Many investors take a short-term view of the stock market, seeing it as an opportunity to score quick profits in an effort to produce a meteoric rise in their wealth. Yet most successful investors understand that the biggest gains come from smart stock picks that continue to produce stellar returns year after year, turning even modest investments into big riches. As a result, it's important to try to isolate stocks that have the potential for success in the long run. To help you in your quest, below you'll find three stocks that could give long-term investors the kind of returns over the next decade and beyond that can turn your investment capital into true wealth.
Home Depot builds
Home-improvement retail giant Home Depot (NYSE:HD) has delivered impressive long-term performance for far longer than a decade, with average 24% annualized returns dating all the way back to 1985. Yet what's more impressive is how well Home Depot has responded to the housing bust and the ensuing recession in 2008. The company was able to adapt to an economic environment in which homeowners were underwater on their mortgages, emphasizing renovation projects to make homes more livable since many homeowners couldn't sell their homes to move up to higher price points.
With the housing market having recovered, Home Depot has successfully used a two-part strategy. It is still catering to do-it-yourself homeowners, but it has also built up a bigger presence among professionals needing supplies to do projects. In addition, offering its own project-based work has also helped lift Home Depot's sales. Even though the stock is at all-time highs, Home Depot's latest financials suggest that there's plenty of growth left for the retailer in the next decade.
Chipotle will get healthier
By contrast, fast-casual restaurant Chipotle Mexican Grill (NYSE:CMG) has been dealing with less-than-perfect conditions lately. Slowing comparable-restaurant sales growth has many investors convinced that Chipotle's best days are behind it. The company posted just 2.6% higher comps in its most recent quarter and predicted sluggishness throughout 2016. Moreover, a recent scare due to an e. coli outbreak has also made some investors nervous about the stock's short-term prospects.
Nevertheless, Chipotle is responding with a faster pace of store openings to accelerate its overall revenue growth. The company now believes it will open between 220 and 235 restaurants in 2016. Moreover, the potential for new store concepts like ShopHouse Southeast Asian Kitchen and Pizzeria Locale is huge. Even without comps getting back to their past levels, Chipotle could be a much bigger part of the restaurant scene by 2025.
Activision Blizzard plays harder
The video game industry has never been more competitive, but Activision Blizzard (NASDAQ:ATVI) has done a good job of making the most of opportunities in the space. With its Call of Duty, Destiny, and World of Warcraft franchises continually producing impressive sales, Activision has been able to keep its positive momentum going. Moreover, through Blizzard's partnership with Chinese video game giant Netease (NASDAQ:NTES), Activision also has its fingers in the fast-growing gaming market in China as well.
Activision just became part of the S&P 500 earlier this year, so you can see just how long it has taken mainstream investors to see the future potential in the stock. At a reasonable valuation for its anticipated growth rate, it's not too late to play Activision Blizzard for big gains in the decade to come.
Trying to trade your way to success almost always fails. Instead, it pays to focus on good stocks for the long term. These three stocks aren't sure things, but they have the potential it takes to go the distance in the next decade and beyond.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard and Chipotle Mexican Grill. The Motley Fool recommends Home Depot and NetEase.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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