Looking to get rich in the stock market? One of the best ways to do so is by investing in sound businesses that can thrive no matter what the market throws their way. A well-run business is one that has a steady income stream, including during economic downturns. It also should have some advantage that helps it thrive or at least a viable plan for reaching profitability.
Unfortunately, sometimes businesses that check all these boxes tend to fly under the radar of the meme stock crowd. So one more often has to go searching for them. To help with that search, here are three under-loved, but successful companies with stocks capable of achieving a 10% annual growth rate -- the amount needed to double your investment by 2030.
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1. Progressive
Progressive (PGR 0.96%) writes auto and property insurance policies for individuals and businesses. While insurance admittedly isn't the most exciting business, the way Progressive executes it business can't help but excite investors.
NYSE: PGR
Key Data Points
Progressive was the first insurance company to use its customers' driving behavior to help price its insurance policies. The company rolled out this technology, called telematics, in 2004 and made it widely available to customers in 2011. The technology has been an enormous success, making Progressive one of the best in the industry at pricing policies.
Insurers use a metric called the combined ratio to see how well they write policies. The combined ratio is the ratio of claims plus expenses to the total premiums collected. Over 20 years, Progressive's combined ratio has averaged 91% (lower is better), crushing the industry average of 100% in that same period.
Data sources: Progressive and National Association of Insurance Commissioners. Chart by author.
Progressive is also in a good position to raise its premiums in this inflationary environment we're experiencing. The company quickly adapted to rising claims costs starting last year and has grown its net earned premiums by 12% from last year.
Progressive's stock has returned investors about 26% annually over the past decade. With its ability to price insurance policies better than the rest, there's no reason it can't achieve a 10% annual growth rate and double your money in the coming years.
2. Goosehead Insurance
Goosehead Insurance (GSHD 2.99%) is a company that sells insurance using a franchise-based model. It was founded in 2003 and has been a publicly traded company since 2018.
NASDAQ: GSHD
Key Data Points
Goosehead takes a unique approach to insurance sales, leveraging technology that allows it to onboard franchisees at a head-spinning pace. From 2018 through 2021, Goosehead has grown its franchise count from 646 locations to over 2,151, which is a 50% annual growth rate.
Goosehead aggressively grows its franchise count because it sees this as key to higher profit margins and cash flows down the road. During its initial franchise agreement, Goosehead earns a 20% royalty from its franchisee. After that initial term, which lasts about 10 years, Goosehead's royalty then increases to 50% -- setting it up for a future of strong cash flows.
The insurance agency has achieved solid growth, with premiums generated by its franchise channel growing 52% annually. It has incurred higher expenses to onboard and train new franchisees. However, with a strategy for growth and constant execution, I think Goosehead can be an excellent long-term performer in the next decade and beyond.
3. Marsh & McLennan
Marsh & McLennan (MMC 1.67%) helps companies manage risk and advises them on workplace issues. While it's not the most exciting business, what is exciting is the cash flow it generates.
NYSE: MMC
Key Data Points
Over the last decade, the company has grown its net income by 13% annually. Its free cash flow, or cash left over after paying expenses and capital expenditures, has grown at 10% annually.
The company has benefited from strong demand for its advice, especially as companies navigate uncertainties around the pandemic, global supply chain issues, and the transition toward cleaner energy. It has also benefited from rising insurance premiums, which have boosted its commission revenue.
Marsh & McLennan is in an excellent place to thrive, and CEO Dan Glaser has said that "when the world is unsettled, demand for our services rises." The company should do well even in an economic downturn. According to Glaser, the company has grown its earnings per share in every recessionary period since 1962 -- making this another excellent stock that could double your money in the coming years.
