Finding new growth stocks to add to your portfolio usually isn’t too difficult. Finding growth stocks to buy and hold forever, however, can be a different story. The underlying company must be capable of evolving over time as its marketplace changes. Just ask Xerox, Kodak, and Blockbuster.
With that as the backdrop, here’s a rundown of three growth stocks you can comfortably buy and hold for a lifetime. These organizations not only manage businesses that are perpetually in demand, but each has proven willing and able to change as needed to continue growing.
Amazon: The Digital Behemoth
It’s such a commonly suggested stock pick that it’s almost become a cliché. Nevertheless, Amazon (NASDAQ: AMZN) is an investor favorite for all the right reasons. Not only is it the leading e-commerce company in the U.S., but its sales growth streak remains almost perfectly unfettered.
Granted, its cloud computing arm — Amazon Web Services — has a great deal to do with this uninterrupted growth. AWS accounts for roughly two-thirds of the company’s operating income, even though it only contributes about 18% of revenue. The e-commerce side of the business obviously isn’t wildly profitable.
See, profitability isn’t a terribly important part of the argument for or against owning Amazon stock. The reason this company is such a great forever growth holding is its digital ecosystem that makes it so easy to become and remain a customer.
Given that well-established habits are hard to break, Amazon is apt to hold on to its commanding lead of North America’s e-commerce market as it continues to grow. There’s just no rival in a position to threaten the company.
And its primary market is nearly certain to keep growing. Despite the business’s maturity, the U.S. Census Bureau reports that e-commerce still only makes up around 16% of the nation’s total retail sales. That leaves tons of room for more growth.
MercadoLibre: The Unstoppable Force in Latin America
While Amazon may be the dominant e-commerce name in North America, know that this dominance only applies here. Outside of the U.S., it doesn’t. MercadoLibre (NASDAQ: MELI) is frequently referred to as the “Amazon of Latin America,” acknowledging its Amazon-like control of this particular geographic market.
This growth is also expected to persist for at least a few more years, as Latin America’s e-commerce markets explode in the wake of the proliferation of broadband-capable smartphones. MercadoLibre is positioned to at least capture its fair share of this growth, if not more than its fair share.
As for why this company is doing what Amazon and other outsider players can’t, it’s not complicated. MercadoLibre was founded by people living in this market, and built from the ground up to serve consumers who may think and act differently than U.S. consumers do. This awareness of local norms and preferences can matter in a big way.
PepsiCo: Beverage Giant with Sustainable Growth
Last but not least, add beverage giant PepsiCo (NASDAQ: PEP) to your list of growth stocks to buy and hold forever.
It admittedly stretches the definition of what qualifies as a growth stock. Given the likely net growth you could actually achieve by reinvesting PepsiCo’s dividends in more shares of the stock, however, it might be worth a look from a different angle.
PepsiCo is parent to its namesake cola, as well as popular beverages like Mountain Dew, 7UP, Bubly water, and Gatorade, just to name a few. This is also parent to snack chip company Frito-Lay, the name behind Lay’s potato chips, Doritos, Cheetos, and others. Although PepsiCo’s chips business is the smaller of the two arms, it’s a great product mix aimed at tapping into the snack market’s endless allure.
The Success Recipe Behind PepsiCo’s Bottling Strategy and Dividend Growth
PepsiCo, a beverage behemoth synonymous with refreshment, takes a divergent approach compared to its main rival, Coca-Cola. While Coca-Cola delegates a significant portion of its production tasks to external bottling partners, PepsiCo opts for ownership of the majority of its bottling plants. This distinction sets them apart, leading to a unique advantage – though it may pinch profit margins due to the costly nature of bottling operations, PepsiCo gains exquisite control over its packaging processes. This meticulous oversight not only allows for precision but also opens avenues for revenue generation by bottling beverages for external brands.
Finer Margins, Finer Control
This distinction translates to thinner profit margins but grants PepsiCo meticulous control over its packaging process, setting them apart from Coca-Cola.
Dividend Growth and Stock Value
At the heart of PepsiCo’s strategy lies its seamless machinery to drive dividend growth, outpacing the trajectory of its competitor, Coca-Cola. This edge is partially attributed to PepsiCo’s zealous stock buyback initiatives complemented by their firm grasp on business operations.
Over 52 years, PepsiCo’s streak of annual dividend growth has been a boon for investors who opted to reinvest these payouts. A retrospective analysis reveals that a humble $10,000 injected into PepsiCo’s stocks in 1984 would have ballooned to nearly $1.7 million today, had those dividends been channeled back into more shares. The resultant annualized net return of approximately 12% embodies the essence of a growth stock.
Long-Term Rewards
Investors who have ridden the wave of PepsiCo’s dividend growth over time have reaped significant rewards, showcasing the dividends as a powerful catalyst for wealth generation.
While it requires patience and a long-term vision, the consistent growth trajectory provided by PepsiCo paints a compelling picture for discerning investors seeking steady returns in the volatile market landscape.
