Long-term investing is the most straightforward way to build wealth in the stock market. Most of the market's gains come from a relatively small portion of stocks. Finding, buying, and holding exceptional companies can remarkably affect your investment returns.
Ironically, you don't need to find the next big thing to strike it big. Here are four companies you may already be familiar with today. These winners have proven themselves and still have plenty of long-term growth potential to merit a long-term place in your portfolio.
1. Amazon
E-commerce has become a way of life for American consumers, and Amazon (AMZN 3.43%) is arguably the biggest reason why. The company began selling books online in the late 1990s, but today it sells virtually anything you can think of and commands nearly 40% of all e-commerce sales in the United States.
Amazon's business has steadily expanded to new markets, including a cloud computing segment, advertising, entertainment, and more. The company will soon enter the automotive business, selling vehicles online late next year.
The company's massive size and willingness to seek new growth opportunities are a powerful one-two punch. Analysts believe Amazon's earnings per share (EPS) will grow by an average of 27% annually, making it a compelling long-term stock to own.
2. Visa
Cash has become a dated form of payment thanks largely to payment cards and networks like Visa (V -0.23%). The company's payments network is the largest in America and globally. It makes money by charging merchants a small fee whenever a customer uses a Visa-powered credit/debit card or digital wallet. You could think of Visa as a tollbooth, collecting from all the transactions traveling on its highway-like network.
Visa is one of the best companies equipped for inflation because its fees are based on a percentage of the transaction amount. In other words, if inflation raises prices, Visa's revenue grows. The company is extremely profitable because revenue grows faster than its costs to maintain the business. Roughly $0.60 of every revenue dollar ends up as free cash flow.
Analysts believe the company will grow earnings by 14% annually, on average, so there is still juice left to squeeze from this financial powerhouse.
3. Uber Technologies
Ride-hailing is still a relatively new industry, having started in 2009 when Uber Technologies (UBER -0.38%) launched its app. Today, Uber dominates ride-hailing in the U.S., with roughly 75% of the market -- competitor Lyft has the remaining quarter. The company spent years losing money, which has led people to question the stock.
However, Uber has turned a major financial corner in recent years. Today, it is producing billions in cash flow, and analysts are giddy about the company's future earnings growth, calling for annual growth averaging 68% over the coming years. The company's massive market share acts as a distribution network to quickly ramp up new services, like freight and business services, car rentals, and food delivery.
4. Chipotle Mexican Grill
Successful businesses don't need to be complicated. Chipotle Mexican Grill (CMG 2.41%) has turned beans and rice into a multi-billion-dollar empire through crisp execution and branding, creating a dedicated customer following. Chipotle owns its restaurant locations and has followed a growth strategy of reinvesting its profits to open new stores. Today, the company has approximately 3,321 locations.
That leaves plenty of room for more. Will Chipotle someday catch up to McDonald's at over 38,000 worldwide? Maybe not, but it can certainly open up stores for years without worries about oversaturating the market.
Additionally, the company dedicates a chunk of profits to share repurchases, further growing EPS. Chipotle has lowered its outstanding shares by nearly 16% since its IPO. That winning recipe, along with expected 23% average annual earnings growth, make Chipotle another stock you can buy and hold.
