There’s no question this is one of the oddest holiday seasons in history. The coronavirus disease 2019 (COVID-19) pandemic has put a halt to societal norms, disrupted the traditional work environment, and effectively stopped large family gatherings for the holidays.
Nevertheless, it remains the season of giving — and there’s no gift greater than financial freedom.
Over time, no asset class has delivered more robust returns to investors than the stock market. Based on the historic return of the S&P 500, investors are doubling their money about once a decade. Do that for 40 years, and you could return your initial investment 16 times over.
There are a number of great stocks that look poised to outperform the broader market. If you’re looking to secure your financial independence, the following five stocks could make that happen.
There’s likely no healthcare stock that offers more surefire long-term growth prospects than robotic surgical system developer Intuitive Surgical (NASDAQ:ISRG).
Over the last 20 years, Intuitive has placed about 5,900 of its da Vinci surgical systems. That may not sound like a lot, but it’s more than all its competitors combined. The company has built up incredibly strong rapport within the hospital and surgery center community, making it very unlikely that its clients will ever switch to a competing soft tissue surgical system.
Yet what really stands out about Intuitive Surgical’s business model is the company’s widening operating margin. In the company’s early years, most of its revenue came from selling its pricey da Vinci systems, which cost between $0.5 million and $2.5 million. Unfortunately, these machines have relatively low operating margins. Over time, as more systems have been installed, Intuitive Surgical’s higher-margin operating segments, such as instruments sold with each procedure and maintenance services, have grown into the lion’s share of total sales. This trend is going to continue for a long time to come.
Mastercard (NYSE:MA) is going to play a key role in the cashless society of the future.
Buying into the Mastercard story is a simple bet on U.S. and global growth. Mastercard is the No. 2 player by credit card network purchase volume in the consumption-heavy U.S. As a merchant-fee-driven business, Mastercard will benefit as the U.S. and global economies expand over time. The data is clear that periods of economic expansion last considerably longer than recessions, putting Mastercard on the right side of history.
Also, Mastercard strictly acts as a payment facilitator and not a lender. Though this reduces the amount of revenue it can generate from interest income and fees during periods of robust economic expansion, it also protects Mastercard from credit delinquencies during inevitable contractions. Mastercard’s avoidance of lending is why its profit margin is almost always above 40%.
With close to three-fourths of the world’s transactions still conducted in cash, this brand-name financial services stock has a long growth runway ahead.
Few sectors are as boring as utilities. But among electric utility stocks, none offers the long-term growth potential of NextEra Energy (NYSE:NEE).
NextEra is on the leading edge of renewable energy innovation. No electric utility in the U.S. is generating more capacity from solar or wind power than NextEra, and it’s really just getting started. The company plans to install 30 million additional solar panels in Florida by 2030 to generate another 10,000 megawatts of capacity. Assuming we see climate change initiatives come out of Washington, D.C., in the coming years, NextEra will be way ahead of the curve.
There’s also no debate that green energy projects are costly. However, this focus on renewables has driven down NextEra Energy’s generation costs. It’s also allowing it to grow by a high single-digit rate year after year.
Furthermore, historically low lending rates will continue to encourage NextEra to finance green energy projects cheaply. Utility stocks don’t get more exciting than NextEra.
Social media up-and-comer Pinterest (NYSE:PINS) also has the tools necessary to help investors achieve financial freedom.
Whereas most social platforms run into a period of slower or flattening user growth, this hasn’t been the case for Pinterest. Its monthly active user (MAU) growth tallied 30% on average between 2017 and 2019. It has picked up even more in 2020, with people stuck in their homes due to COVID-19. This is especially true in the overseas markets, where 90% of Pinterest’s net MAUs are. Although international MAUs generate much lower average revenue per user (ARPU) than users in the U.S., there’s opportunity to double overseas ad-based revenue many times over this decade.
What should really excite the long-term shareholders of Pinterest is the company’s potential to become a major e-commerce platform. Since its users are willingly sharing the products, places, and services that interest them, Pinterest can easily become the go-to medium between small businesses and motivated consumers. Pinterest has already partnered with Shopify to help its small businesses grow. It looks to be in the early innings of a major growth phase.
Don’t be fooled by its $1.61 trillion market cap — Amazon (NASDAQ:AMZN) is still very much a growth stock. It also offers game-changing upside.
As you’re likely aware, Amazon is the kingpin of U.S. e-commerce sales. Market research company eMarketer estimated in March that Amazon’s current market control of 38.7% of all online sales would expand by 100 basis points to 39.7% in 2021. That’s about 33 percentage points higher than its next-closest competitor.
Even though retail margins are nothing to write home about, being the go-to online retailer has its perks. For example, it’s helped the company land more than 150 million Prime members worldwide.
The Amazon growth story is just as much about cloud infrastructure as it is retail. Despite only accounting for 12.5% of 2020 sales through September, Amazon Web Services (AWS) is responsible for $10 billion of the company’s $16 billion in year-to-date operating income. As more small and medium-sized businesses shift online and into the cloud, AWS’ building-block cloud services will send sales and margins substantially higher. AWS is Amazon’s ticket to tripling its operating cash flow over the next four years.