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2 Growth Stocks to Buy for the Next Decade

By Anthony Di Pizio – Updated Oct 1, 2021 at 2:05PM

Key Points

  • Redfin is achieving scale never thought possible in the real estate business, and it has saved consumers over $1 billion.
  • Advanced Micro Devices is snatching market share in arguably the most crucial industry in the world.

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Redfin and AMD represent two best-in-class opportunities in two red-hot industries.

Committing your money to an investment thesis is hard, but doing so for the long term can be even more daunting. It's difficult to predict what the world will look like in a year, let alone 10 years, so it can be challenging to invest with conviction.

But we have the benefit of history. It has taught us that the best investment strategies have a long-term focus, backed up by the 35-fold return generated by the S&P 500 index since 1981. Some individual stocks have even outperformed that mark, and they're usually game-changing companies that transform consumer habits.

Here are two prime examples to buy for the next decade (or longer). 

A couple standing in front of their new home, with a sold sign out front

Image source: Getty Images.

1. Redfin

While technology has overhauled so many industries, real estate has been a slow mover. Buying or selling a home is a long, stressful, and expensive process. But it's the most substantial financial decision most of us ever make, so we tend to follow the traditional path by default.

Redfin (RDFN 2.80%) recognizes this, so it hasn't tried to reinvent the wheel. Instead, where real estate agents are usually independent or work within small firms, Redfin has hired an army of thousands of them to build an unprecedented level of scale. Naturally, with grander scale comes higher gross profits, and the result is Redfin's 1% real estate listing fee instead of the industry-standard 2.5%.

The company says it has saved consumers over $1 billion since it started, and as a result, they're flocking to list their homes with Redfin. This mutually beneficial arrangement has sent the company's growth soaring. 

Metric

2018

2021 (Estimate)

CAGR

Revenue

$486.9 million

$1.78 billion

54%

Data sources: Redfin, Yahoo! Finance. CAGR = compound annual growth rate.

The company's revenue growth comes as it takes an increasing share of total U.S. home sales. It represented the sale of 0.81% of all homes in 2018, which has expanded to 1.18% in the first half of 2021. 

Where Redfin's tech-driven competitors buy and flip thousands of houses each quarter in a new business model dubbed iBuying, Redfin uses the house-flipping process to simply complement its services instead. That's because iBuying exposes these companies to volatile swings in house prices, and a time might come where prices fall, and they could be stuck with thousands of homes in inventory that no longer can be sold profitably.

Redfin sold just 463 homes in the first half of this year through iBuying, compared to competitor Zillow Group, which sold over 4,000. 

Redfin isn't profitable yet, but it's inching closer each year. Investors should focus on the company's growth, supplemented by its expansion into verticals like the rental market through an acquisition of RentPath back in April. 

But most important, it's on the fast track to dominating the traditional real estate sales process. A long-term focus could bring you big rewards with this stock. 

A person in a lab wearing protective clothing, holding a computer chip in their gloved hand

IMAGE SOURCE: GETTY IMAGES

2. Advanced Micro Devices (AMD)

Formally known as semiconductors, computer chips in all their variations have fast become the single most important manufacturing components in existence. Consumer goods are getting smarter, and as more of our lives make the digital transition, the demand for advanced processing power will continue to soar. 

Advanced Micro Devices (AMD -0.19%) is a best-in-class semiconductor producer that drives some of our most-prized consumer electronics. In the latest example, it just signed a new deal with Tesla to power the in-dash infotainment systems in its Model S and Model X electric vehicles. 

But the company is best known in tech circles for its PC computing and graphics chips, which have been hard to come by lately due to a pandemic-driven shortage. It has grown its revenue share in this segment for five straight quarters, suggesting it's crushing the competition.

The Semiconductor Industry Association expects semiconductor sales to grow by 19.7% this year, but AMD's growth rate is far outpacing that, further highlighting its increasing market share.

Metric

2018

2021 (Estimate)

CAGR

Revenue

$6.4 billion

$15.6 billion

34%

Earnings per share

$0.32

$2.49

98%

Data sources: Advanced Micro Devices, Yahoo! Finance.

While AMD's stock price has grown by 1,400% over the last five years, its operating performance not only suggests it's justified, but that it's probably going to continue. With a forward price-to-earnings multiple of 40, it trades at a slight premium to the iShares Semiconductor ETF, which trades at a 35 multiple. It suggests investors believe AMD offers a more valuable proposition than a basket of its peers. 

And with earnings growth of over 20% estimated in 2022, those investors might be right. Especially if it comes on the back of a projected $18 billion in revenue, which would be a consecutive all-time high for the company. 

Strong revenue and earnings growth, paired with expanding market share in a crucial industry, make AMD a no-brainer for the next decade. 

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Redfin, Tesla, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends the following options: short September 2021 $65 calls on Redfin. The Motley Fool has a disclosure policy.

Stocks Mentioned

Advanced Micro Devices Stock Quote
Advanced Micro Devices
AMD
$77.48 (-0.19%) $0.15
Tesla Stock Quote
Tesla
TSLA
$194.70 (%)
Zillow Group Stock Quote
Zillow Group
ZG
$37.92 (1.39%) $0.52
iShares PHLX SOX Semiconductor Sector Index Fund Stock Quote
iShares PHLX SOX Semiconductor Sector Index Fund
SOXX
$385.24 (-0.72%) $-2.79
Zillow Group Stock Quote
Zillow Group
Z
$38.32 (0.90%) $0.34
Redfin Stock Quote
Redfin
RDFN
$5.51 (2.80%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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