The stock market has been a topsy-turvy place to put your money in recent years. You may remember the Nasdaq Composite index soared 74% from the beginning of 2020 through the end of 2021. Then it collapsed by 33% in 2022.
Buying growth stocks and then letting them go at the first sign of trouble makes it nearly impossible to realize a positive return. Conversely, most investors who took a long-term approach to growth stock investing have come out miles ahead since the beginning of the COVID-19 pandemic. The Nasdaq Composite index as a whole has climbed 53% since the end of 2019, and it's up 185% over the past seven years.
Image source: Getty Images.
These two stocks have seen their share of ups and downs, but the advantages their unique businesses have over potential competitors could allow profits, and in turn their stock prices, to outperform benchmark indexes and rise fivefold before the end of the present decade.
Etsy
Etsy (ETSY 0.34%) has seen a lot of ups and downs in recent years, and investors who bought the stock at its peak in 2021 are still down by about two-thirds. On a longer time frame, though, shares of the online marketplace for unique items and handcrafted goods have more than tripled since its initial public offering in 2015.
In addition to its eponymous two-sided marketplace, Etsy also owns Reverb. Musicians and independent retailers throughout North America and beyond rely on Reverb's marketplace.
Unlike practically every other e-commerce platform on the internet, Etsy and Reverb don't need to forecast consumer trends. Individuals and independent retailers with a passion for their artwork, instruments, or recording gear gladly accept that risk themselves.
The first quarter of 2023 wasn't an easy one for e-commerce platforms. eBay reported a 5% year-over-year decline in gross merchandise volume and a revenue gain of just 1%. Even Amazon reported stagnant first-quarter product sales.
Etsy recently displayed the strength of its competitive position by raising prices. Even though the gross value of merchandise sold on Etsy during the first quarter declined 4.6% year over year, the company was able to report total revenue that climbed 10.6% to $641 million. Despite higher fees, Etsy also reported an increasing number of active sellers on its platforms.
Right now, Etsy stock is trading for a reasonable 22 times forward-looking earnings expectations. Earnings might not grow in a straight line, but by 2030 there's a good chance they'll be up fivefold along with the stock price.
Vertex Pharmaceuticals
Back in 2012, Vertex Pharmaceuticals (VRTX -0.06%) first earned approval to treat cystic fibrosis patients who had a rare gene mutation responsible for the disorder. Since then it's stayed several steps ahead of any potential competition by consistently developing new combination treatments that address the dozens of known mutations responsible for the life-threatening disorder.
First-quarter cystic fibrosis product sales grew 13% year over year, and the company could have a new product line before the end of 2023. Earlier this month, the U.S. Food and Drug Administration (FDA) began reviewing an application for exa-cel, an experimental new gene therapy that Vertex is developing in collaboration with CRISPR Therapeutics.
On or before Dec. 8, the FDA is expected to announce an approval decision that could make exa-cel a new treatment option for patients with severe sickle cell disease and transfusion-dependent beta-thalassemia. Patients with these diseases currently rely on blood transfusions, but a single course of treatment with exa-cel could allow them to produce viable red blood cells on their own.
Shares of Vertex have been trading at 23.8 times earnings expectations, which is more than fair given the company's position in the cystic fibrosis space. With exa-cel and more experimental drugs headed for commercialization stages, this stock has a pretty good chance to deliver a fivefold gain by 2030.
