In this article, we will take a look at 10 stocks that can potentially make you rich in 5-10 years.
According to SPIVA research, only 15% of actively managed funds can outperform the S&P 500 Index in the long run. Selecting the best long-term stocks is not an easy task and requires an in-depth understanding of the stock market and macroeconomic developments. The statistics are more unfavorable for average investors, who have generated a modest annualized return of 1.9% from 1998 to 2018, in comparison to the S&P 500’s gain of 5.6% during the same period.
The primary reason an average investor underperforms the broader market is their high level of risk aversion towards investing in a bearish market. On the other hand, legendary investors like Warren Buffett take phases of economic uncertainty as an opportunity to build stakes in the best long-term stocks at cheap valuations. Occidental Petroleum Corporation (NYSE:OXY) is the most recent example of how Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK-B) has built up a 20% stake in the company and even received the go-ahead from the regulators to buy up to half of the company. The most recent purchase of 5.99 million shares for nearly $352 million between September 26 and September 28 took place after the Houston, Texas-based energy company lost more than 20% of its value in the previous month due to the broader market decline. Mr. Buffett not only owns over 20% of the outstanding shares of Occidental Petroleum Corporation (NYSE:OXY) but also owns $10 billion worth of preferred shares of the company that generates $800 million in dividends annually.
For investors looking to get rich in the next five to 10 years, they should look at the best long-term stocks that are either at the inflection point from the bottom or at the start of a cyclical trend. While big-cap companies like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL) offer security, in the long run, there are many small companies that have the potential to expand significantly in the next decade, and generate exponential returns for the investors.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
The companies selected are relatively small entities that offer handsome potential upside to the investors due to their growth outlook over the next 5-10 years. These companies have been shortlisted as the best long-term stocks due to strong business fundamentals and expansion plans. Insider Monkey’s database of 895 hedge funds as of Q2 2022 was utilized to rank the stocks according to the level of hedge fund ownership. Please keep in mind that these are the author’s stock picks. Insider Monkey’s official stock picks are different than these stocks and can be seen in its monthly newsletter.
10 Stocks That Will Make You Rich In 5-10 years
10. HighPeak Energy, Inc. (NASDAQ:HPK)
Number of Hedge Fund Holders: 4
HighPeak Energy, Inc. (NASDAQ:HPK) is a Fort Worth, Texas-based oil and gas exploration and production company founded in 2020.
Energy stocks like HighPeak Energy, Inc. (NASDAQ:HPK) are expected to provide more upside to investors as crude oil prices have bounced significantly after the members of OPEC+ decided to cut crude oil production to stabilize prices. This was the first significant cut in production by the cartel in the past two years. In such an environment, HighPeak Energy, Inc. (NASDAQ:HPK) is expanding its production efforts to capitalize on the rising demand. The company has acquired over 14000 acres in the last few months to increase high-margin oil production.
HighPeak Energy, Inc. (NASDAQ:HPK) has a trailing twelve months (ttm) EBITDA margin of 77.3% as opposed to the sector average of 25%. The company is expected to record a 295% YoY increase in profit in 2022, followed by a 129.7% rise in 2023. Strong fundamentals and high-profit margins make HighPeak Energy, Inc. (NASDAQ:HPK) one of the best long-term stocks to own.
9. InvenTrust Properties Corp. (NYSE:IVT)
Number of Hedge Fund Holders: 10
InvenTrust Properties Corp. (NYSE:IVT) is a Downers Grove, Illinois-based real estate investment trust (REIT). The company has 62 shopping malls in its portfolio, with an occupancy rate of 95.4%. InvenTrust Properties Corp. (NYSE:IVT) is focused on acquiring land and developing grocery-anchored or shadow-anchored shopping malls in the fast-developing Sun Belt region.
InvenTrust Properties Corp. (NYSE:IVT) is a defensive nature business that can easily weather the storm of a recession. Five of the top ten tenants of the company are grocers, and the company generates 20% of the annual rent from grocers and drug stores. These stores provide necessities and are very less likely to face a shutdown due to an economic slowdown.
Experts have a favorable outlook on InvenTrust Properties Corp. (NYSE:IVT) as one of the best long-term stocks. The company’s funds from operations (FFO) growth has been robust, with a 27% YoY increase in the core FFO per share in Q2. Furthermore, the management is forecasting a 4-5% growth in net operating income in 2022.
