No matter the size of your portfolio, only a handful of growth stocks can make a fortune, even if the other stocks you own end up losing. The reason is simple: growth stocks represent businesses that can consistently outperform industry averages in terms of revenue and profit growth. Investors love these companies and don’t shy away from paying a premium for stocks that can make them rotten to the rich.
The trick, however, is to identify companies with unfailing growth prospects – like the following three actions, each setting up a megatrend that should only increase.
The future of energy is here
I always recommended NextEra Energy (NYSE: SEN) as a large stock of dividend growth, but this is only because the company has huge growth prospects in a disruptive sector.
NextEra Energy started in 1925 as a traditional utility, then called Florida Power & Light, but ventured into alternative energy as early as the 1990s. In 2009, NextEra had become the largest producer of wind and solar energy in the United States. This pioneering advantage in renewable energy, coupled with aggressive growth movements, has made NextEra Energy the largest solar and wind energy company in the world today.
Image source: Getty Images.
Renewable energy is already the fastest growing energy source, with the Center for Climate and Energy Solutions designing renewable energies to generate 45% of global electricity by 2040, compared to just 26% in 2018. It doesn’t take much to understand the type of growth ahead of NextEra Energy.
NextEra Energy is, in fact, a dream stock for growth and income investors. NextEra’s adjusted earnings per share have reached a compound annual growth rate (CAGR) of 8.7% since 2005, and the dividend per share has grown at a CAGR of 9.6% since then. See how the stock fared in the middle.
NEE data by YCharts
With management aiming for a 6% to 8% growth in adjusted EPS until 2023 from a base of 2021 and 10% annual dividend growth until “at least” 2022, and with the company’s aspiration to become the ” largest and most profitable supplier of clean energy in the world “in the long run, NextEra Energy is an obvious wealth-forming stock to be acquired in the coming decades.
The sky is the limit for this industry
E-commerce is an indisputable megatrend, and Shopify (NYSE: SHOP) it is only scratching the surface, having conquered only 8.6% of the US retail e-commerce so far. The company’s exclusive sale proposal (USP) is its platform that allows merchants of all sizes to easily create digital storefronts and manage the entire sales process. From entrepreneurs to bigger brands, Shopify has something for everyone.
Over the years, Shopify has aggressively expanded its international presence; forged partnerships with big names, including Amazon.com (NASDAQ: AMZN), Facebook, PayPal Holdings, Photograph, and Pinterest, to name a few; set up payment options in multiple currencies and channels and launched its own logistics and financing arms.
Their efforts showed up in their numbers: the gross value of Shopify merchandise rose from $ 15.4 billion in 2016 to $ 119.6 billion in 2020. Revenue jumped more than seven times to almost $ 3 billion in 2020 and grew 86% last year.
While 2020 was an exceptional year for e-commerce because of the COVID-19 pandemic, Shopify is expected to continue to increase sales rapidly. This makes Shopify one of the main actions in an industry with dizzying potential.
Health has the potential to generate a lot of money
Teladoc Health (NYSE: TDOC) stocks have been hit in recent weeks, but growth stocks tend to fluctuate. The drop in Teladoc’s shares, however, had a significant catalyst: Amazon’s next launch of its own telehealth service, Amazon Care.
The financial influence, reach and power of Amazon’s brand make it a reasonable threat, but let’s not forget that Teladoc is already a global leader in the virtual care industry, registering 14 million visits across all of its channels in 2020.
In addition, telemedicine is one of the few trends that will not go away after the COVID-19 pandemic. The industry was growing rapidly even before the coronavirus crisis – 76% of hospitals in the U.S. already had a telehealth program in place by 2017, compared to just 35% in 2010, according to the American Hospital Association. Industry experts project that the market will grow by double digits in the coming years, with McKinsey & Company valuing the market value at $ 250 billion in the United States alone.
TDOC data by YCharts
Most importantly, it is a highly fragmented market that should offer Teladoc ample opportunities to expand and remain at the forefront. Advanced Medical in 2018, MedecinDirect in 2019 and Livongo Health in 2020 are just some of the notable acquisitions that Teladoc has made in recent years. The $ 18.5 billion acquisition of Livongo, in particular, could be a game changer as it expands Teladoc’s control of chronic disease management.
After a 98% growth in revenue in 2020, Teladoc projects a growth of 80% at the midpoint for 2021, with revenue reaching $ 2 billion at the upper end of its guidance range. This growth is still incredible and may well fuel the stock price.
Ultimately, what matters is that telehealth, e-commerce and renewable energy are massive megatrends, and each of these three actions has huge addressable markets to explore, which is why they all look set for such great growth.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.