead of schedule on the cost-saving front. The company expects to have reduced its annual operating expenses by at least $2 billion in fiscal 2022. All the while, significant investments are being made in Walgreens' digitization initiatives, which were accelerated during the pandemic. Although direct-to-consumer sales still take a back seat to in-store purchases, online sales should be a sustainable rapid growth opportunity for the company.
Arguably the most exciting aspect of Walgreens' turnaround strategy is its partnership with VillageMD. This duo plans to open as many as 700 full-service clinics co-located in Walgreens' stores in more than 30 U.S. markets. Since most in-store clinics can only handle very simple tasks, such as vaccines, this initiative could be the key to drawing in repeat customers and funneling them to Walgreens' high-margin pharmacy.
At 10 times forward-year earnings per share, Walgreens Boots Alliance is currently one of the cheapest Dow stocks.
Last but not least, payment processing giant Visa (NYSE:V) can charge higher over the next seven years and double your money.
The beauty of the Visa operating model is that it's cyclical. Despite recessions being a normal part of the economic cycle, they often only last a few months or a couple of quarters. By comparison, periods of economic expansion typically go on for years, or even a decade. Visa is able to roll with the punches for a few quarters during a recession, but benefits immensely from disproportionately long periods of economic growth.
Visa is also the most dominant player in the No. 1 market for consumption in the world: The United States. In 2018, it held a 53% share of credit card network purchase volume in the U.S., which was more than 30 percentage points higher than its next-closest competitor.
It happens to have a long runway for infrastructure expansion, too. Since most global transactions are still being conducted in cash, Visa has the opportunity to expand its infrastructure organically or through acquisition into emerging markets. This should allow Visa to maintain a growth rate near 10%, as well as a profit margin at or above 50%.