No matter the size of your portfolio, just a handful of growth stocks could make you a fortune even if the other stocks you hold end up losers. The reason is simple: Growth stocks represent businesses that can consistently trump their industry averages in terms of top- and bottom-line growth. Investors love such companies and don't shy away from paying a premium to own stocks that could make them filthy rich.
The trick, though, is to identify companies with surefire growth prospects -- like the three following stocks, each of which is riding a megatrend that should only increase.
The future of energy is here
I've often recommended NextEra Energy (NYSE:NEE) as a great dividend growth stock, but that's only because the company has tremendous growth prospects in a disruptive industry.
NextEra Energy started off in 1925 as a traditional utility, then called Florida Power & Light, but it ventured into alternative energy as early as the '90s. By 2009, NextEra had become the largest wind and solar energy producer in the United States. That early-mover advantage into renewable energy, coupled with aggressive growth moves, has turned NextEra Energy into the world's largest solar and wind energy company today.
Image source: Getty Images.
Renewable energy is already the fastest-growing source of energy, with the Center for Climate and Energy Solutions projecting renewables to generate 45% of global electricity by 2040, up from only 26% in 2018. It doesn't take much to understand the kind of growth ahead of NextEra Energy.
NextEra Energy is, in fact, a dream stock for income and growth investors alike. NextEra's adjusted earnings per share has achieved 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. Here's how the stock has fared in between.
With management targeting 6% to 8% growth in adjusted EPS through 2023 off a 2021 base and 10% annual dividend growth through "at least" 2022, and with the company's aspiration to become the "largest, most profitable clean energy provider in the world" in the longer run, NextEra Energy is a no-brainer wealth-builder stock to own for the coming decades.
The sky's the limit for this industry
E-commerce is an indisputable megatrend, and Shopify (NYSE:SHOP) is only scratching the surface, having cornered only 8.6% of the U.S. retail e-commerce so far. The company's unique selling proposition (USP) is its platform that enables merchants of all sizes to easily create digital storefronts and manage the entire sales process. From entrepreneurs to larger brands, Shopify has something for everyone.
Over the years, Shopify has aggressively expanded its international footprint; forged partnerships with big names including Amazon.com (NASDAQ:AMZN), Facebook, PayPal Holdings, Snap, and Pinterest, to name a few; set up multicurrency, multichannel payment options, and launched its own logistics and funding arms.
Its efforts have shown up in its numbers: Shopify's gross merchandise value soared from $15.4 billion in 2016 to $119.6 billion in 2020. Revenue jumped more than sevenfold in between to nearly $3 billion in 2020 and grew 86% last year.
Although 2020 was an exceptional year for e-commerce because of the COVID-19 pandemic, Shopify should continue to grow sales rapidly. That makes Shopify a top stock to own in an industry with dizzying potential.
Healthcare holds the potential for big money
Teladoc Health (NYSE:TDOC) stock has been pummeled in recent weeks, but growth stocks tend to oscillate. The drop in Teladoc shares, though, has had a significant catalyst: Amazon's upcoming launch of its own telehealth service, Amazon Care.
Amazon's financial clout, reach, and brand power make it a reasonable threat, but let's not forget that Teladoc is already a global leader in the virtual care industry, clocking 14 million visits across all its channels in 2020.
Moreover, telemedicine is one of the few trends that won't fizzle out 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, versus only 35% in 2010, according to the American Hospital Association. Industry experts project the market to grow by double digits in the coming years, with McKinsey & Company sizing up the market to be worth $250 billion in the U.S alone.
Most importantly, it's a highly fragmented market that should offer Teladoc ample opportunities to expand and remain a front-runner. Advanced Medical in 2018, MedecinDirect in 2019, and Livongo Health in 2020 are just some of the notable acquisitions Teladoc has made in recent years. The $18.5 billion Livongo acquisition, in particular, could be a game-changer as it expands Teladoc's hold in chronic disease management.
After 98% growth in revenue in 2020, Teladoc projects 80% growth at the midpoint for 2021, with revenue hitting $2 billion at the higher end of its guidance range. That's still incredible growth and could very well fuel the stock's price.
What ultimately matters is that telehealth, e-commerce, and renewable energy are all massive megatrends, and each of these three stocks has humongous addressable markets to exploit, which is why they all appear poised for such huge growth.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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