According to Blackrock (NYSE:BLK) analysts, investors looking for growth as the economy begins to recover need to be in stocks. In fact, many investors are breathing a sigh of relief for not panicking when the market sold off in February and March.
But while a Black Swan event like the Covid-19 pandemic can teach investors short-term lessons, the trick to buy-and-hold investing is identifying companies that give you the confidence to invest for not just 10 weeks but 10 years.
For many investors, this means identifying key trends. Before the pandemic, trends were emerging. Those trends, such as e-commerce, financial technology, digital healthcare, are quickly becoming part of our “new normal.” Think about it. Cash is now literally “dirty money.” E-commerce is not just convenient; it’s essential. And we’ve figured out that the patient-doctor relationship can take place via video chat.
And all of this feeds into other trends, including the idea that our smartphones are only going to become more powerful and more important. But the next 10 years are not destined to be the decade of stealth small-caps. Many of the companies that are well-positioned for the next decade will be familiar to most investors.
Here are 7 companies that are going to become increasingly relevant over the next decade. When you buy them now, you’ll be thanking yourself when the calendar turns to 2030.
Quick Links
- PayPal
- Square
- Shopify
- Amazon
- Verizon
- Teladoc Health
- Chegg
#1 - PayPal (NASDAQ:PYPL)
PayPal (NASDAQ:PYPL) is one of the leading companies in the emerging financial technology (fintech) sector. Although the company has been around for quite some time, it still behaves like a young startup.
For example, PayPal is best known for its ability to allow consumers and businesses to make digital payments. That has spawned Venmo, a cash app that allows individuals to send money to each other without carrying cash. But PayPal has expanded to look a lot more like a full-service bank. Today, the company offers peer-to-peer fund transfers, debit cards, credit cards, and small business loans under its Working Capital program.
This diversity of services is highlighting two critical target audiences. First, gig workers oftentimes are sole proprietors that need to find a payment method other than cash. After the financial crisis, cash made a brief comeback, but as e-commerce continued to grow, there became a need for small businesses to get payments without ACH transfers and the like. That’s where PayPal excels.
One limitation of PayPal was its ability to accept payments in remote settings. To help correct this, PayPal is introducing a new touchless feature on its mobile app. This will allow customers to use PayPal as a form of payment at places like farmers' markets that may not be set up for digital payments.
If this sounds like another company, you know, keep reading.
About PayPal
PayPal Holdings, Inc operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources, such as bank accounts, PayPal or Venmo account balance, PayPal and Venmo branded credit products comprising its installment products, credit and debit cards, and cryptocurrencies, as well as other stored value products, including gift cards and eligible rewards.
Read More - Current Price
- $84.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $83.45 (1.5% Downside)
#2 - Square (NYSE:SQ)
Square (NYSE:SQ) is another leader in the fintech sector. In a society where businesses are becoming more mobile, Square allows merchants to accept remote payments for most major credit cards. Square is most easily identified by its signature square-shaped dongle. Merchants insert the dongle into their smartphone or tablet, and they have a way to accept safe, secure credit payments.
And like PayPal, Square is expanding on its base service to meet the needs of its users. It has its own peer-to-peer payment solution, CashApp that is similar to Paypal’s Venmo app.
One of the concerns is that as Square and PayPal begin to offer complementary services, they will begin to cannibalize each other’s businesses. That may be a concern by 2030, but in the short term, there’s plenty of business to go around.
A more clear and present danger for Square is the damage done to small businesses due to the mitigation measures taken due to the Covid-19 pandemic. Mom and pop businesses have been among the hardest hit and most likely not to come back. However, if you’re looking to invest in companies that you can own for the next ten years, then you have to believe that other businesses will open as others close. That makes Square a great option.
About Block
Square, Inc provides payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions. It offers hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts EMV® chip cards and Near Field Communication payments; Chip card reader, which accepts EMV® chip cards and enables swiped transactions of magnetic stripe cards; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; and Square Register that combines its hardware, point-of-sale software, and payments technology, as well as managed payments solutions.
Read More - Current Price
- $89.69
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $91.18 (1.7% Upside)
#3 - Shopify (NYSE:SHOP)
If there’s one thing that has millions of Americans sheltered in place taught us is that e-commerce will only continue to grow. No company’s poised to overtake Amazon, but Shopify (NYSE:SHOP) proves to be a worthy competitor.
As with Square, which we mentioned above, you have to avoid being a prisoner of the moment when it comes to Shopify. The next 10 years will make us less reliant on physical storefronts. It is simply going to be more cost-effective to own and operate a business online.
And to do that, businesses need a website with all the tools to make e-commerce convenient and secure. Shopify helps companies build their online storefront with its suite of tools. What’s very attractive about the company’s business model is that they draw a high margin from their core offering. That makes the growth formula pretty simple.
Of course, Shopify faces competition, not the least of which is Amazon and its Amazon Web Services (AWS). But Shopify does offer e-tailers some unique benefits, and that means for the foreseeable future, there will be plenty of room in this space.
And that’s important because Amazon is not going away.
About Shopify
Shopify Inc, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing.
Read More - Current Price
- $103.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 16 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $94.95 (8.7% Downside)
#4 - Amazon (NASDAQ:AMZN)
The rapid expansion of e-commerce activity is even putting a strain on Amazon (NASDAQ:AMZN). But the company has virtually limitless financial resources, and it is using them to make sure that packages are getting delivered on schedule.
But for investors looking at the next 10 years, Amazon should be considered because it is always looking for the next new thing. But Amazon doesn’t just look for it; it seeks to dominate that space. For example, Amazon has created its own streaming movie service, Amazon Video, a natural extension of its Amazon Prime service, and a segue into its game streaming service, Twitch.
