Retiring a millionaire is a goal for many investors. Thankfully, there are multiple paths to achieving such a goal.
One tried-and true way (also one of the simplest) is to invest in a reliable index fund. With the S&P 500 averaging an annual return of about 10%, a simple $450-a-month contribution should net the investor just over $1 million in 30 years if those averages hold. It may take a while and require patience, but the odds are good the investor will make enough to retire a millionaire.
However, it's likely you didn't click on this article just to be told to buy an index fund. It's more likely you're looking for stocks with market-beating potential. The same $450 monthly contribution to an investment vehicle with an annual return just 2 percentage points higher would yield an additional $500,000 over those 30 years. That little bump in returns isn't easy to achieve, but here are these three stocks that could help you attain it.
Alphabet (GOOG -1.60%) (GOOGL -1.61%) is the fourth-largest company in the world as measured by market cap. It has a long history of outsized growth, but it's getting so big now that investors might wonder if Alphabet has room to grow and keep outperforming the market going forward. I believe it still does, mostly because the company's cash flows will drive further growth.
Alphabet's primary business is advertising (80% of Alphabet's revenue came from advertising in the second quarter), which has been around for thousands of years (the oldest advertisement was found in Egypt and dates to 3,000 B.C.). It's unlikely that advertising will go away, and that means Alphabet's primary revenue stream is unlikely to ever dry up.
But just because advertising is always around doesn't mean it's a smooth business. In challenging economic times, advertising budgets get cut because it is an easy part of a business's budget to pull back spending on. This, in turn, negatively affects businesses like Alphabet. The second quarter was one of those periods, but Alphabet still managed to grow revenue by 13% year over year. This growth shows resiliency and affirms that Alphabet's platforms (Google, Android, and YouTube) are places companies consider high-priority ad options even in economic downturns.
Alphabet also produced $12.6 billion in free cash flow in Q2. Although this was down from previous quarters, it's still impressive. This level of cash flow allows Alphabet to invest in its business like few others can, or repurchase shares (Alphabet repurchased $15.2 billion in the quarter).
With Alphabet's dominant position in advertising and strong cash flows, the stock is a great candidate to beat the market for the foreseeable future.
2. The Trade Desk
The Trade Desk (TTD 1.94%) provides the technology that ensures advertisers' ads are placed in front of their intended audiences. Companies may cut their ad budgets in a downturn, but they won't eliminate them. With limited ad funds, what is purchased must be placed effectively.
This is a big reason why The Trade Desk's sales rose 35% year over year in Q2. It also retained at least 95% of its customers, maintaining an eight-year streak. Despite the challenging economic conditions, The Trade Desk excelled at a time when others struggled.
The Trade Desk could help make you a millionaire because of its massive market opportunity. Global ad spending was estimated to be $750 billion in 2019, and while The Trade Desk will never capture all of that, it could help place a significant portion of these ads. A particularly lucrative area for The Trade Desk is connected TV, as the cost per mille (the price per 1,000 ad impressions) is double that of linear TV.
Companies want to be more precise in targeting their ads to the right audience with a higher ad cost, giving The Trade Desk an edge in this advertisement medium. The Trade Desk's opportunity is still in its infancy, and investors can confidently purchase this stock, which is down 45% from its high.
dLocal (DLO -2.53%) allows retailers to sell to developing nations. Through dLocal's plug-ins, businesses like Amazon and Nike don't have to wrestle with the various currencies and payment systems worldwide and instead leave the calculations and procession to dLocal. Instead of developing individual sales solutions for each country, companies can use dLocal to help them gain instant access to the 37 countries (and counting) that dLocal is available in. This gives dLocal's product a great value proposition.
To say this solution is catching on is an understatement. In Q2, dLocal's revenue grew 72% year over year to $101 million. Even more impressive is dLocal's net revenue retention rate of 157%, which means existing customers this quarter increased their usage of the service, spending $157 for every $100 they spent last year.
As a cherry on top, dLocal is also highly profitable.
Profit margins of 30% or greater are rare, but investors should take note when young, growing companies have them.
The growth path for dLocal has three parts. First, as emerging economies become more developed and e-commerce becomes more prevalent, dLocal's use case will rise. Second, more merchants will want to expand their global footprint. Finally, existing companies will expand their spending by adopting additional solutions and countries.
dLocal has a considerable growth runway, and it's certainly a stock that could provide massive returns over time, helping investors reach that million-dollar goal by retirement.