While the average U.S. worker can count on receiving monthly Social Security benefits in retirement, these payments aren't meant to replace a person's entire paycheck. That's why it's crucial to build a nest egg independent of government programs to support people who are aging.
One great way to establish financial security in retirement is by investing in stocks, and the earlier the better. Let's look at three companies that can help anyone increase their wealth in the next decade: DexCom (DXCM 1.89%), Microsoft (MSFT 1.65%), and Amazon (AMZN 1.30%). Investing in these three stocks could land investors a compound annual growth rate (CAGR) of 14.9% in the next decade -- thereby comfortably turning $250,000 into $1,000,000.
1. DexCom
DexCom is a medical devices specialist that made its name thanks to its continuous glucose monitoring (CGM) system, which helps diabetes patients track their blood glucose levels. The company has been highly successful on the market in the past 10 years, and there are at least three reasons it can keep this up.
First, CGM enjoys relatively low penetration even in the U.S., a leader in the adoption of the technology. CGM devices are even less popular in the rest of the world, despite providing diabetes patients with better outcomes. In other words, even within the current population of diabetes patients worldwide, there is significant room for DexCom to make headway.
Second, diabetes is a growing problem, and the number of people with this illness will increase in the coming years.
Image source: DexCom
That means there will be more of a need for DexCom's products, as it is one of the leaders in the CGM market. Third, the healthcare company continues to innovate. While DexCom's current crown jewel is the G6, it is working on its successor, the G7. The latter device will be smaller and help people with diabetes achieve even better health outcomes.
DexCom submitted an application to regulators in the U.S. for the G7 in the fourth quarter. The device could earn clearance from the Food and Drug Administration sometime this year. Greater adoption of CGM technology will work wonders for DexCom in the next 10 years, just as it has in the past. Look for the company's revenue and earnings to continue growing along with its share price.
2. Microsoft
Microsoft continues to be a leader in computer operating systems -- with very few competitors worth mentioning. The company's brand name has become extremely powerful, granting the business a solid moat. Consumers, be they individuals or businesses, tend to gravitate toward what they know works best.
Microsoft also offers a set of productivity tools that are invaluable to companies small and large. These include Microsoft Teams, among other applications many companies rely on for their day-to-day activities. As a result of the productivity-enhancing services it offers companies, the business benefits from high switching costs -- its clients can't easily jump ship without risking business disruptions.
In other words, most of them are likely to stay put for the foreseeable future. Arguably the most promising business segment is its cloud computing offering. Microsoft Azure became a leader in this field in the past decade, and it held a 21% share of the cloud computing market as of the fourth quarter of 2021.
The cloud computing space will grow substantially moving forward. Microsoft's already strong position, combined with its remarkable ability to generate free cash flow to reinvest, cements it as a dominant player. That's great news for Microsoft and its shareholders, and that's before we talk about the company's gaming products.
Microsoft's entire business still looks robust after all these years, and investors who get in today will be glad they did so 10 years from now.
3. Amazon
Tech giant Amazon is also a leader in more than a few industries. First, there's its e-commerce business. Amazon is one of the most visited websites worldwide. It offers consumers several perks, including a nearly infinite basket of goods to choose from, competitive prices, and one-day shipping for many items. Amazon's operations will benefit from the continued adoption of e-commerce, which the pandemic may have accelerated.
In the fourth quarter of 2021, e-commerce sales accounted for a meager 12.9% of retail sales in the U.S. There remains significant room to grow for the industry. Thanks to its existing competitive edges, it's extremely unlikely that newcomers or competitors will knock Amazon out of its position.
Image source: Getty Images.
The company benefits from a particular kind of network effect, that founder Jeff Bezos has coined the flywheel. The value of its services increases as more people use it and momentum generates more momentum. Both customers and merchants on Amazon stand to gain as more of each group joins the company's e-commerce platform. Thanks to this dynamic, Amazon will likely stay atop (or at least near the top) of this sector in the next decade.
Meanwhile, Amazon is also one of the biggest players in cloud computing. The company's Amazon Cloud had a 33% share of the market as of the fourth quarter, and it was the only one that beat out Microsoft Azure. The high growth and juicier margins associated with Amazon's cloud business will work wonders for both its top and bottom lines in the coming years.
Achieving a CAGR of 14.9% in the next decade is well within the tech giant's reach. Potentially eye-popping returns are in the reach of investors who buy a large swatch of stock (as part of a diversified portfolio) and hang on for the long run.
