Although the old saying "it takes money to make money" may have held true once, particularly in today's market that's no longer the case. In fact, the real rule may have always been that a little bit of money consistently invested in stocks over time can reward you with fabulous wealth.
There is no better vehicle for enriching yourself than investing in stocks. Gold, bonds, and real estate have all underperformed stocks over the long haul. While certain asset classes may beat stocks over short periods of time, the long-term results prove that if you want to accumulate large amounts of wealth, investing in stocks is the way to go.
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Deutsche Bank published a study showing that over the past 100 years, equities beat out gold by 5.6% per year, housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
In all that time, stocks had negative returns in only two decades: the Great Depression of the 1930s, and the 2000s when a combination of the dot-com implosion, 9/11, and the financial markets collapse all combined to sink the market, causing negative returns of 0.5% and 0.9%, respectively.
Yet those bummer years ended up resulting in remarkable returns afterward. The 1940s produced compound annual returns of 10.2% annually, including dividends, while the 2010s generated a compound annual growth rate of 14%.
It's clear that for investors who want the best chance of living comfortably in retirement, investing in stocks and staying in the market for the long haul is the correct strategy. For that reason, by the time you're ready to retire, the following trio of winning stocks can make you as an investor very wealthy indeed.
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Altria
The biggest tobacco company in the U.S., Altria (MO 0.12%) continues to dominate the traditional cigarette space with its Marlboro brand, which still controls a whopping 42.7% of the market. Altria remains the top dog in electronic cigarettes, too.
Although Altria's investment in Juul Labs' electronic cigarette has been almost completely written off after the Food & Drug Administration came after it for allegedly inducing teens to use e-cigs, the Juul device remains the market share leader, albeit at drastically lower percentages than when it controlled three-quarters of the e-cig scene. And an administrative law judge recently dismissed the FDA's lawsuit challenging Altria's 35% ownership stake in Juul, meaning the tobacco giant can keep its share of the company.
Altria also owns equity investments in brewer Anheuser-Busch InBev and marijuana company Cronos Group.
Despite the secular decline in smoking, the tobacco stock has grown its profits over time because it is able to make up for the loss of smokers through price increases. Invariably two or three times a year, Altria will raise prices to offset tax increases or rising input costs and because of nicotine's addictive nature, smokers willingly pay up.
Operating profits grew to $11.6 billion last year, a better than 6% increase, and Altria has raised its dividend every year for 51 years, making it a Dividend King. The payout currently yields 7% annually and is not in any danger of being cut anytime soon.
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Shopify
E-commerce platform provider Shopify (SHOP -2.37%) is having a very bad month. Its stock is down 32% in February after PayPal's earnings report showed a significant slowdown in business that took down the entire payments sector, after Shopify's own results indicated the pandemic premium it was enjoying had dissipated.
Shares are down 63% from their all-time high last November, but it seems to be an overreaction. Business is returning to the mean rather than evaporating. Shopify is still growing, but at a more natural rate than the hyper-elevated pace seen during the lockdown phase of the pandemic. The company is also becoming more vertically integrated.
It's taking over fulfillment by operating its own warehouses and offering merchants a number of new products to make the Shopify platform a one-stop place to do business. It's launched Shopify Balance, a money management account for merchants; Shopify Capital, a small business loans operation; and Shopify Plus, a fully hosted enterprise e-commerce platform for fast-growing brands and celebrities. It will also start selling non-fungible tokens, or NFTs, on its platform to help businesses and brands better connect with customers.
Wall Street expects revenue to grow fourfold over the next five years, hitting $16 billion, and leading profits to explode higher to over $27 per share.
Shopify is not a cheap stock by traditional metrics. It trades at 29 times trailing earnings, over 100 times next year's estimates, goes for 18 times sales, and 185 times the free cash flow it produces. By waiting you just might be able to get a better price, but who knows? Shopify is clearly a long-term growth stock and is well worth your limited investment dollars when you plan to hold on to the e-commerce platform's shares for years, if not decades.
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Verizon
Shares of telecom giant Verizon (VZ -0.53%) have only recently begun to bounce higher after a long, steady slide lower. With the rollout of 5G networks beginning in earnest, a real estate land grab is underway between Verizon, AT&T, and T-Mobile for supremacy.
AT&T has the momentum at the moment because of its aggressive purchases of sub-6 Gigahertz spectrum, giving it almost as much as Verizon owns. But because of delays in fully implementing C-band spectrum, which was part of what all the recent hubbub was about with 5G networks and the airlines, it will be a year or so before Verizon is able to fully participate.
But Verizon is also the leader in millimeter-wave spectrum, with twice as much spectrum as AT&T, which is where the industry is expected to ultimately end up. So the carrier may give up a point or two now by not being as acquisitive in the spectrum auctions, but it is positioned nicely to benefit from the technological advances being made in the long run.
Moreover, Verizon invested heavily in infrastructure upgrades that others are undertaking now. While that caused it to assume significant debt in the process, it generates some of its best profit margins from data consumption, so those sunk costs will pay off for years to come as its rivals are weighed down by the task.
Verizon remains a resilient telecom and it is a reliable dividend payer as well, raising the payout for 17 consecutive years. With a yield of 4.8% annually, it's an investment that will pay off handsomely for many years to come.
