Which is better: growth stocks or value stocks? Well, over the last 20 years, the answer is pretty clear -- growth stocks.
Simply compare the nearly 20-year performance of the Vanguard Growth ETF and the Vanguard Value ETF. A $10,000 investment in the value ETF would have grown to almost $46,000 today. That's not too shabby -- but it doesn't hold a candle to a $10,000 investment in the growth ETF, which would be worth over $68,000.
VUG Total Return Level data by YCharts
So, where should investors look for long-term buy-and-hold growth stocks? Well, here are four worth considering.
Image source: Getty Images.
1. Adobe
First up is Adobe (ADBE 0.97%), the maker of iconic software titles such as Photoshop, Illustrator, and Adobe Acrobat.
The company, which is valued at $252 billion, is already a megacap stock and America's 24th largest company by market cap. However, what should appeal to investors are its healthy fundamentals.
In its most recent quarter (the three months ending on Sept. 1), Adobe reported stellar results. Highlights included:
- The company earned $4.9 billion in revenue, up 10% from a year earlier.
- Diluted earnings per share (EPS) increased to $3.05, up 26% year over year.
- Operating margin grew from 33% to 35%.
What's behind the great numbers? In part, it's Adobe's innovative use of artificial intelligence (AI). The company has quickly integrated AI-enabled features into some of its software offerings, such as generative text, image creation, and visual editing.
These new features will likely ensure that Adobe software will remain the best-of-breed choice for creative professionals. And that means growth-oriented investors would be wise to buy and hold Adobe shares.
2. Shopify
Next up is Shopify (SHOP 1.78%), the Canadian e-commerce platform.
NASDAQ: SHOP
Key Data Points
Let me be clear: Shopify stock isn't for every investor. Shares are extremely volatile and plunged nearly 75% in calendar year 2022. That said, Shopify stock remains worth considering -- if you're willing to buy and hold.
That's because the company is still early in its life cycle and is focused on growth -- and lots of it. Indeed, as of its most recent quarter (the three months ending on June 30), Shopify reported $1.7 billion in revenue, an increase of 31%. That rate of revenue growth is hard to find and difficult to sustain, but the company still expects sales growth of around 25% through the end of this year.
Bear in mind, the company generates revenue by selling services to its e-commerce business partners, so a consumer slowdown or recession could lead to a real slowdown in growth. However, for investors willing to stick with the company despite potential macroeconomic headwinds, the company's long-term prospects make it a name to remember.
3. Costco
The third growth stock worth buying and holding forever is Costco Wholesale (COST +1.17%). This iconic consumer brand is famous for its giant warehouses filled with a wide range of products, from jeans and televisions to tires and pumpkin pies. However, the real key to this company's success is its membership program, which boasts more than 127 million members.
That enormous customer base makes Costco one of America's largest companies by sales, having generated more than $242 billion in revenue over the last 12 months. Moreover, it's growing revenue at a clip of nearly 10% year over year.
COST Revenue (TTM) data by YCharts
And while the company's fundamentals are first-class, potential investors will have to pay up for a share of the profits. Shares trade at a price-to-earnings multiple of 40 -- roughly 2.5 times the long-term average for the S&P 500.
Nevertheless, sometimes you have to pay more for quality. Given Costco's large and loyal customer base, along with its strong financials, growth-oriented investors should still consider adding Costco shares for the long term.
4. Alphabet
Finally, Alphabet (GOOG 1.53%) (GOOGL 1.60%) rounds out the list of growth stocks worth buying and holding forever.
NASDAQ: GOOG
Key Data Points
As the parent company of Google and YouTube, Alphabet already has established, iconic, and highly lucrative brands. Indeed, the company is estimated to handle roughly 92% of search engine traffic globally, leading to astonishing advertising revenue.
In its most recent quarter (the three months ending on June 30), the company's Google Search segment reported almost $43 billion in revenue. For context, that's almost $8 billion more revenue than Starbucks generated over the last 12 months.
And that's to say nothing of the company's fastest growing segment: Google Cloud. That segment is the third-largest cloud services provider and generates about $32 billion in annual revenue -- roughly equivalent to Netflix's total sales over the last 12 months.
In short, Alphabet is a true giant with plenty of room left to grow and a stock any growth-oriented investor would be wise to consider holding forever.