Third Avenue Management shared its outlook on InvenTrust Properties Corp. (NYSE:IVT) in its Q4 2021 investor letter. Here’s what the firm said:
“During the quarter, the Third Avenue Real Estate Value Fund entered into such a transaction by purchasing the common stock of InvenTrust Properties at prices below where the company had offered to repurchase shares via a tender offer. However, unlike traditional “risk arbitrageurs”, Fund Management’s intentions were to forego the buyback in anticipation of more value being recognized as the management team executed on its business plan for this recently listed business.
Founded in 2004, InvenTrust Properties Corp. (“InvenTrust”) historically operated as a privately-held Real Estate Investment Trust (“REIT”) that invested in a diverse set of commercial properties. However, the entity seemingly initiated a process to create liquidity for its investor base around 2015 when it internalized its management agreement with Inland Real Estate Group and subsequently spun-off its hotel assets (Xenia Corp.) and office properties (Highland REIT) into separate companies. The remaining shopping center portfolio served to form the InvenTrust platform, which was finally listed as a publiclytraded REIT during the quarter.
At the time of the listing, InvenTrust controlled nearly 10 million square feet of predominantly grocery-anchored retail properties that were approximately 93% occupied and located in select Sunbelt markets including Austin, Miami, Raleigh, and Tampa. The company also had very modest debt levels allowing it to launch a “tender offer” to purchase up to 4.0 million shares to support the transition to the public markets…” (Click here to see the full text)
8. The Buckle, Inc. (NYSE:BKE)
Number of Hedge Fund Holders: 23
The Buckle, Inc. (NYSE:BKE) is a Nebraska-based fashion retail company that is present in 42 states through its 451 stores.
Buckle, Inc. (NYSE:BKE) is experiencing growth across multiple segments and working on lowering its dependence on other stores operating in its retail space. The denim segment is leading the business and contributing 40% to the company’s top line as of 2022. The Buckle, Inc. (NYSE:BKE) is planning to open five new stores in 2022, in line with its expansion plans.
The Buckle, Inc. (NYSE:BKE) has generated a return on capital employed (ROIC) of 29% in the last twelve months. Furthermore, the stock also offers an annual forward dividend yield of 3.56% as of November 8.
Miller Value Partners also shared a positive stance on The Buckle, Inc. (NYSE:BKE) in its Q2 2022 investor letter. Here’s what the investment management firm said:
“Another name with a nice dividend yield, attractive valuation and significant shareholder alignment is clothing retailer The Buckle (NYSE:BKE). Based in Omaha, NE, management owns almost 40% of the company and is shifting its focus to online sales. The company is very well run and has been onto something for a long time. In each of the last 27 consecutive calendar years, The Buckle has generated positive free cash flow (not “adjusted” free cash flow), something that few companies can say. Despite this track record, the company trades at a trailing free cash flow yield in the teens with a rock-solid balance sheet, in our opinion, and a highly aligned management team in Warren Buffett’s backyard.”
7. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Holders: 39
Discover Financial Services (NYSE:DFS) is a Chicago, Illinois-based financial services company that came into being following its spin-off from Morgan Stanley in 2007.
Discover Financial Services (NYSE:DFS) operates an efficient online bank and is also home to two notable payment gateways. The first is the credit card network that competes alongside American Express Company (NYSE:AXP), Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V). The corporation also owns the Pulse payment network, which is an interbank electronics fund transfer system. In a research note issued on September 26, Kevin Barker at Piper Sandler gave Discover Financial Services (NYSE:DFS) an Overweight rating and a target price of $124. Experts believe that the credit card business fundamentals remain strong for Discover Financial Services (NYSE:DFS)
Discover Financial Services (NYSE:DFS) has experienced stable dividend growth over the last ten years, with the quarterly dividend per share expanding at a compound annual growth rate (CAGR) of 11.6%. The stock offers an annual forward dividend yield of 2.38% as of November 8. Discover Financial Services (NYSE:DFS) has maintained solid loan performance with decent delinquency rates this year despite the economic uncertainty. Analysts think the company’s consistent performance makes it one of the best long-term stocks to buy.
As of Q2 2022, Discover Financial Services (NYSE:DFS) was held by 39 hedge funds.
6. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 40
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is an Israel-based provider of residential, commercial, and large-scale photovoltaic (PV), energy storage, and backup solutions.
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is a key beneficiary of the Inflation Reduction Act (IRA). There is a wide belief that the legislation will ensure rapid decarbonization of the US economy and that companies like SolarEdge Technologies, Inc. (NASDAQ:SEDG) will pave the way toward clean energy. This will result in superior shareholder returns.
