Several stocks appear to be no-brainers to hold for a decade or longer in a portfolio when looking back on their performance. Take Amazon or Netflix -- both stocks are up more than 1,500% over the past decade, but many investors may not have had the confidence to say they would hold these stocks for a decade when questioned in 2012.
To hold onto a business long-term requires trust in both its management and market opportunity, two factors that are hard to judge looking that far ahead. But I plan to hold two stocks for at least a decade or more: Nvidia (NVDA 3.68%) and CrowdStrike (CRWD -2.17%). Both companies are led by their founders and have massive tailwinds in the industries where they operate. Investors should take notice of these picks as two stocks with decade-long holding potential.
Image source: Getty Images.
Nvidia
In 1999, Nvidia invented the graphics processing unit (GPU), which changed computing forever. At first, these units processed calculations necessary for real-time graphics shading. Now, the GPU's use has expanded into artificial intelligence (AI) and self-driving cars. In addition, GPUs have become a necessary component in the hundreds of data centers popping up around the world annually.
The leader behind this innovative business is Jensen Huang, who founded the company in 1993. At 59 years old, Huang is still in touch with many exciting trends like the metaverse and shows no signs of stepping down as CEO anytime soon. To Huang and Nvidia, the metaverse isn't a social media playground -- it's a place to get business done. Nvidia's Omniverse allows for 3D collaboration with digital twins and manufacturing simulation. With the expanding use cases of the GPU and the metaverse opportunity, Nvidia's business is well-positioned to thrive over the coming decade.
Currently, the business isn't doing too shabby either. Nvidia's fiscal year 2022 (ended Jan. 30, 2022) revenue rose 61% to $26.9 billion, a new company record. The data center division led the way in growth with fourth-quarter revenue rising 71% year over year to $3.3 billion. However, its largest segment, gaming, grew 37% year over year to $3.4 billion and will likely be overtaken by the data center division some time this year.
In today's inflationary environment, pricing power is critical. If a company can continue to raise its gross margin or keep it steady, it has pricing power and can resist the effects of inflation by passing price increases on to consumers or pressuring suppliers to keep their costs constant. Nvidia has steadily raised its gross margin over the past decade, showing how it is committed to making its products more profitable.
Data by YCharts.
Even though the stock trades at an expensive price-to-earnings (PE) ratio of 63, the company is still growing its bottom line rapidly. That growth should result in a lower valuation multiple at the same stock price or drive shares higher with the same valuation. Either way, Nvidia stock is a strong candidate for a decade or longer holding period.
CrowdStrike
CrowdStrike CEO and founder George Kurtz used to work for cybersecurity firm McAfee before he realized the direction technology was heading. He knew cloud computing would become the standard and businesses would need a cloud-first cybersecurity solution. CrowdStrike fulfills that vision by offering endpoint protection to clients solely through the cloud.
Endpoint protection focuses on network access points like laptops and phones, working much like a more advanced version of the anti-virus software you likely have installed on your computer.
Image source: Getty Images.
CrowdStrike has seen business boom over the past years:
| Fiscal Year | Customer Count | Year-Over-Year Growth |
|---|---|---|
| 2019 | 2,516 | 103% |
| 2020 | 5,431 | 116% |
| 2021 | 9,896 | 82% |
| 2022 | 16,325 | 65% |
Data source: CrowdStrike. Fiscal years ending Jan. 31.
Among its customer base, CrowdStrike serves 15 of the top 20 banks and 65 of the Fortune 100. Although customer growth is beginning to slow, investors shouldn't be worried as the company is a master at getting its customers to increase their spending.
Its dollar-based retention rate measures how much existing customers spend from one 12-month period to the next. For the fiscal 2022 fourth quarter, CrowdStrike's retention rate was 124%, meaning the same group of customers generated 24% more annual recurring revenue during the year than they did in the comparable prior-year period.
The company primarily grows customer spending by getting them to use more modules. Each module allows IT departments to use different tools CrowdStrike has developed. As of the fourth quarter, CrowdStrike has more than 20 modules, and 69% of customers use at least four of them. With only 34% using six or more, CrowdStrike has room to upsell to its customer base.
CrowdStrike has a premier endpoint protection solution and was recognized by Gartner as a leader in its Magic Quadrant rankings while also claiming the top spot in its "completeness of vision" metric. Investors should be wary of increased volatility with the stock richly valued at 35 times sales. However, best-of-breed companies usually don't come cheap, and CrowdStrike is no exception. The cybersecurity spending wave is just getting started, and CrowdStrike's market expansion should last for at least a decade.
Both Nvidia and CrowdStrike are led by visionary CEOs and have a vast market opportunity. Consider picking up shares with the idea of holding for at least three to five years but ideally for a decade if their execution aligns with the industry tailwinds.
