Investing in the right stocks can lead to life-changing returns, especially if you have a lengthy time horizon. Compounding does its magic when you don’t touch your investment for many years. If you get an 8% return on your $10,000 investment, it becomes $10,800 at the end of the year.
However, an investor who gets an annualized 8% return over the next 30 years will turn their $10,000 into $100,626.57. That also includes the investor isn’t making any additional contributions to their portfolio. That’s why Charlie Munger said the first $100,000 is the hardest. Once you reach that level, it becomes easier to make the next $100,000 because of compounding.
Some growth stocks grow at a faster rate than 8% per year. It’s possible to find stocks maintaining annualized double-digit growth rates for over a decade. Investors looking for promising long-term opportunities may consider these enticing growth stocks.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been delivering explosive returns for several years. The stock is up by 34% year-to-date and has tripled over the past five years. Online advertising continues to attract millions of businesses and generate more revenue for Alphabet.
The advertising segment was a major reason the company reported 15% year-over-year revenue growth in the first quarter. Net income growth outpaced revenue growth, which resulted in a 29.4% net profit margin. Alphabet is trimming its workforce while delivering higher revenue growth.
Google Cloud is growing faster than the company’s advertising services. As AI tailwinds manifest themselves, the company’s cloud platform should experience elevated growth in the upcoming quarters.
Wall Street believes that AI tailwinds and other factors will result in solutions for long-term investors. Alphabet is rated as a Strong Buy with a projected 7% upside. The highest price target of $225 per share suggests that Alphabet can gain an additional 21%.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has also delivered impressive long-term returns for investors. The stock is up 24% year-to-date and has gained 236% over the past five years. The tech giant also offers a 0.65% yield and has maintained a double-digit dividend growth rate for several years.
Although Microsoft has numerous business segments, Microsoft Cloud is the most important one. Cloud revenue reached $35.1 billion in Q3 FY 24, 23% higher than last year’s revenue. That’s more than half of the company’s $61.9 billion in revenue for the quarter. Overall revenue increased by 17 years over year, while net income was up by 20 years over year.
Microsoft also has exposure to social media, gaming, advertising, business software and other verticals. Copilot makes it easier for the company to expand into additional industries and gain market share in its existing verticals. Copilot for Security has helped Microsoft strengthen its presence in the cybersecurity industry.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) has been a construction leader for almost 100 years. The firm provides essential equipment that helps contractors and construction businesses fulfill projects. The company raised its dividend by 8% earlier this year but already offers a 1.72% yield. It’s rare to see a company with a high growth rate and yield, but Caterpillar delivers.
You’ll also see plenty of growth in the stock price. The firm trades at a P/E of 15x and is up by 142% over the past five years. Caterpillar reported 47% year-over-year net income growth in the first quarter and deployed $5.1 billion toward share repurchases and dividend distributions.
16 Wall Street analysts rate Caterpillar stock as a moderate buy. The average price target suggests a 13% upside from current levels. Some analysts are even more bullish. The highest price target of $440 per share indicates that Caterpillar can rally by an additional 34%.
Semrush (SEMR)
Semrush (NYSE:SEMR) is a search engine marketing tool that generates $354.2 million in annual recurring revenue. This Q1 figure represents a 21% year-over-year improvement. A yearly recurring revenue model makes it easier for Semrush to scale its finances over time. The company can increase its revenue by attracting more customers, raising prices and incentivizing existing customers to upgrade their accounts. Semrush has been able to do just that.
“We continue to succeed in executing on our core growth pillars by onboarding more customers, cross-selling and up-selling to existing customers and leveraging AI in our platform to ensure businesses of any size have the most valuable digital marketing software suite,” Semrush CEO and co-founder Oleg Shchegolev explained in the Q1 press release.
Semrush closed the first quarter with nearly 112,000 paying customers, which is a 10% year-over-year improvement. The company also generated $2.1 million in net income and offered encouraging guidance. These signs point to a growth stock that can deliver long-term gains.
HubSpot (HUBS)
HubSpot (NYSE:HUBS) has been in the rumor mill for several months. Tech giants are looking at the company as an acquisition target, which can lead to a big payday for investors. The speculation has helped this year, as the stock is only up 8% year-to-date. However, shares have more than tripled over the past five years, giving a better idea of what can happen when momentum accumulates.
The customer relationship management software continues to deliver impressive results. Revenue increased by 23% year-over-year in the first quarter to $617.4 million. Net income came to $5.9 million, compared to a net loss of $36.6 million in the same quarter last year. HubSpot also has a healthy balance sheet, with $1.8 billion in cash, cash equivalents and short-term and long-term investments.
HubSpot’s customer base grew by 22% year over year to reach 216,840 customers. That’s plenty of recurring revenue for the company, and the average customer has an annual subscription of $11,447. It’s no wonder big tech is circling HubSpot.
Chipotle (CMG)
Chipotle (NYSE:CMG) has been cooking up tasty returns for several years. The stock is up by 39% year-to-date and has more than quadrupled over the past five years. Shares are fresh from a stock split and have attracted plenty of Wall Street bulls. Chipotle is currently rated as a Moderate Buy with a projected 7% upside. The highest price target of $80 per share suggests that Chipotle can gain an additional 29% from current levels.
Recent financial results warrant optimism. In the first quarter, Chipotle reported 14.1% year-over-year revenue growth, while diluted earnings per share increased by 23.9% year-over-year. Chipotle closed out the quarter with a 13.3% net profit margin.
The fast-food restaurant chain remains on pace to open 285-315 restaurants this year. Chipotle opened an additional 47 restaurants in the first quarter, 43 of which were Chipotlanes. Chipotle has delivered impressive financials while raising prices and demanding strong customer loyalty.
Robinhood (HOOD)
Robinhood (NASDAQ:HOOD) offers a suite of financial products and innovates in the industry. Some of the company’s Gold perks are hard to beat, such as a credit card with unlimited 3% cashback, a 1% boost on all qualifying deposits and 3% contribution matches for IRAs.
The brokerage firm has been a rough hold for several years, but the stock has flipped the script. Shares have surged by an astonishing 81% year-to-date as the company delivers high profits. Robinhood reported 40% year-over-year revenue growth in the first quarter, generating $157 million in net income. Q1 profits represent a significant improvement as the company reported a net loss of $511 million in the same quarter last year.
Robinhood has many opportunities to expand its revenue in future quarters. Investing activity, retirement accounts, credit cards and margins are some of Robinhood’s opportunities that can reward long-term investors. The firm closed the quarter with 13.7 million monthly active users, representing a 16% year-over-year increase.
On this date of publication, Marc Guberti held long positions in GOOG and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.