If time has taught investors anything, it's that patience pays off when you're invested in great companies.
Despite stock market crashes and corrections being an inevitable part of the investing cycle, each and every notable move lower in the market throughout history has eventually been put on the backburner by a bull market rally. Put another way, when you a buy into a stock matters far less than how long you plan to hold.
Even with the broader market just a stone's throw from a new all-time high, long-term investors can still find plenty of bargains. If you've got $25,000 to invest, which won't be needed for bills or emergencies, and plan to hold for at least five years, the following five stocks can double your money.
One of the smartest ways to put $25,000, or some portion of that cash pile, to work right now is in e-commerce behemoth Amazon (AMZN -1.63%). Even though it's already one of the largest stocks in the world by market cap, Amazon's incredible cash flow growth portends significant upside yet to come.
Most folks know Amazon as the most dominant online retailer on the planet. This year, it's expected to command about a 40% share of U.S. online retail, which is more than five times higher than its next-closest competitor, Walmart. But what's truly meaningful for Amazon is that it's been able to sign up 200 million people worldwide to a Prime membership. Since retail margins are generally low, the fees Amazon collects from Prime help it to buoy margins and undercut brick-and-mortar retailers on price.
In addition to being the clear-cut leader in U.S. e-commerce, Amazon is the global top dog in cloud infrastructure services. During the first quarter, Canalys estimated that Amazon Web Services (AWS) brought in just shy of a third of global infrastructure spending. Based on AWS' second-quarter revenue, Amazon's cloud segment is nearly pacing $60 billion in annual run-rate sales. With margins that run circles around online retail, AWS is a key segment that'll send Amazon's operating cash flow skyrocketing.
By mid-decade, Amazon should be generating well over $300 in cash flow per share, which should lead this stock to double in value, if not more.
Social media up-and-comer Pinterest (PINS -1.48%) is another good bet to double investors' money over the next five years.
Many on Wall Street weren't thrilled with Pinterest after its second-quarter operating results showed a sequential decline in monthly active users (MAUs) from 478 million to 454 million. However, this decline ignores a number of key factors. For instance, as economies reopened following pandemic-based lockdowns, people stopped spending an excessive amount of time online and in their homes. Additionally, MAU growth remains well within longer-term historic trends for the company.
What's far more important for Pinterest than MAU growth is the continued monetization of its user base. Even with its net MAUs growing at a slower year-over-year rate in the June-ended quarter, global average revenue per user (ARPU) jumped 89%, with international ARPU climbing 163%. This tells investors that advertisers are willing to spend a lot more to get their message in front of Pinterest's audience, especially in overseas markets.
What's more, Pinterest's user base can be targeted more effectively than other social media platforms. With its MAUs willingly sharing what things, places, and services interest them, Pinterest simply has to serve as the middleman platform while connecting merchants to these users. This should be a highly profitable operating model, and it's still in the very early innings.
Walgreens Boots Alliance
It's not just growth stocks that could double investors' money over the next five years. Value stock Walgreens Boots Alliance (WBA 0.66%) has all the tools necessary to double a $25,000 investment in half a decade.
The big catalyst for pharmacy giant Walgreens is its multipoint turnaround plan. According to management, the company is on track to reduce its annual operating expenses by more than $2 billion in fiscal 2022. At the same time, it's been investing aggressively in digitization efforts. For example, pushing direct-to-consumer sales has never been a top priority for drugstores. But in the wake of the pandemic, it's become a sustainable source of double-digit growth potential.
As a Walgreens Boots Alliance shareholder, I'm even more excited about the company's partnership with VillageMD, which was announced in the summer of 2020. The duo plans to open as many as 700 full-service clinics co-located in Walgreens' stores in over 30 U.S. markets. The differentiator here is "full-service clinics" with physicians on staff. Being able to tackle more than just vaccines or a minor sniffle could allow Walgreens to draw repeat patients and funnel prescriptions directly to its pharmacy.
A forward price-to-earnings ratio of less than 10 is simply too low for a company as profitable as Walgreens.
Planet 13 Holdings
To get an immediate concern out of the way, legalization doesn't need to occur at the federal level in the U.S. for cannabis stocks to succeed. While it would undoubtedly make life easier, we've already seen 36 states legalize medical marijuana, half of which have regulations in place that allow, or will allow, for the consumption and/or retail sales of recreational pot. In other words, Planet 13 will be just fine without reform progress on Capitol Hill.
What makes this company special is its unique approach to operating a dispensary. Rather than focusing on quantity, Planet 13 has chosen to highlight the experience. It currently operates two dispensaries: A 112,000-square-foot SuperStore just west of the Las Vegas Strip in Nevada and a 55,000-square-foot SuperStore in Santa Ana, Calif., about 15 minutes from Disneyland. The Vegas SuperStore offers a café, a consumer-facing processing center, an events stage, and a massive selling area complete with dried cannabis, paraphernalia, and derivatives galore. There's simply no other cannabis company offering the experience Planet 13's dispensaries provide.
The company was also recently awarded a retail license in Chicago and has bought its way into Florida (it's eyeing the Miami and Orlando markets). If it's as successful in these markets as it's been in Vegas, Planet 13 could become a true top-performing cannabis stock.
Last, but not least, a $25,000 investment in conglomerate Berkshire Hathaway (BRK.A 0.66%) (BRK.B 0.59%), the company run by billionaire investing mogul Warren Buffett, can double your money in the next five years. Considering that Buffett had led Berkshire's Class A shares to an average annual return of 20% over the past 56 years, a compound annual return of 14.9% over the next five years sounds quite doable.
First and foremost, Berkshire's success is a reflection of the company's cyclical investment portfolio. Approximately 85% of the company's invested assets are tied up in just three sectors: Technology, financials, and consumer staples. Although Buffett is aware that recessions are inevitable, he also knows they don't last very long. He's aligned his company's investment portfolio to take advantage of long periods of economic expansion.
The Oracle of Omaha is also a big fan of dividend stocks. Berkshire Hathaway looks to be on pace to collect north of $5 billion in dividend income this year, including preferred stock dividends. Based on the company's initial cost basis, this works out to a yield on cost of around 5%. Companies that pay dividends are often profitable and time-tested, which is precisely what Buffett and his investment team look to buy.
With the U.S. economy in the early stages of an economic recovery, Berkshire Hathaway is set to thrive.