If time is on your side, what’s one of the best investment strategies to generate meaningful long-term returns? Buy a bunch of up-and-coming stocks with huge upside potential over the next 10 years.
In other words, buy stock in the companies defining the future. I’m talking hyper-growth companies with relentlessly innovative management teams and big visions, societal and economic megatrends on their side and the potential for huge profits at scale.
Those up-and-coming companies will continue to grow revenues and profits at a rapid pace over the next 10 years. As go revenues and profits, so go stocks. Thus, a portfolio of those up-and-coming stocks should generate meaningful long-term returns.
With that in mind, let’s take a look at 10 of my favorite up-and-coming stocks to buy for the next 10 years.
The Short: A pure-play on the secular shift towards programmatic advertising.
The Long: Ad tech company The Trade Desk has increasingly established dominance as the go-to demand side platform for programmatic advertising over the past several years.
That’s a big deal. Programmatic advertising — which essentially involves the usage of data and algorithms to automate and improve the advertising process — is the future of advertising.
Today, only a slice of all advertising budgets are transacted programmatically. By the end of the decade, almost all advertising will be done programmatically.
As the ad world pivots from traditional to programmatic advertising, The Trade Desk will become an increasingly large part of the advertising process.
The platform’s ad spending volume will skyrocket. So will revenues. And profits. And TTD stock.
The Short: The best way to invest in the commercial space boom of the 2020s.
The Long: Best known as the company which has delayed its promise for commercial spaceflight operations by over a decade, Virgin Galactic increasingly appears to be just months away from finally turning that dream into a reality.
That is, thanks to its spaceship the VSS Unity completing landmark powered missions which sent both pilots and non-pilot crew into space over the past year and a half, Virgin Galactic appears well on its way to launching commercial luxury spaceflight operations in either 2020 or 2021.
That business will be wildly successful. Already 8,000 people across the globe have registered to go on a Virgin Galactic flight. At $250,000 a head, you’re already talking $2 billion in “pre-booked” revenues. And the business model is highly profitable, with 75% gross margins and muted expense rates, so you’re looking at $1 billion-plus in “pre-booked” profits.
Yet that’s just the tip of the iceberg. After commercial luxury spaceflight operations launch, Virgin will leverage economies of scale and technological advancements to lower space tourism ticket prices and create a more mid-level spaceflight business. Thereafter, the company will apply its proprietary hypersonic technologies to create high speed mobility aircraft.
Big picture: this company is the top of the first inning of a huge multi-year growth narrative. As the company successfully navigates through that narrative over the next few years, SPCE stock will soar.
The Short: A leader in breakthrough antibody-drug conjugates (ADCs) technology for treating cancer.
The Long: Cancer is a big problem. Every year, roughly 2 million Americans are diagnosed with cancer. Over 600,000 perish from the disease.
At present, traditional cancer treatments involve chemotherapy. Chemotherapy works. Sometimes. But it’s also imperfect, because in addition to killing cancerous cells, it also kills normal, healthy cells. This is why chemotherapy has such undesirable side effects.
Insert ADCs. The science is complex, but over the past few years, scientific breakthroughs have resulted in companies creating antibody-drug conjugates, which leverage something called monoclonal antibodies to target only cancerous cells in cancer treatment, while leaving normal cells alone.
It’s chemotherapy minus the side effects.
As such, ADCs are the future of cancer treatment. And the pioneer in ADC technology is Mersana, a company which isn’t just developing ADCs, but also ADC technology platforms which can be used to scale the ADC production process.
Over the next decade, as ADCs go from nascent science to mainstream treatment, Mersana’s revenues, profits and stock price will all roar higher.
The Short: The digital education company of the future.
The Long: Chegg is a connected learning platform tailor-made for today’s high school and college students.
That is, Chegg’s platform offers students a myriad of academic help services where they want them (online), how they want them (on-demand), and at a familiar pricing structure (subscription model). As such, it reasons that as the digitization wave sweeps across the academic world over the next decade, Chegg will become a standard academic resource tool across all high schools and colleges.
That suggests Chegg is still in the early stages of its journey. The platform, while rapidly growing, only has 3.9 million subscribers. Consider that there are 54 million high school and college level students across the U.S. and Europe.
As such, over the next several years, Chegg will sustain robust subscriber growth. Robust sub growth will power robust revenue growth. Robust revenue growth will power robust profit growth. And robust profit growth will drive CHGG stock way higher.
The Short: The Tesla (NASDAQ:TSLA) of the soon-to-be-very-big, global plant-based meat market.
The Long: Plant-based meat is the future of meats consumption for one very simply reason: it’s environmentally and socially positive.
Thanks to the wide-spread use of social media and the internet, 21st Century consumers — especially young ones — are hyper-aware of the environmental and social implications of their actions. Their behavior is consequently changing, to support products and services which are environmentally and socially positive. Think electric cars. Or solar energy. Or even plant-based dairy products.
Plant-based meat falls perfectly into this trend. Relative to animal-based meat production, plant-based meat production reduces carbon emissions (cows contribute significantly to global warming) and respects animal welfare (no animals have to be killed). Those benefits will become increasingly attractive to a wider array of consumers over the next decade.
As they do, plant-based meat will follow in plant-based dairy’s footsteps. It will march towards 10%-plus penetration in the global meats market by the end of the decade.
Beyond Meat — the industry leader with distinct and widening branding, production, and distribution advantages — will boom alongside the market. BYND stock will turn into a big winner in the 2020s.
The Short: In the early innings of unlocking tremendous value from Purchase Intelligence.
The Long: One of the biggest truths in the investment world is that big data equals big money.
