With decades ahead of them before they reach retirement age, investors in their 30s shouldn't be shy about adding a few high-risk growth stocks to their portfolios. While stocks that fit that description tend to come with much more short-term volatility, well-selected companies that have the potential to grow quickly for years can, over time, turbo-charge a portfolio's returns.
With that in mind, we reached out to a trio of our Foolish contributors and asked each of them to share a stock that they thought made an ideal choice for investors with ultra-long time horizons. Read on to see which stocks they highlighted, and to see if you think any of them deserve a spot in your portfolio.
Matt DiLallo: If you're like me and still have three decades to go until retirement, the primary focus of your portfolio should be on growing wealth. In order to accomplish that goal, you should hold a couple of companies that are innovative and using technology to fundamentally change an industry for the better. One such company is BofI Holdings (NASDAQ:BOFI), which is the holding company for the Bank of the Internet, among other Internet-based financial entities.
The company aspires to be the most innovative branchless bank in the country by leveraging technology to lower costs and upset the apple cart of the massive banking sector. It has had a lot of early success: The company is a top quartile performer in its peer group on key banking metrics like return on equity and return on average assets. Meanwhile, its business model is more profitable because of its lower costs, driving 30% compound annual earnings-per-share growth since 2011.
With only $6.7 billion in assets, BofI Holding has an enormous growth runway ahead of it, given that some of its brick-and-mortar peers have balance sheets that exceed $2 trillion. In particular, the company's technology-based model is well suited to make it the bank of choice for millennials and other tech-savvy individuals. It's that blend of innovation, profitability, and compelling upside that makes it a stock to consider if your portfolio has a long way to grow before you'll reach retirement.
Brian Feroldi: With home entertainment options getting better each year, movie theater operators are being forced to step up their games and offer patrons experiences that can't be matched in their living rooms. That fact is causing more and more of them to turn to IMAX's (NYSE:IMAX) unique offerings to help them bring customers back for more. The company's oversized screens and unique projection capabilities deliver a movie experience that can't be replicated anywhere else.
With a tailwind like that in place, it's no wonder that the company continues to grow quickly. IMAX's worldwide screen total is now 1,061 -- up 154 screens in 2015 alone -- and the company expects to bring at least another 135 screens online in 2016.
Growing its screen count is key, as not only does the company benefit from straight system sales, it also keeps a portion of total ticket sales from movie operators who sign up for its joint revenue-sharing agreements. Those arrangements are a win-win, as they lower the installation cost for the theater operators, and at the same time give IMAX an opportunity to pull in recurring revenue.
This model has hugely benefited IMAX's financials as the company continues to scale its operation. That's allowed it to become more profitable over time, as evidenced by its margin expansion.
While overall results will be lumpy from quarter to quarter -- mega hits like Star Wars only come along every few months -- as long as the company continues to open up new theaters to its networks, then its top and bottom lines should both head higher over time. That's why I think this stock is a great choice for investors with a long-term time horizon.
Evan Niu, CFA: If you're in your 30s, then chances are, you have a pretty long time horizon for equity investments. The benefits of that are numerous -- everything from the ability to take advantage of compound growth or dividends over time, to being able to withstand the volatility associated with growth-oriented stocks.
The chances are also pretty good that you're a millennial (like me). It's always good to start investing by concentrating on companies and brands that you're familiar with, especially if you're a customer of them.
Netflix (NASDAQ:NFLX) is a great stock that fits all of these criteria. Millennials are more likely to have cut the cord and rely on over-the-top streaming services than any other demographic. A study last year from NATPE and CEA found that Millennials value Netflix far more than broadcast or cable. Traditional cable packages simply don't appeal to us like they used to, and the number of alternatives grows every day.
At the same time, Netflix is very much a volatile growth stock. Shares trade at over 350 times earnings and 6.3 times sales -- well into growth territory. The video streamer still has plenty of opportunities to grow in the years ahead as it continues to push internationally. Just this year, it announced a massive expansion into 130 new markets. Funding that growth will be costly, but well worth it. Netflix also continues to differentiate itself by growing its library of original content.
If you're willing to hold on for the ride, Netflix could deliver for years to come.
Brian Feroldi owns shares of BofI Holding, Imax, and Netflix. Evan Niu, CFA owns shares of Netflix. Matt DiLallo owns shares of BofI Holding and Imax. The Motley Fool owns shares of and recommends BofI Holding, Imax, and Netflix. 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.