Buying and holding stock in solid companies for the long run is a tried-and-tested way of multiplying one’s wealth in the long run, as this strategy allows investors to gain from the power of compounding and also from secular growth trends in various industries.
The S&P 500, for instance, averaged annual returns of 13.9% from 2011 to 2020. However, certain stocks have outperformed the broader market’s returns by huge margins over the past decade. The likes of Apple (NASDAQ: AAPL) and ASML Holding (NASDAQ: ASML) have crushed the S&P 500’s returns comfortably in the past 10 years.
A $50,000 investment in Apple a decade ago is now worth almost $420,000, assuming the dividends paid out by the company were reinvested. Meanwhile, ASML has turned a $50,000 investment into more than $730,000 in a decade. So a $100,000 investment in these stocks would have made investors millionaires in 10 years.
Let’s look at the reasons why these companies could replicate their terrific growth in the coming decade. We will also check out the prospects of Twilio (NYSE: TWLO), which has the potential to become a multibagger and multiply investors’ wealth substantially in the long run.
Apple’s iPhones and iPads have helped the company grow impressively over the years and turned it into a technology giant. Analysts expect the company to finish fiscal 2022 with $393 billion in revenue and $6.13 per share in earnings. That would translate into revenue growth of 7% and earnings growth of 9% over the prior year.
So, Apple needs some massive growth drivers in the next 10 years beyond its current offerings that could move the needle significantly. The good part is that Apple is reportedly working on a new line of products that could unlock the next growth frontier. The rumored Apple Car could be one such product.
According to a report by Nikkei and analytics firm Intellectual Property Landscape, Apple has reportedly filed 248 automotive patents. These patents cover a wide range of applications ranging from car seats to windows to connected car applications.
What’s more, Apple has recently hired an executive from automotive firm Lamborghini to reportedly work on its autonomous electric vehicle. Apple has reportedly built a big team of automotive engineers that includes former employees from companies such as Tesla, Alphabet, Volvo, Rivian Automotive, and others.
The rumor mill suggests that Apple is aiming to launch its electric car by 2025. While that may seem ambitious, the company’s entry into the electric car market could unlock a whole new opportunity for Apple, as this market is expected to grow at an annual rate of 22% through 2030.
Throw in other potential growth drivers such as the metaverse and the 5G smartphone boom, and it won’t be surprising to see Apple clock impressive growth over the next decade and remain a top stock that could help make investors millionaires once again.
2. ASML Holding
ASML Holding has turned out to be a winning investment over the past decade, as mentioned. Looking ahead, it won’t be surprising to see ASML step on the gas, as the company is now sitting on stronger prospects thanks to the semiconductor boom. A closer look at ASML’s latest results will explain why that’s the case.
ASML’s second-quarter revenue shot up 35% year over year to 5.44 billion euros ($5.79 billion). The company supplies lithography machines to major chipmakers across the globe for printing semiconductors, and its offerings are in solid demand, as the impressive revenue spike showed. The company’s net income also jumped 36% over the prior-year period to $1.44 billion.
More importantly, ASML is built for long-term growth. The company is sitting on an order backlog worth more than 33 billion euros, which translates into roughly $33.5 billion at the current exchange rate. The Dutch giant is expected to finish 2022 with nearly $22 billion in revenue. Its massive backlog is an indication that ASML could sustain its impressive growth in the future.
Even better, the demand for semiconductor manufacturing equipment that the likes of ASML sell is expected to jump to $260 billion by 2030 from $72 billion in 2020, according to a third-party estimate. Given that ASML is the leading supplier of lithography machines used to make chips, it is in a nice position to tap into this huge incremental revenue opportunity.
Analysts expect ASML’s earnings to grow at an annual rate of close to 30% a year for the next five years. However, don’t be surprised to see it grow at such an impressive pace even beyond that and remain a top semiconductor stock in the long run that could help make investors millionaires.
Twilio operates in the rapidly growing cloud communications market, which is why the company has been reporting impressive growth. Analysts are expecting the company to finish 2022 with revenue growth of 36% to $3.86 billion. What’s more, Twilio is expected to turn profitable on a non-GAAP basis next year. It is expected to report earnings of $0.22 per share in 2023, as compared to a loss of $0.39 per share in 2022.
More importantly, it is expected to clock 155% annual earnings growth for the next five years, per consensus estimates. It is not surprising to see why analysts are expecting Twilio to sustain its impressive momentum for a long time. According to a third-party estimate, the global cloud communications market is expected to clock a compound annual growth rate of 20% through 2030, generating $51 billion in revenue at the end of the forecast period.
Twilio commanded nearly 40% of this market last year, per third-party estimates. So Twilio is in a solid position to tap into this fast-growing opportunity and significantly increase its top and bottom lines in the long run.
That’s why investors looking to buy a top cloud stock that could substantially multiply their investments over the next decade should consider scooping up Twilio stock following its 70% pullback in 2022. Twilio is trading at 4.8 times sales, as compared to its five-year average sales multiple of nearly 17. So, investors are getting a good deal on Twilio stock right now, and they may not want to miss this opportunity, considering the company’s impressive long-term potential.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML Holding, Alphabet (A shares), Alphabet (C shares), Apple, Tesla, and Twilio. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.