There are a lot of unknowns today, which can make it difficult to invest. Uncertainty about how high interest rates will rise and whether there will be a recession in the next year can make it difficult to know how stocks will perform in the near term.
However, one factor drives stock prices in the long term: earnings growth. Companies that grow their earnings and cash flow at healthy rates for extended periods tend to produce market-beating returns. American Tower (AMT 0.35%), Blackstone (BX 1.78%), Brookfield Infrastructure (BIP 0.35%)(BIPC +0.00%), Prologis (PLD 0.60%), and NextEra Energy (NEE 0.31%) have histories of delivering above-average earnings growth and producing market-beating returns.
That should continue as they're all focused on capitalizing on strong long-term growth trends. Because of that, you could confidently invest $500 into any of them right now.
Data-driven growth
Data usage is growing exponentially, driven by long-term megatrends like the transition to the cloud, artificial intelligence (AI), the Internet of Things (IoT), and 5G. The digital economy needs more infrastructure to transmit and store all this digital information. According to one estimate, companies must invest $1 trillion over the next five years to upgrade data infrastructure worldwide.
NYSE: AMT
Key Data Points
American Tower is a leader in digital infrastructure. The infrastructure real estate investment trust (REIT) has a large-scale global tower business and a fast-growing U.S. data center platform. The company believes its platforms will continue to deliver growth and strong returns as it capitalizes on the strong tailwinds driving the need for additional infrastructure.
And that should increase utilization across its existing assets and provide new expansion opportunities. This year, it's investing $1.5 billion to build additional tower sites and expand its data center capacity, setting the stage for future earnings growth.
A megatrend investor capitalizing on a megatrend
Alternative investments, like hedge funds, private equity, infrastructure, and real estate, have historically produced higher risk-adjusted returns than the public stock and bond markets. That's driving investors to pour capital into alternatives, a megatrend that should continue. According to a forecast by investment data company Prequin, global private capital assets under management will double by 2027 to $18.3 trillion.
While institutional investors, such as pension funds and insurance companies, have been a big growth driver for alternative asset managers over the years, retail investors will be a key catalyst in the future. That plays right into the strategy of leading alternative asset manager Blackstone (BX 1.78%), which has developed several investment vehicles geared toward retail investors.
Blackstone has grown into a leader because of its differentiated investment returns. A big driver of its success is its thematic investment approach. Blackstone invests in high-conviction themes to deliver outsize returns for its clients. Data infrastructure, rental housing, logistics real estate, and hospitality are among its highest-conviction investing themes. Blackstone's thematic approach and differentiated returns position it to continue capturing a large share of the capital investors will pour into alternatives in the future.
Focused on a trio of trends
Brookfield Infrastructure operates a globally diversified infrastructure business. The company has been actively rotating its portfolio to position it for the three trends where it sees the most growth potential: digitalization, decarbonization, and deglobalization.
NYSE: BIP
Key Data Points
Brookfield has been building out its digital infrastructure platforms, including buying two data center businesses this year and funding half the cost of developing a new semiconductor chip manufacturing facility in the U.S. That latter investment also fits within its deglobalization investment theme. Brookfield believes its focus on these high-conviction areas will drive double-digit cash-flow-per-share growth over the next several years.
A leader in logistics real estate
Prologis' leading global logistics real estate portfolio positions it to capitalize on the increasing adoption of e-commerce and changing inventory management practices resulting from supply chain issues. The company has a vast land bank to support $38 billion of future value-creating warehouse developments, giving it a long growth runway.
Meanwhile, rental rates are rising sharply due to limited supply and robust demand for warehouse space. Prologis estimates a 68% gap between existing rents on its long-term leases and current market rates. That represents $2.7 billion of incremental income as legacy leases expire and reprice to market rents. This forecast suggests the income of its existing portfolio will rise 8% to 10% annually for the next several years.
Plugged into a powerful megatrend
NextEra Energy is a global leader in producing electricity from the wind and sun. That positions it to continue capitalizing on the global decarbonization trend.
NYSE: NEE
Key Data Points
The utility has a massive (and growing) backlog of wind, solar, and energy storage projects to drive growth over the next few years. Meanwhile, it's also capturing opportunities to develop new electricity transmission lines and invest in green hydrogen projects. These investments have the company on track to grow its earnings toward the upper end of its target range through 2026.
High-conviction investments
Currently, American Tower, Blackstone, Brookfield Infrastructure, Prologis, and NextEra Energy are five of my highest-conviction investments. They're all focused on capitalizing on long-term trends that should enable them to grow their earnings at healthy rates for years to come, positioning them to produce attractive returns. Because of that, investors can confidently invest $500 into any of them right now.
