Many people have the goal of becoming a millionaire before they retire. Not only is it a fun achievement, but it's also close to what many people need to maintain their lifestyle in their golden years. But if you only have a decade left before retiring, reaching millionaire status will require a lot of money (there are no shortcuts).
However, by investing in these three stocks, you can boost your returns from the market's average 10% annual return to around 12% to 13%. That will require just under $300,000 ($294,588 to be exact) to hit millionaire status. So, what are these three stocks?
Alphabet
Alphabet (GOOG 0.87%) (GOOGL 0.75%) is the parent company of Google, YouTube, and the Android operating system. Its primary business is advertising, but it also has its hands in two important industries: artificial intelligence (AI) and cloud computing.
These could be massive growth catalysts for Alphabet over the next decade. With Alphabet's latest generation of its Gemini generative AI model beating the competition on nearly every base mark test, it's sure to be a top choice for developers. Alphabet hasn't recognized any revenue from this segment yet, but it will be one to watch in the coming years.
NASDAQ: GOOGL
Key Data Points
Cloud computing has been a huge business trend in past years as companies find it easier to outsource computing resources instead of attempting to estimate what they need on-site. It's also a beneficiary in the AI trend as companies need massive computing power to develop AI models and capture and store data needed for them. Google Cloud grew 22% last quarter, making it Alphabet's fastest-growing division. With the cloud computing market expected to expand from $626 billion in 2023 to $1.27 trillion by 2028, Alphabet is operating in a massive opportunity.
Throw in Alphabet's cheap 20 times 2024 earnings stock valuation, and you've got a recipe for a company that can outperform the market by a couple of percentage points each year.
MercadoLibre
MercadoLibre (MELI +0.41%) is one of my highest-conviction stock picks. It's a leader in the Latin American e-commerce and fintech spaces and has become the combination of Amazon and PayPal in a region with twice the population of the U.S.
NASDAQ: MELI
Key Data Points
It consistently delivered incredible results from both its commerce and fintech segments, with the two delivering 76% and 61% year-over-year currency-neutral growth, respectively, in Q3. While MercadoLibre has been a massive growth machine for a while, it's also starting to improve its margin profile. In Q3, all three major profit-margin measurements increased.
| Metric | Q3 2022 | Q3 2023 | Improvement |
|---|---|---|---|
| Gross margin | 50.1% | 53.1% | 2.95% |
| Operating margin | 11% | 18.2% | 7.24% |
| Profit margin | 4.85% | 9.5% | 4.89% |
Data source: MercadoLibre.
This shows MercadoLibre's strong pricing power and its commitment to becoming a more efficient business. With the Latin American opportunity just starting, MercadoLibre should easily deliver market-crushing returns over the next decade.
Amazon
Amazon had an incredible 2023. While its growth hasn't been spectacular for most of the year, its efficiency gains have been.
AMZN Gross Profit Margin (Quarterly) data by YCharts.
This bodes well for shareholders as we are yet to see Amazon fully profitable for an entire year. Furthermore, Amazon's biggest growth engine will have a great year in 2024.
Amazon Web Services (AWS), its cloud computing wing, is a direct competitor to Google Cloud. However, with the massive $1.27 trillion market opportunity, there is plenty of room for multiple winners. Throughout 2023, many clients chose to optimize their spending with AWS. Management sees that trend slowing down, and new workloads (many related to AI) are starting to come online. This will be a welcome change of pace and should power Amazon higher in 2024.
NASDAQ: AMZN
Key Data Points
Still, Amazon's commerce segments have been doing better, with its advertising and third-party seller services growing at 26% and 20%, respectively, in Q3. Amazon is a cash-flow-generating powerhouse whose full potential we've yet to see. However, we'll experience it in the coming decade, and the stock returns should easily top 10% annually.
While all three stocks are great buys, a well-diversified portfolio comprises at least 25 stocks. Investing all of your nearly $300,000 in these stocks alone is dangerous, as one of them could be hit with an unforeseen headwind and destroy its investment thesis. But as a part of a broader portfolio, I'm confident this trio will post market-beating returns.