But the company is doing more than just targeting the consumer. Amazon is expanding into enterprise services such as cloud computing and has several artificial intelligence initiatives (AI). Simply put, the company finds ways not only to branch out but also to impact that space.
It’s also one reason why Amazon does not yet pay a dividend. For as big as the company is, they are still reinvesting back into their business.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $202.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 41 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $235.77 (16.2% Upside)
#5 - Verizon (NYSE:VZ)
Verizon (NYSE:VZ) is a pure-play among wireless stocks. Unlike some of its competitors, such as AT&T (NYSE:T), Verizon isn’t a player in the streaming wars. It will, however, be a major beneficiary of the 5G revolution.
But even as consumers are looking for temporary relief from their wireless payments, Verizon shows its strength by enabling American workers to seamlessly use solutions such as Microsoft’s (NASDAQ:MSFT) Skype app and Zoom Communications (NASDAQ:ZM). With a developing sense that many workers will continue to work from home for the foreseeable future, ensuring the wireless bill gets paid will be a priority.
With more Americans cutting the cord, our mobile devices have become windows to the world. And that isn’t going to go away anytime soon.
Verizon may be lagging behind other growth stocks. However, Verizon is a rock-solid dividend play. The company has increased its dividend for 15 consecutive years and has a payout ratio of just over 50%.
About Verizon Communications
Verizon Communications Inc, through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments, Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
Read More - Current Price
- $42.22
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $46.37 (9.8% Upside)
#6 - Teladoc Health (NYSE:TDOC)
Teladoc Health (NYSE:TDOC) operates on such a simple premise that it’s amazing it’s taken this long. Why shouldn’t we be able to pick up the phone and call a doctor to get medical advice, particularly as it relates to something that is not life-threatening? Parents with young children frequently need to decide whether to wake up their (hopefully) on-call pediatrician or rely on what they read on WebMD.
Teladoc Health improves on that dynamic by allowing patients to talk to a licensed physician. This is becoming even more important as patients are afraid that going to a doctor’s office may make them sicker than when they arrived.
But put the safety issue aside. What Teladoc is tapping into is what doctors and patients have always known. There are times when office visits are not necessary. Some things can be handled with a phone call, at least initially. Health care costs are not likely to come down anytime soon. Any service that helps reduce costs is going to have an advantage in the next decade.
Investors may be concerned that Teladoc is a fly-by-night concept. But they shouldn’t worry because companies like Zoom are eager to get into this space. That could lead to a second concern, that is, does Teladoc have a moat. It may not have a large moat, but it has a small one and a great first-mover advantage for now. Eventually, health insurance companies will probably get involved with this, and that may weed out competition.
About Teladoc Health
Teladoc Health, Inc provides virtual healthcare services worldwide. The company operates through Teladoc Health Integrated Care and BetterHelp segments. The Integrated Care segment offers virtual medical services, including general medical, expert medical, specialty medical, chronic condition management, and mental health, as well as enabling technologies and enterprise telehealth solutions for hospitals and health systems.
Read More - Current Price
- $9.00
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.08 (34.2% Upside)
#7 - Chegg (NYSE:CHGG)
For millions of American students and parents, remote learning was a reality this spring. And while it’s looking more likely that students at all educational levels will return to the classroom this spring, the pandemic did showcase that digital learning is already in place. And that’s the case for Chegg (NYSE:CHGG).
Chegg is a pioneer in connected learning. The company has a new platform that will become the standard for virtually all U.S. high school and college classrooms over the next ten years. Chegg allows students to access on-demand resources, including e-textbooks, homework solutions, online tutoring, test preparation, writing help, etc.
It’s a one-stop-shop for academic resources. And it’s all digital. While not all students will want to learn this way, a fair amount will. And that’s where the story gets fascinating for investors. Chegg operates in a small niche of approximately 3 million high school and college students today. However, the company projects that it will reach all 36 million students in 10 years.
More subscribers will bring more revenue. And more revenue means larger profits and an increase in the share price.
About Chegg
Chegg, Inc operates a direct-to-student learning platform that helps learners build essential life and job skills to accelerate their path from learning programs in the United States and internationally. Its subscription services include Chegg Study, which offers personalized step-by-step learning support from AI, computational engines, and subject matter experts, as well as Tinger Gold and DashPash Student services; Chegg Writing that provides students with a suite of tools, such as plagiarism detection scans, grammar and writing fluency checking, expert personalized writing feedback, and premium citation generation; Chegg Math, a step-by-step math problem solver and calculator that helps students to solve problems; Chegg Study Pack, a bundle of various subscription product offerings, including Chegg Study, Chegg Writing, and Chegg Math services; and Busuu, an online language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors, and a community of members to practice alongside.
Read More - Current Price
- $1.74
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 7 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $4.69 (170.6% Upside)
If there’s anything the recent run in the market is reminding us of, and it’s that the market is forward-looking. And right now, the market is projecting that the economy will recover. But what does that have to say about the market not only for the rest of 2020 but for the next decade?
Investors that bought Netflix in 2010 would be delighted (mostly) in 2019. Streaming content and cutting the cord was one of the megatrends of the past decade that came to pass. Of course, other trends like the impeding marijuana boom have not quite panned out yet.
In this presentation, we’ve given you seven stocks that should pass the test of the next ten years. Not surprisingly, many of these stocks are in the technology sector, but not just technology in the broad sense, but technology in a way that will impact consumers and businesses in the next decade.
And all of these businesses pass a key test that is attributed to Warren Buffett. That is, invest in what you know. These companies have business models that are easy to understand and should give you confidence as investors.
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