2 Monster Growth Stocks to Buy Now and Hold

Famed value investor Peter Lynch once said: "All you need for a lifetime of successful investing is a few big winners." And that makes a lot of sense. After buying a stock, the worst outcome is a 100% loss, but there is no limit on the upside. A stock can grow several-fold in value, and a few of those monster investments can more than compensate for any losses from less successful stock picks.

Building on that idea, HubSpot (HUBS -2.40%) and Lululemon Athletica (LULU -1.26%) are stocks that are growing quickly, and both could generate significant wealth for shareholders in the coming years. Here's why.

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1. HubSpot

HubSpot pioneered the concept of inbound marketing. Rather than delivering unsolicited ads across the internet (i.e. outbound marketing), inbound marketing tools are used to create compelling web and social content that attracts viewers. More importantly, inbound tactics can generate leads at less than half the cost of outbound methodologies.

Since launching its marketing hub, HubSpot has expanded its platform into a full customer relationship management (CRM) solution, including hubs for sales, service, operations, and content management. These tools help small- and medium-sized businesses engage leads, convert leads into customers, and provide high-quality services throughout the customer lifecycle.

HubSpot uses its inbound tools to power its own growth, and the results speak for themselves. Since 2017, the number of customers with more than one hub (i.e. software module) has grown from 35% to 57%, meaning the average revenue per customer is trending upward. Not surprisingly, that has translated into strong top- and bottom-line growth.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Looking ahead, HubSpot is set to maintain that impressive momentum. With more consumers shopping online each year, building and maintaining good customer relationships is the key to retention and repeat purchases, and HubSpot's platform is an effective solution. To that end, Bank of America analyst Brad Sills puts the company's market opportunity at $87 billion.

What's more, HubSpot recently partnered with Stripe to integrate payment processing capabilities into its platform. That service should simplify business-to-business commerce for merchants, while also expanding HubSpot's addressable market. HubSpot Payments has only been live for about a month, but management sees it as a significant growth driver. That's why this stock belongs in your portfolio.

2. Lululemon Athletica

Lululemon is a retailer of athletic apparel and accessories. The company offers a comprehensive line of clothing for both men and women, featuring products designed for an active lifestyle. In addition to its growing e-commerce business, Lululemon also operates over 500 physical stores, the majority of which are in North America and China.

So what makes this company so special? Lululemon has cultivated an incredible brand image, and its logo has become synonymous with premium apparel. Few retailers ever accomplish that, and it didn't happen by accident. Lululemon invests aggressively in innovation, involving researchers, scientists, and engineers in the design process. That has allowed the company to develop a range of proprietary and technically advanced fabrics.

Of course, the retail industry is intensely competitive, and other premium brands like Nike and Under Armour have certainly captured their fair share of the market. But Lululemon's brand recognition arguably eclipses that of both rivals, as evidenced by its 58% gross profit margin over the past 12 months. By comparison, Nike and Under Armour posted gross profit margins of 49% and 42%, respectively.

Not surprisingly, Lululemon has delivered impressive financial results over the long term.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Looking forward, Lululemon has plenty of room to grow its business. The global athleisure market reached $284 billion in 2020, according to Grand View Research, and that number is expected to grow at 8.6% per year through 2028.

Likewise, Lululemon entered the connected fitness space last year with the acquisition of Mirror, an interactive platform that allows users to access live and on-demand classes like cardio, yoga, and boxing. Mirror still represents a small portion of total revenue, but the subscription component (not to mention the marketing potential) could supercharge Lululemon's business down the road if the product gains traction.

Here's the bottom line: With the holidays on the horizon, Lululemon should see strong consumer demand. And given its strong brand image and massive addressable market, I think this $60 billion business could grow into a $240 billion company over the next decade, a valuation that still falls short of Nike's current market cap.