That is, wherever there is big data, there is an opportunity to turn that data into actionable insights, and turn those actionable insights into huge revenue streams. See Facebook (NASDAQ:FB) or Alphabet (NASDAQ:GOOG). Both of them leveraged big data to create $500 billion-plus digital advertising empires.
Cardlytics is on a similar path. The company is tapping into the huge world of Purchase Intelligence, or payment card data, to improve bank loyalty programs.
Specifically, Cardlytics is partnering with banks to gain access to their robust payment card data and in turn leveraging this data (which tells you who is buying what) to improve banks’ loyalty programs by matching the right products and promotions to the right consumers.
Cardlytics is still in the top of the first inning of this Purchase Intelligence growth narrative. But they have all the data. So what comes next in this story is big money.
More and more marketers will flock to Cardlytics’ rewards programs, resulting in bigger and better promotions, more consumer spend, and bigger revenues and profits for Cardlytics. As all that happens, CDLX stock will keep flying higher.
The Short: Pioneering a new (and better) form of identity-based cloud security.
The Long: The bull thesis on Okta is pretty simple and boils down to three things.
First, every enterprise in the world is migrating to the cloud, especially in the wake of the coronavirus pandemic shutting down physical offices. One of the biggest benefits of cloud-hosted services is that they allow for workflow flexibility and employee mobility. As such, the value of workflow flexibility and employee mobility will only grow in the workplace over the next several years.
Second, traditional cloud security systems actually optimize against both of those things. That is, traditional cloud security systems build a “castle” of security around the whole ecosystem. That’s very secure. But the problem is that you can’t leave the castle, meaning workflow flexibility and employee mobility are constrained. That’s bad news for our current reality of work from home.
Third, Okta’s identity-based Identity Cloud solution fixes these shortcomings of traditional cloud security systems. Instead of covering the whole ecosystem with a “castle” of security, Okta outfits each individual in the organization with a “body armor” of security. This body armor optimizes for workflow flexibility and employee mobility, without compromising on security or integrity.
Over the next decade, as enterprises continue to shift to the cloud and place more stock in employee mobility, Okta’s Identity Cloud solution will go from niche, to the Gold Standard for security. Amid that transition, OKTA stock will boom.
The Short: A social media platform in the early stages of creating a truly differentiated, potentially enormous digital ad business.
The Long: Much like Okta, the bull thesis on Pinterest boils down to three things.
First, Pinterest’s huge user base over of 300 million monthly active users will only keep growing. That’s because Pinterest has created an inspiration and visual discovery platform with a unique value prop (if you’re looking for something to do or ideas for a project, you are going to visit Pinterest). This unique value prop will only grow in popularity as we continue to migrate into a more experience-focused society, creating strong user growth tailwinds for Pinterest.
Second, Pinterest has only scratched the surface of monetizing its huge user base. On a monthly active user basis, Pinterest has about as many users as Twitter (NYSE:TWTR). Yet Twitter’s revenues will be more than double Pinterest’s revenues this year.
Third, Pinterest’s ad business could become potentially enormous. That’s because the relevance and effectiveness of Pinterest’s ads will be far higher than ads on other social media platforms, a byproduct of two things.
One, Pinterest users are on the app for a reason (to find something to do), and targeted ads delivered to intent-driven users will have higher conversion. Two, unlike Twitter, Pinterest is already a feed of visuals that look just like ads. Real ads will seamlessly integrate into the existing user experience.
All in all then, Pinterest is in the first inning of rapidly scaling what could one day be a huge digital ad business. During this rapid growth era, PINS stock will be a big winner.
The Short: At the forefront of China’s luxury EV market, which will rapidly grow over the next decade.
The Long: At the risk of sounding like a broken record, the bull thesis on NIO stock also breaks down into three parts.
First, EVs are the future of global auto transportation. This is mostly due to a shift in consumer preference for socially and environmentally positive products and services. But it’s also supported by government incentives, improved EV technology, expanded EV charging infrastructure, and lower EV price points.
Second, the China EV luxury market will be huge at scale. That’s because Chinese consumers have a propensity for luxury items (they are expected to account for nearly 50% of global luxury good spending within the next few years). EVs will be no different. Just as Chinese consumers are the fuel behind the market for $1,000 handbags, they will also be the fuel behind the market for $100,000 EVs.
Third, in China’s huge EV luxury market, there will be some favor for the home-grown product, both by consumer choice and government force. Nio is the undisputed, home-grown leader in China’s luxury EV market.
Net net, Nio could follow a Tesla-like growth trajectory over the next decade to rise by several hundred percent.
The Short: A pure-play on the secular shift in warehouses towards hydrogen-powered forklifts.
The Long: Last but not least on this list of up-and-coming stocks to buy for the next 10 years is hydrogen fuel cell (HFC) maker Plug Power.
The story here is pretty simple.
Enterprises are feeling increasing pressure on all fronts to “go green”. But going green isn’t cheap. Often, it’s quite expensive. So, over the next decade, companies will increasingly seek-out cost effective ways to improve sustainability.
One way to do that is by partnering with Plug Power.
Plug Power makes HFC forklifts which are zero-emission, surprisingly cost-effective, last forever, have long shelf-lives, don’t require much maintenance, have short re-charge times and improve workflow productivity. In other words, HFC forklifts are exactly what enterprises are looking for: a smarter, cheaper and better way to go green.
Over the next decade, warehouses all across America will swap out their traditional forklifts for Plug Power’s HFC forklifts. As they do, Plug Power’s revenues will roar higher. Today’s losses will turn into tomorrow’s profits. And small-cap PLUG stock will power higher.
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