While the largest chunk of my portfolio is more securely nestled in ETFs, I also maintain a handful of carefully chosen positions that I plan to hold for a decade or more. This is fueled by the speculation that they may outperform the overall market.
The following three names feature strong growth and profitability prospects, forming quite compelling investment cases that could power strong wealth creation over the next decade. It’s important to remember, that with singled-out stock, your risk exposure is higher, as there is no guarantee those companies will remain solvent over time. However, with the right picks, this can be avoided.
Axon Enterprise (AXON)
Axon Enterprise (NASDAQ:AXON) has consistently outperformed the market over the years, creating massive amounts of wealth for its shareholders. Yet, it may still be in the early stages of market domination. The company has been on a journey to empower law enforcement agencies with cutting-edge technology and ultimately save more lives.
It all began with their iconic Taser device, which aims to render bullets obsolete. Since then, the company has grown tremendously, offering a diverse portfolio that includes cutting-edge body cameras and advanced evidence management software. What’s more, all of these offerings seamlessly integrate within its cloud platform, forming a powerful ecosystem for police departments and other agencies.
To illustrate the company’s ongoing momentum, Axon’s revenues between 2014 and 2024 grew at a compound annual growth rate (CAGR) of 27.5%. Even more special is the fact that Axon’s growth has accelerated in recent years. At a forward price-to-earnings (P/E) ratio of about 63x, AXON stock is obviously trading at a premium multiple. Yet, its rapid penetration into this niche yet exciting industry likely justifies it.
Crocs (CROX)
Crocs (NASDAQ:CROX) is one of my largest positions and one I plan to hold for at least a decade from today. The rather funny nature of the company’s iconic clog shoe might make it a bit hard to take Crocs seriously as a potential investment. However, Crocs is so much more than that. The company has shown remarkable adaptability, transcending its initial perception as a novelty footwear brand.
To elaborate, while its iconic clog remains a staple, Crocs has diversified its offerings to include a wide range of styles catering to various consumer preferences. The HEYDUDE acquisition, which closed in early 2022, significantly expanded its target group. Notably, the company has been rapidly paying down the debt issued to fund this acquisition and can, therefore, resume share repurchases.
The reason Crocs has grown to be one of my largest positions lately is that its shares seem to be trading at a discounted valuation. Despite Crocs having grown its revenues at a 10-year CAGR of 12.7% while featuring industry-leading margins, the stock is trading at a forward P/E of just 11.3x. Thus, investors should have a notable margin of safety as well.
Alphabet (GOOGL)
Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) is far from a hidden gem. Most investors likely already have some exposure to this tech giant, as it’s one of the largest holdings in major indices. Nevertheless, on an individual level, Alphabet’s potential for significant wealth creation remains outstanding.
Critics have long voiced concerns about the company’s investment case, especially when it comes to the looming impact of AI platforms like ChatGPT on its core search engine business. Yet, Alphabet has consistently delivered robust growth across all fronts lately, effectively debunking such claims. If anything, Alphabet’s own AI developments have been driving strong targeting results for advertisers, leading to significant revenue growth.
In its most recent results, Google Search revenues rose by 14%, reaching $46.2 billion. Its YouTube Ads revenues saw an even stronger increase of 21%, totaling $8.1 billion. These numbers contradict the prevailing concerns voiced by skeptics. Simultaneously, Alphabet boasts one of the healthiest balance sheets on Wall Street. Its strong growth and underlying fundamentals position the stock for robust wealth creation moving forward.
On the date of publication, Nikolaos Sismanis held long positions in AXON, CROX, and GOOGL/GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nikolaos Sismanis is a professional research analyst with five years of experience in the field of equity research and financial modeling. Nikolaos has authored over 1,000 stock-related articles that focus on uncovering deep value opportunities, identifying growth stocks at reasonable valuations, and shining a spotlight on overlooked international equities.