The stock market is a wealth-building machine. But it requires investors to exercise patience and focus on great companies over the long run.
For instance, the broader market has undergone three sizable bear market declines since the beginning of 1995. This includes the dot-com bubble bursting, which ravaged high-growth stocks, and the Great Recession, which more than halved the valuations of many great companies. Despite these declines, the innovation-driven Nasdaq 100 is higher by almost 3,500% in 27 years. Patience can pay off handsomely if you're invested in innovative companies.
If your desire is to become a millionaire, consider investing $200,000 into the following trio of innovative stocks and waiting 10 years.
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Axon Enterprise
The first high-growth, innovative company that has the potential to make patient investors millionaires over the next decade is Axon Enterprise (AXON -1.34%).
Although it's not a household name, Axon is well-known in the law enforcement community. It's the company behind the popular less-than-lethal Taser devices, as well as the body cameras worn by police officers. Axon supplies evidence-database software to police departments, too.
For as long as I can recall, Axon's sole focus has been on law enforcement and enterprise opportunities. But last year, the company laid out a broader-market strategy that nearly doubled its total addressable market from $27 billion to $52 billion. This extra $25 billion is expected to derive from Axon expanding into the consumer market, where it has virtually no penetration at the moment. Being able to grow organically within the law enforcement community, while also offering its less-than-lethal devices to public, should provide the company with a sustainable double-digit growth opportunity throughout the decade.
Furthermore, Axon Enterprise can make waves by looking beyond the borders of the United States. Although the company has plenty of room for market share expansion domestically (it holds respective 21% and 12% shares of the Taser and body camera market in the U.S.), its market share is virtually nonexistent in Latin America, Asia, the Middle East, and Africa. Its cloud-software solutions market share is also in the low single digits worldwide. These are long runway opportunities for a highly innovative company.
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EverQuote
Innovation comes in all sizes and industries. Despite its diminutive market cap of $440 million, EverQuote (EVER 1.49%) has the tools to quintuple a $200,000 investment by 2032 and make people millionaires.
EverQuote operates an online insurance marketplace. According to the company, the U.S. insurance market, which includes distribution and ad spend, is worth $154 billion. Just $6.5 billion of this $154 billion is digital ad spending. But while the total market value of the U.S. insurance industry is projected to grow by 4% annually through 2024, digital ad spend is expected to grow by 16% annually. In other words, ad dollars and consumer buying preference are shifting online, which puts EverQuote at the center of the fastest-growing niche of a highly profitable industry.
What EverQuote's proprietary platform provides is a benefit for both the consumer and insurers. Having 19 of the top 20 auto insurers on its platform allows consumers to quickly price-compare policies. Meanwhile, the company notes that approximately one out of five consumers requesting an insurance quote will ultimately purchase a policy on its platform. This means insurers can more effectively utilize their advertising budget to target motivated shoppers.
Although auto insurance remains EverQuote's bread and butter, the company has been pushing into new verticals for years, such as commercial, home, renters, life, and health insurance. These verticals have been growing at a much faster rate than its established auto insurance marketplace, and they provide an add-on opportunity that could rapidly lift the company's margins.
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Airbnb
A final innovation-driven stock that can turn a $200,000 investment into $1 million over the next 10 years is stay-and-hosting platform Airbnb (ABNB -3.18%).
Like virtually all companies focused on travel, Airbnb's operating results took it on the chin during the initial stages of the coronavirus pandemic. However, with COVID-19 vaccination rates ticking up domestically and around the world, the travel industry has rebounded in a big way.
What investors need to realize about Airbnb is this company isn't a fad. In the three years leading up to the pandemic, Airbnb's total bookings more than quintupled from 52 million to 272 million. Mind you, this growth occurred with less than the 4 million hosts currently on the platform. With around 1 billion households worldwide, we're witnessing the tip of the iceberg in terms of hosting marketplace potential.
What's more, the pandemic has given rise to mobile workforces. As long as workers have internet access, they aren't necessarily tethered to any one location. Not surprisingly, Airbnb's fastest growing segment has been long-term stays (defined as 28 or more days).
Beyond hosting, Airbnb also wants a bigger piece of the global $8 trillion travel industry. It aims to secure its shares of this giant market through its Experiences segment. Experiences works with local experts to lead travelers on adventures. The expectation is that we could see Airbnb expand these relationships to also include transportation and dining activities in the future, which would allow it to gobble up more travel dollars.
