The stock market has kept investors on pins and needles over the last few years, slumping at times and soaring at other moments. While 2024 is already off to a strong start, no one can predict with exact certainty what the market will do in the coming weeks and months.
If you're investing in quality businesses that can deliver growth over the long run though, you don't need to try to predict what the market will do in the short term. Market timing is a strategy that rarely brings in meaningful returns.
If you have even a relatively modest amount like $500 to invest, you can still become part owner of businesses that you find to be compelling investments. Here are two top stocks that could benefit from a bull market streak and bring in winning returns over the next five to 10 years.
1. Teladoc Health
Teladoc Health (TDOC +0.59%) isn't getting high marks from investors, with shares trading down more than 30% from the start of this year. As a shareholder in this stock over the last few years through its continued turbulence amid shifting investor sentiment, I can attest that it has been one ugly ride.
Why do I still hold onto this stock? Because I still believe in the fundamental value proposition of this business, its leadership within a vast and growing addressable market, and the growing need for solutions that this platform is ideally poised to provide to a global base of healthcare consumers.
I'm not saying this stock will be for everyone, but for investors with a well-diversified portfolio who want to capitalize on the future of the telehealth industry, Teladoc looks like it could be a vastly undervalued buy with considerable long-term potential.
And when I say long-term, I'm not talking about the next couple of years. I'm talking about the next five to 10 years. If you look at Teladoc's performance over the last few years, those steep impairment charges related to writedowns of its pandemic-era acquisitions and declining revenue don't paint a pretty picture. However, it's important to take these elements one by one.
NYSE: TDOC
Key Data Points
Those impairment charges did nothing for Teladoc's balance sheet, but they were non-cash in nature, not actual operational losses. In fact, most of the net losses recorded on Teladoc's balance sheet in the past few years have been non-cash expenses. Teladoc is also consistently shrinking its net losses, with its full-year 2023 net loss coming to $220 million compared to just shy of $14 billion in 2022.
As for the rate of revenue growth, Teladoc is at a more mature stage of its business compared to several years ago, and that pandemic-level growth trajectory was unlikely to be sustainable long-term. Still, the growth is there. In 2023, Teladoc brought in revenue of $2.6 billion, up 8% from the prior year. Operating cash flow for the 12-month period totaled $350 million, an 85% year-over-year increase, and free cash flow totaled $194 million, up 1,041% from one year ago.
If you compare that revenue figure to Teladoc's revenue in 2019, before the pandemic, that's a four-year increase of about 370%. Not too shabby. The stock itself is currently trading at a price-to-sales multiple of 0.9. Even a small investment in this stock could still pay off over the long haul for patient investors.
2. Green Thumb Industries
Green Thumb Industries (GTBIF +1.88%) is a cannabis cultivator and retailer that specializes in both medicinal and recreational products. At the time of this writing, the company has 92 retail locations open across the nation in more than a dozen different markets.
Green Thumb has heavily concentrated its operations in some of the most lucrative cannabis markets in the nation. These markets include states like Florida, the largest medical cannabis market in the country, where it just opened its 15th dispensary. It also boasts a notable presence in other key markets like Illinois, Massachusetts, Minnesota, and Nevada.
It's no secret that cannabis legislation is incredibly piecemeal in the U.S. The lack of federal legalization and the mixed legal limits for both medicinal and recreational usage across the country have created a difficult operating environment for businesses in this industry. Some are flailing. Others, like Green Thumb Industries, are slowly but surely widening their footprint in core target markets while diversifying across both medical and adult-use products.
OTC: GTBIF
Key Data Points
Green Thumb Industries bears the unique distinction of being one of the few marijuana businesses with steady revenue growth and profitability according to generally accepted accounting principles (GAAP). In 2023, the company pulled in revenue of $1.1 billion, a 4% increase from 2022.
Net income for the 12-month period came to $36 million, three times the profits it reported in the prior year. The company also brought in operating cash flow of $225 million in 2023, a notable 42% jump from 2022.
Over the trailing-five-year period, Green Thumb Industries has grown its annual revenue by 90% while annual profits have jumped 142% during that same time frame. It takes a certain level of risk appetite to invest in the marijuana space. However, if you have cash to invest as a part of a well-diversified basket of stocks, this profitable pot stock looks like a standout choice in a promising industry that is still in its nascent stages.
