Nearly a year after the peak of meme stock mania, and down 80% from its 52-week highs, AMC Entertainment still ranks among the most widely held stocks on Robinhood, and the idea of another AMC short squeeze is still a hot topic of conversation in various corners of social media.
But for long-term investors, there are plenty of great growth stocks out there that are better ways to build long-term wealth than hoping for a short squeeze in a meme stock that seems to have run out of momentum. Here are three stocks that are set for years of growth and can help you build your portfolio sustainably for the long run, without relying on a short squeeze or gambling on a long-shot outcome.
Being that it has been a publicly-traded company for 30 years and has grown into a $90 billion market cap on its way to becoming a ubiquitous brand globally, many investors don’t always think of Starbucks (NASDAQ: SBUX) as a growth stock. But the coffee giant still has plenty of growth ahead of it, both in the United States and internationally.
On its last earnings call, Starbucks suspended its sales guidance because of the lockdowns in China. Sales in China fell 23% during the quarter. However, this issue overshadowed the fact that Starbucks actually grew same-store sales in North America by an impressive 12%. That’s a huge gain for such an established company, especially during a quarter where consumers faced considerable headwinds from rising inflation.
Overall, the company posted global same-store sales growth of 7%, which is impressive given the overhang from China. China is opening back up and returning to normal life as lockdowns in Shanghai and other major cities end. Before the most recent round of lockdowns, Starbucks had been demonstrating consistent growth in China, amassing 5,400 locations in the country. The massive market will continue to be an important growth opportunity for the coffee giant.
Starbucks added 97 net new stores in China during the second quarter, despite the challenges there. Interim CEO Howard Schultz says that he expects the company’s business in China to eventually surpass its U.S. business, which would be great for shareholders. Schultz says that 75% of the stores Starbucks opens in fiscal 2022 will be outside the U.S., underscoring the enormous growth opportunity internationally.
In sum, shares of Starbucks are a great way to build long-term wealth, as it is still growing in the United States and has substantial growth potential in China and beyond.
2. Floor & Decor
Floor & Decor (NYSE: FND) has a much smaller presence than Starbucks, but it is growing its footprint rapidly. The specialty-flooring retailer currently operates 160 locations and wants to grow to 500 over the next several years.
There’s reason to believe that management can hit this target, as they’ve already grown store count by 17.8% over the past five years on an annualized basis. The company is firing on all cylinders, growing revenue, earnings per share, and earnings before interest, taxes, depreciation and amortization (EBITDA) at significant rates over the last five years. Revenue has grown at a compound annual growth rate (CAGR) of 25.5% over the past five years, while earnings per share have grown by a CAGR of 37% during that time, making the Atlanta-based company an ideal addition to long-term growth portfolios.
In the most recent quarter, Floor & Decor grew revenue by over 30% year over year. The company is also expanding into higher-margin and value-additive areas like the commercial market and design services.
Investors buying now can take advantage of the sell-off in housing-related names and growth stocks to buy this high-quality, fast-growing Warren Buffett-held stock at a 40% discount to where it started the year, at 20 times earnings.
3. Intuitive Surgical
Last but not least is Intuitive Surgical (NASDAQ: ISRG), the maker of robotic surgery machines like the da Vinci Surgical System.
The stock has hit a rough patch amid the growth sell-off in 2022 and is down nearly 40% year to date. But while shares have declined, the company is growing revenue and procedures. During the first quarter of 2022, Intuitive Surgical grew revenue by 15% year over year and procedure growth increased by 19%. Furthermore, the company’s installed base of da Vinci systems increased from 6,142 at the end of the first quarter in 2021 to 6,920 at the end of March 2022.
The increasing installed base of da Vinci machines is the gift that keeps on giving as the company operates an attractive “razor and blade” business model in which customers buy the da Vinci systems and then repeatedly buy higher-margin instruments that need to be replaced with each procedure, leading to increased recurring revenue for the company.
Intuitive Surgical has a powerful moat in that its installed base of systems dwarfs that of any competitor. Furthermore, the expensive price tag (up to $2.5 million) and extensive amount of training required for each system means that once these systems are installed, a customer is unlikely to switch to an alternative.
Forget about AMC
There is no need for investors to cross their fingers and hope for a short squeeze with AMC when there are a bevy of high-quality growth stocks on sale with significant growth opportunities ahead that are all great ways to build lasting long-term wealth.
Michael Byrne has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical and Starbucks. The Motley Fool recommends the following options: short July 2022 $85 calls on Starbucks. The Motley Fool has a disclosure policy.