In an investor note published on August 8, Mark Strouse at JPMorgan increased the target price for SolarEdge Technologies, Inc. (NASDAQ:SEDG) from $373 to $419 and maintained an Overweight rating on the stock. The significant upward revision in target price was due to the expected impact of the IRA on the transition towards renewable energy. SolarEdge Technologies, Inc. (NASDAQ:SEDG) is expected to capitalize on the changing trends and increase its market share in the coming years, making it one of the best long-term stocks to have in your portfolio.
ClearBridge Investments discussed its outlook on SolarEdge Technologies, Inc. (NASDAQ:SEDG) in its Q2 2022 investor letter. Here’s what the firm said:
“We are well-positioned to participate in the accelerating energy transition. High and rising utility costs combined with policy support are driving increased penetration of home solar plus storage systems in Europe. Israel-based SolarEdge Technologies (NASDAQ:SEDG) expects to see significant growth in solar installations in this market led by Germany and Italy, among others, where consumers are not only demanding solar on the roof but a complete system solution including batteries. This phenomenon is accelerating revenue growth for these companies.”
In addition to popular stocks like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), growing companies like SolarEdge Technologies, Inc. (NASDAQ:SEDG) also offer an opportunity to earn strong returns over the next decade.
5. Tractor Supply Company (NASDAQ:TSCO)
Number of Hedge Fund Holders: 41
Tractor Supply Company (NASDAQ:TSCO) is a Brentwood, Tennessee-based provider of agriculture, home improvement, livestock, and pet care-related products through a network of retail stores.
Between 2012 and 2021, Tractor Supply Company (NASDAQ:TSCO) saw its revenue per store expand by 50% while the total number of stores rose by 85%. Furthermore, the company has also seen its dividend grow consistently over the last 13 years. The stock’s annual forward dividend yield stands at 1.78% as of November 8. Analysts believe that Tractor Supply Company (NASDAQ:TSCO) can be termed as one of the best long-term stocks due to the company’s quality of operations and the successful execution of targets.
In a research note issued on August 19, Brian Nagel at Oppenheimer gave Tractor Supply Company (NASDAQ:TSCO) stock an Outperform rating with a target price of $270. The proposed target price reflects a potential upside of over 37% from the closing price as of November 8. The analyst believes that the short-term weakness in share price gives an attractive opportunity to go long on Tractor Supply Company (NASDAQ:TSCO).
Wedgewood Partners shared its outlook on Tractor Supply Company (NASDAQ:TSCO) in its Q4 2021 investor letter. Here’s what the firm said:
“Tractor Supply contributed favorably to performance during the quarter. Demand from the Company’s niche, affluent rural customer base continues to surge in a post-COVID world with comparable store sales running over +40% higher compared to pre-pandemic (2019) levels. Tractor Supply is seeing growth across all channels, from its website to e-commerce that is fulfilled by its 2000-store fleet to regular in-store traffic. The Company is also managing inflation and supply chain disruptions extremely well, passing through nearly +7% of inflation on consumable goods and managing a quarterly inventory in-stock rate that was actually higher than pre-pandemic. Tractor Supply is an exceptional retailer, and we continue to hold it as a top position.”
4. Marriott International, Inc. (NASDAQ:MAR)
Number of Hedge Fund Holders: 46
Marriott International, Inc. (NASDAQ:MAR) is a Bethesda, Maryland-based operator of one of the biggest hotel chains globally. The company has over 8,000 properties and a portfolio of over 30 brands, such as Ritz-Carlton, Sheraton, and Westin in its portfolio.
On September 15, Stuart Gordon at Berenberg upgraded Marriott International, Inc. (NASDAQ:MAR) stock from a Hold to a Buy rating and also increased the target price from $165 to $185. The analyst is seeing rapid recovery in the lodging sector that is yet to be reflected in Marriott International, Inc.’s (NASDAQ:MAR) stock price. Gordon anticipates a strong increase in the company’s revenue per available room (RevPAR) in 2023 despite the possibility of a recession looming.
Marriott International, Inc. (NASDAQ:MAR) offers an annual payout of $1.20, translating into an annual forward dividend yield of 0.81% as of November 8. The company’s strong cost control and higher demand for services are expected to give a significant push to operational efficiency in the following years. These factors have led many to see Marriott International, Inc. (NASDAQ:MAR) as one of the best long-term stocks in the market currently.
