Which stocks will be big winners? That isn't an easy question. Sometimes, the stocks that are the stars of today could become the duds of tomorrow.
However, that's not always the case. Some stocks have special qualities that give them an advantage both in the present and in the future. I predict that these three stocks could trounce the market over the next five to 10 years.
1. Mastercard
Mastercard (MA 0.49%) is lagging behind the S&P 500 a little so far in 2023. However, it's a much different story over the last five- and 10-year periods, as Mastercard delivered much higher returns than the overall market.
NYSE: MA
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I think that Mastercard will extend its market-beating record over the coming years. The company's competitive position stands out as one big reason why. Along with Visa, Mastercard enjoys a duopoly in the credit card payment processing market. The company has a well-known brand that consumers, banks, and merchants trust.
Mastercard's financials are rock-solid. A company that has generated free cash flow of more than $10 billion and a return on invested capital of 46% over the last 12 months is one that's in a strong position to make investors happy campers in the future.
What I especially like about Mastercard, though, is the long-term trends that work in its favor. E-commerce should continue to grow. Customers will almost certainly continue to shift from cash to digital payments, even when shopping at brick-and-mortar stores.
The middle classes should expand in emerging nations, further driving credit card use. Mastercard won't be the only beneficiary of these tailwinds, but I fully expect it will be one of the biggest winners.
2. TransMedics Group
Don't look now, but TransMedics Group (TMDX 1.31%) could be in the process of making one of the best comebacks of the year. Shares of the medical technology company had fallen nearly 40% year to date by late October. The stock has skyrocketed since then, though, thanks to the company's blowout third-quarter results.
NASDAQ: TMDX
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I believe that the case for TransMedics is simply too compelling to ignore. The company's Organ Care System (OCS) preserves donor lungs, hearts, and livers while they're in transit. With the current standard -- cold storage -- a shocking percentage of donor organs (82% for lungs) don't make it to the intended recipients. OCS boosts utilization rates to over 80% and significantly lowers post-transplant complications.
Another big problem with organ transplants has been the lack of availability of airplanes to transport organs across the country. TransMedics is solving this problem. The company recently acquired flight charter operator Summit Aviation and is building a national aviation unit exclusively dedicated to transporting donor organs.
TransMedics is the only company with a multi-organ platform approved by the U.S. Food and Drug Administration (FDA). It's steadily removing all of the barriers to successful organ transplantation. With a market cap of around $2.3 billion and a multibillion-dollar market opportunity, I think the stock will handily outperform the S&P 500 over the next few years.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX +9.82%) continues to beat the market in 2023 -- just as it has done in recent years. The big biotech's cystic fibrosis (CF) franchise has driven this success. Vertex markets the only therapies that treat the underlying cause of the rare genetic disease.
NASDAQ: VRTX
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But Vertex's CF drugs aren't the main reason why I'm confident the stock will trounce the market going forward. I think the company's expansion beyond CF will generate tremendous growth over the next decade and beyond.
Vertex doesn't have to wait very long for that expansion to begin with a bang. The FDA should announce its approval decision for exa-cel in treating sickle cell disease by Dec. 8, 2023. The agency's PDUFA date for the gene-editing therapy in treating transfusion-dependent beta-thalassemia is set for March 30, 2024.
Exa-cel could be just the first of several blockbuster drugs on the way for Vertex. The company hopes to move forward with the regulatory approval process for non-opioid pain drug VX-548 next year. It's evaluating inaxaplin in a pivotal study targeting APOL1-mediated kidney disease, a rare disorder that affects more patients worldwide than CF does.
And there's more. Vertex is the leader in developing a potential cure for type 1 diabetes (T1D). Its pipeline already includes three T1D programs in clinical testing.
