Among the thousands of publicly traded companies in the U.S., only four stocks have a market capitalization of $1 trillion or more: Apple, Microsoft, Alphabet, and Amazon. This year's market crash also means some stocks that joined the elite club last year, like Meta Platforms and Tesla, aren't there anymore.
The stock market sell-off also means stocks could find it harder to make the $1 trillion cut, but that doesn't mean they won't. Companies that are already growing fast enough and are equipped to exploit growth opportunities could hit $1 trillion in a few years. Here are three such high-growth stocks that could hit the milestone in just 10 years from now, or maybe even sooner.
Ready for the next leg of growth
Johnson & Johnson (JNJ 2.40%) isn't really a high-growth stock, but the company's plans could spur its growth and send its shares catapulting. The next 10 years are crucial as the company transforms itself, and if it can execute, J&J's current market cap of around $467 billion could slowly but steadily rise close to $1 trillion.
The thing is, J&J is in the process of spinning off its consumer health business into a separate publicly traded entity within the next 18 to 24 months. By doing so, the company wants to drop off a cyclical business and emerge as a healthcare pure-play with a focus on pharmaceuticals and medical devices. Pharmaceuticals alone brought in 55% of sales for J&J in 2021, and medical devices contributed 29% to its top line.
These two were also the largest contributors to J&J's earnings before tax (EBT) last year -- pharmaceuticals generated EBT margin of 34.9%, while medical devices reported EBT margin of 16.2% in 2021. Comparatively, consumer health's EBT margin came in at only 8.8%.
It's clear that the spin-off will allow J&J to focus on and invest in high sales-and-margin businesses, which should help drive its income and cash flows at a faster pace than now. That aside, J&J is also expected to boost shareholder returns in the form of larger dividends and share repurchases as its cash flows grow. Combined, both factors should reflect in J&J's stock price and push its market cap higher. Since J&J is also a Dividend King with 60 years of consecutive dividend increases, it's a rare stock that should mix dividend and growth to hit $1 trillion in market cap.
Just 5 years to $1 trillion?
Warren Buffett is known for his stock-picking prowess, and people who have invested in shares of his conglomerate, Berkshire Hathaway (BRK.A -0.64%) (BRK.B -0.81%), have done so hoping to make money as the several companies that Berkshire owns grow. There's another embedded growth opportunity in Berkshire: Its stock portfolio.
Berkshire owns stakes in more than 50 publicly traded companies, including high-growth companies like Apple, Snowflake, and BYD, to name a few. In fact, it's a hugely diversified portfolio, so there are almost always some pockets of strengths. For instance, while growth stocks have tanked this year, Berkshire's stock portfolio is riding the boom in energy stocks like Chevron and Occidental Petroleum.
So although Berkshire's key businesses, including insurance, utilities, and railroad, must perform well for the company's market cap to rise, a rise in the value of its stock portfolio can also hugely help drive Berkshire's value higher. That, I believe, could make it easier for this company to reach $1 trillion in market cap. The most important point is that it could reach there in as few as five years.
Here's the thing. Between 1965 and 2021, Berkshire stock generated a compound annual return of 20%. The S&P 500 grew at 10.5% during the period. Even if Berkshire grows at the market's pace henceforth, which is almost half the company's own pace of growth over a period of more than 50 years, it'll take just a little over five years for the stock to surpass $1 trillion from its current market cap of around $600 billion. Berkshire has the leadership, portfolio, and cash to make it there.
The stock with indisputable growth catalysts
Visa (V -0.09%) currently commands a market cap of around $417 billion. That's a more than four-fold growth in just one decade, so it's not unreasonable to expect the stock to just more than double in another 10 years. Visa is the leader in the global payments processing industry and is growing its revenue, margins, and cash flows rapidly.
While the COVID-19 pandemic proved to be a huge tailwind for e-commerce and digital transactions, restricted cross-border travel was a significant headwind for Visa. Yet, Visa's payments volume increased 16%, revenue grew 10%, and net income rose 13% in its financial year ended Sept. 30, 2021. Visa also increased its dividend by 17% in the year.
Visa's growth continues into 2022, with its revenue and net income rising by almost 24% each in the six months through March 31.
In the longer term, two factors will hold the key to Visa's growth: The global shift toward digital payments, and innovation. While the first is self-explanatory, Visa is doing a lot of things to diversify revenues. To name a few, it is expanding its merchant base including small businesses, getting Visa credentials into as many wallets as it can, launching products and services for business-to-business, business-to-consumer, and government-to-consumer transactions, and investing in value-added services like cybersecurity, data solutions, and analytics for clients and partners.
The global digital payments market is projected to grow by double-digit compound annual growth rates through 2030. That should lay the foundation for Visa's growth, and its stock price.