Are you truly ready to dive into a handful of stocks and then sit on them for years -- maybe even decades -- in search of future fortune?
It's OK if you aren't. For some people, navigating the market's every twist and turn and perpetually looking for the next hot stock is just their jam. For others, though, buying and holding the right growth stocks makes the most sense.
Here's a closer look at four buy-and-hold growth stocks capable of dishing out triple-digit gains over the course of the next 10 to 20 years.
1. Microsoft
Microsoft (MSFT 1.82%) is of course the centerpiece of the personal computer market. GlobalStats estimates Microsoft's Windows operating system is installed on two-thirds of the world's actively used PCs, making the company the top gatekeeper (of sorts) for people's access to the internet.
Microsoft is so much more than Windows these days, however. Its cloud computing arm now accounts for 23% of the world's cloud computing revenue, according to numbers from Synergy Research, and it's outgrowing all others on this front. The software giant also still commands a huge piece of the office productivity market now that cloud-based Office 365 is available at a nominal cost. The Xbox video gaming ecosystem is a Microsoft product as well. Then there's the ancillary business support services most people never see, or even think about.
The point is, the world is highly dependent on Microsoft, and not too terribly interested in venturing into less-known and less-proven platforms.
Evidence of this claim lies in its results. Not once since late-2017 has the company failed to drive year-over-year quarterly revenue growth of some degree, even including the early days of the COVID-19 pandemic. Operating income growth has been almost as reliable. Credit the relatively young business model of renting rather than outright selling access to much of its software, which generates consistent and predictable sales.
MSFT Revenue (Quarterly) data by YCharts
Both the top and bottom lines are running into economic headwinds now. But, Microsoft being what it is, there's little reason to doubt it will be able to push through this one as it has all the others.
2. Broadcom
When most investors think of the microchip business, high-profile companies like Intel and Nvidia come to mind. And to be fair, both are important to the industry. If there was one overlooked name in the business you'd desperately miss were it to close shop, however, it would arguably be Broadcom (AVGO 3.84%).
See, while Broadcom doesn't make computer processors or graphics cards, it does make semiconductors found in everything from fiber-optic networking equipment to ethernet adapters to Wi-Fi chips to data storage controllers. Its customers include data centers, technology-driven factories, and telecom service providers, just to name a few.
There's a trade-off investors need to consider. That is, while companies like Nvidia or Intel regularly report sales and earnings growth well into the double digits, Broadcom doesn't. For perspective, this year's expected top-line growth of less than 8% and next year's projected growth of under 7% are more or less the current norm. That's not exactly compelling.
The trade-off may well be worth it, though. Broadcom's sales are reliably in that single-digit range from one year to the next, whereas companies such as Intel and Nvidia are one developmental misstep or one economic downturn away from a major sales setback. That's just the nature of being at the cutting edge of any technology business, which isn't where Broadcom operates. Broadcom makes somewhat simpler chips used in commonly purchased equipment, but it's still the powerhouse of that proven arena.
3. Amgen
While they may know the name, most investors would be hard-pressed to name a single drug that pharmaceutical company Amgen (AMGN 0.22%) makes. And the company likes it that way.
To fully understand why this is the case, however, you have to use another pharma name as an example of what not to do.
Kudos to pharma outfit AbbVie (ABBV -4.58%) for having the foresight and research and development acumen to turn the once-overlooked arthritis treatment Humira into one of the world's best-selling drugs. There's a clear downside to developing a blockbuster drug, though. That is, it's easy to become too reliant on that single drug's sales. Sooner or later patent protection expires, upending that revenue. For AbbVie, the end of Humira's patent protection is already taking a big bite out of what as recently as last year accounted for over one-third of its sales. The drug's revenue is expected to fall 27% in Abbvie's second quarter and fall 37% for the full year.
Amgen doesn't have this problem. No single drug makes up more than 16% of its total sales, while most of them account for less than 5% of its total top line.
Don't confuse this lack of flagship drugs as developmental weakness. It's by design. Amgen thinks about its pipeline and portfolio very carefully, limiting it to investments that make good fiscal sense. Indeed, it may be one of the most disciplined names in the business, making Amgen one of the market's best bets for long-term investors looking to build a nice retirement fund.
4. Lam Research
Last but not least, add Lam Research (LRCX 2.65%) to your list of growth stocks with the potential to grow into a five-bagger by the time you retire.
If you're old enough, you've probably heard the one about how the gold rush of 1849 enriched the people selling pickaxes far more than it rewarded actual gold prospectors. In many ways, the same idea applies to Lam Research. It's not a semiconductor company. Rather, it offers semiconductor manufacturing tools to the tech companies that do such fabrication work, offloading much of the risk of being involved in the chip business.
And it's more than up to the task. Whether a foundry is looking to etch, strip and clean, or measure a wafer, Lam Research can deliver.
Lam's also perpetually getting better. Its recently unveiled Coronus DX bevel deposition solution (needed to prevent contamination in the silicon wafer fabrication process) is the industry's first of its kind, and will overcome the key challenges that are surfacing following the rise of next-generation 3D NAND and logic microchips.
Or if you're not a chip techie, Lam Research's new Coronus DX solution makes it easier to manufacture defect-free chips.
For investors, however, the big takeaway is that Lam is one of only a few players in the foundry support part of the semiconductor business that's set to keep growing. Business consulting outfit McKinsey & Company estimates the worldwide semiconductor business will be worth $1 trillion by 2030, up from 2021's $600 billion. If artificial intelligence is to become everything it's suggested to eventually become, though, that outlook may be far too modest.