In its Q1 2022 investor letter, Aristotle Capital Management presented its outlook on Marriott International, Inc. (NASDAQ:MAR). Here’s what the firm said:
“Marriott International outperformed in the first quarter following a better-than-expected earnings report for the company’s fourth quarter of 2021. During the pandemic, the company reduced expenses which improved operating leverage as revenue recovers. Expectations for travel in 2022 have improved as COVID cases have declined. The company has a strong pipeline of new hotels coming into the Marriott system. There are some indications that business-related travel is starting to recover.”
3. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 51
Dollar General Corporation (NYSE:DG) is a Goodlettsville, Tennessee-based discount retailer with over 18,000 stores across 47 states in the US. The company has established its stores in sub-urban and small towns where big box retailers like Walmart, Inc. (NYSE:WMT) are not present.
In a research note issued on September 16, Matthew Boss at JPMorgan increased the target price for Dollar General Corporation (NYSE:DG) from $287 to $294 and reiterated an Overweight rating on the stock. The target price reflects a potential upside of over 20% from the closing price as of November 8. Experts believe that Dollar General Corporation (NYSE:DG) is one of the few retailers that are in a strong position to experience top-line growth and margin expansion in the future as consumers shift focus from discretionary purchases to consumables owning to the macroeconomic environment. This makes the company one of the best long-term stocks to own now.
Analysts are bullish on Dollar General Corporation (NYSE:DG) in the long term, as the firm has shown a strong acceleration in sales over the last few years. The company observed an increase in revenue to $34.22 billion in 2021 from $23.47 billion in 2017. In addition, effective cost control is likely to help Dollar General Corporation (NYSE:DG) sustain its profitability margins.
Here’s what LRT Capital Management said about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
2. RH (NYSE:RH)
Number of Hedge Fund Holders: 59
RH (NYSE:RH) is a California-based home furnishings designer and retailer with a presence in the US and Canada through its 70 locations. The company has the distinction of having Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK-B) as one of its leading investors.
Phillip Blee at William Blair resumed coverage on RH (NYSE:RH) stock with an Outperform rating on September 21. The analyst highlighted that the company reported a better-than-anticipated top line and bottom line for Q2. Furthermore, RH (NYSE:RH) has been able to capitalize on the changes in consumption trends in the last two years. There is a wide belief that RH (NYSE:RH) is in a position to experience sales and earnings growth in the long run.
Analysts think RH (NYSE:RH) is amongst the best long-term stocks due to its stable free cash flows and premium positioning in the industry. The company has a strong backlog and is also looking into tapping into a market opportunity of $20 to $25 billion globally through expansion plans in the next five years.
Here’s what Polen Capital said about RH (NYSE:RH) in its Q1 2022 investor letter:
“RH is a furniture store company with brand recognition and a unique business model. The company’s stock price fell sharply over the first three months of 2022 despite solid operating results, which resulted in what we believed to be an attractive opportunity to add to our position in the company. We are mindful that, on the margin, the company is certainly experiencing some early impact from record inflation and rising interest rates, and we feel comfortable in both the management team’s ability to navigate these challenges and the power of the company’s brand and its long-term potential.”
1. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 62
JD.com, Inc. (NASDAQ:JD) is a rising Chinese e-commerce entity that has invested the last ten years in developing a logistic infrastructure that ensures swift delivery across China.
The Beijing, China-based company controls the majority of its sales and does not operate on a marketplace model like the Jack Ma-led Alibaba Group Holding Limited (NYSE:BABA). This provides JD.com, Inc. (NASDAQ:JD) the opportunity to capture better margins and more control over the quality of its products. Although the Chinese economy is showing some signs of weakness, this is a short-term phenomenon expected to be resolved soon.
In the last five years, JD.com, Inc. (NASDAQ:JD) observed its revenue increase at a CAGR of 29.61%. The company is expected to continue seeing an expansion in sales with a CAGR of 11.6% in the next decade. Due to its strong growth prospects, JD.com, Inc. (NASDAQ:JD) is being termed as one of the best long-term stocks that investors should buy, with an outlook of five to 10 years to yield significant returns.
Coatue Management raised its stake in JD.com, Inc. (NASDAQ:JD) by 72% during Q2 2022.
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Disclose. None. 10 Stocks That Will Make You Rich In 5-10 years is originally published on Insider Monkey.
