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In this article, we will take a look at 10 stocks that can potentially make you rich in 5-10 years. If you want to skip our discussion and see the top stocks, go to 5 Stocks That Will Make You Rich In 5-10 years.
According to SPIVA research, only 15% of actively managed funds can outperform the S&P 500 Index in the long run. Selecting the best long-term stocks is not an easy task and requires an in-depth understanding of the stock market and macroeconomic developments. The statistics are more unfavorable for average investors, who have generated a modest annualized return of 1.9% from 1998 to 2018, in comparison to the S&P 500’s gain of 5.6% during the same period.
The primary reason an average investor underperforms the broader market is their high level of risk aversion towards investing in a bearish market. On the other hand, legendary investors like Warren Buffett take phases of economic uncertainty as an opportunity to build stakes in the best long-term stocks at cheap valuations. Occidental Petroleum Corporation (NYSE:OXY) is the most recent example of how Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK-B) has built up a 20% stake in the company and even received the go-ahead from the regulators to buy up to half of the company. The most recent purchase of 5.99 million shares for nearly $352 million between September 26 and September 28 took place after the Houston, Texas-based energy company lost more than 20% of its value in the previous month due to the broader market decline. Mr. Buffett not only owns over 20% of the outstanding shares of Occidental Petroleum Corporation (NYSE:OXY) but also owns $10 billion worth of preferred shares of the company that generates $800 million in dividends annually.
For investors looking to get rich in the next five to 10 years, they should look at the best long-term stocks that are either at the inflection point from the bottom or at the start of a cyclical trend. While big-cap companies like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL) offer security, in the long run, there are many small companies that have the potential to expand significantly in the next decade, and generate exponential returns for the investors.
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Our Methodology
The companies selected are relatively small entities that offer handsome potential upside to the investors due to their growth outlook over the next 5-10 years. These companies have been shortlisted as the best long-term stocks due to strong business fundamentals and expansion plans. Insider Monkey’s database of 895 hedge funds as of Q2 2022 was utilized to rank the stocks according to the level of hedge fund ownership. Please keep in mind that these are the author's stock picks. Insider Monkey's official stock picks are different than these stocks and can be seen in its monthly newsletter.
10 Stocks That Will Make You Rich In 5-10 years
10. HighPeak Energy, Inc. (NASDAQ:HPK)
Number of Hedge Fund Holders: 4
HighPeak Energy, Inc. (NASDAQ:HPK) is a Fort Worth, Texas-based oil and gas exploration and production company founded in 2020.
Energy stocks like HighPeak Energy, Inc. (NASDAQ:HPK) are expected to provide more upside to investors as crude oil prices have bounced significantly after the members of OPEC+ decided to cut crude oil production to stabilize prices. This was the first significant cut in production by the cartel in the past two years. In such an environment, HighPeak Energy, Inc. (NASDAQ:HPK) is expanding its production efforts to capitalize on the rising demand. The company has acquired over 14000 acres in the last few months to increase high-margin oil production.
HighPeak Energy, Inc. (NASDAQ:HPK) has a trailing twelve months (ttm) EBITDA margin of 77.3% as opposed to the sector average of 25%. The company is expected to record a 295% YoY increase in profit in 2022, followed by a 129.7% rise in 2023. Strong fundamentals and high-profit margins make HighPeak Energy, Inc. (NASDAQ:HPK) one of the best long-term stocks to own.
9. InvenTrust Properties Corp. (NYSE:IVT)
Number of Hedge Fund Holders: 10
InvenTrust Properties Corp. (NYSE:IVT) is a Downers Grove, Illinois-based real estate investment trust (REIT). The company has 62 shopping malls in its portfolio, with an occupancy rate of 95.4%. InvenTrust Properties Corp. (NYSE:IVT) is focused on acquiring land and developing grocery-anchored or shadow-anchored shopping malls in the fast-developing Sun Belt region.
InvenTrust Properties Corp. (NYSE:IVT) is a defensive nature business that can easily weather the storm of a recession. Five of the top ten tenants of the company are grocers, and the company generates 20% of the annual rent from grocers and drug stores. These stores provide necessities and are very less likely to face a shutdown due to an economic slowdown.
Experts have a favorable outlook on InvenTrust Properties Corp. (NYSE:IVT) as one of the best long-term stocks. The company’s funds from operations (FFO) growth has been robust, with a 27% YoY increase in the core FFO per share in Q2. Furthermore, the management is forecasting a 4-5% growth in net operating income in 2022.
Third Avenue Management shared its outlook on InvenTrust Properties Corp. (NYSE:IVT) in its Q4 2021 investor letter. Here’s what the firm said:
“During the quarter, the Third Avenue Real Estate Value Fund entered into such a transaction by purchasing the common stock of InvenTrust Properties at prices below where the company had offered to repurchase shares via a tender offer. However, unlike traditional “risk arbitrageurs”, Fund Management’s intentions were to forego the buyback in anticipation of more value being recognized as the management team executed on its business plan for this recently listed business.
Founded in 2004, InvenTrust Properties Corp. (“InvenTrust”) historically operated as a privately-held Real Estate Investment Trust (“REIT”) that invested in a diverse set of commercial properties. However, the entity seemingly initiated a process to create liquidity for its investor base around 2015 when it internalized its management agreement with Inland Real Estate Group and subsequently spun-off its hotel assets (Xenia Corp.) and office properties (Highland REIT) into separate companies. The remaining shopping center portfolio served to form the InvenTrust platform, which was finally listed as a publiclytraded REIT during the quarter.
At the time of the listing, InvenTrust controlled nearly 10 million square feet of predominantly grocery-anchored retail properties that were approximately 93% occupied and located in select Sunbelt markets including Austin, Miami, Raleigh, and Tampa. The company also had very modest debt levels allowing it to launch a “tender offer” to purchase up to 4.0 million shares to support the transition to the public markets…” (Click here to see the full text)
8. The Buckle, Inc. (NYSE:BKE)
Number of Hedge Fund Holders: 23
The Buckle, Inc. (NYSE:BKE) is a Nebraska-based fashion retail company that is present in 42 states through its 451 stores.
Buckle, Inc. (NYSE:BKE) is experiencing growth across multiple segments and working on lowering its dependence on other stores operating in its retail space. The denim segment is leading the business and contributing 40% to the company’s top line as of 2022. The Buckle, Inc. (NYSE:BKE) is planning to open five new stores in 2022, in line with its expansion plans.
The Buckle, Inc. (NYSE:BKE) has generated a return on capital employed (ROIC) of 29% in the last twelve months. Furthermore, the stock also offers an annual forward dividend yield of 3.56% as of November 8.
Miller Value Partners also shared a positive stance on The Buckle, Inc. (NYSE:BKE) in its Q2 2022 investor letter. Here’s what the investment management firm said:
“Another name with a nice dividend yield, attractive valuation and significant shareholder alignment is clothing retailer The Buckle (NYSE:BKE). Based in Omaha, NE, management owns almost 40% of the company and is shifting its focus to online sales. The company is very well run and has been onto something for a long time. In each of the last 27 consecutive calendar years, The Buckle has generated positive free cash flow (not “adjusted” free cash flow), something that few companies can say. Despite this track record, the company trades at a trailing free cash flow yield in the teens with a rock-solid balance sheet, in our opinion, and a highly aligned management team in Warren Buffett’s backyard.”
7. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Holders: 39
Discover Financial Services (NYSE:DFS) is a Chicago, Illinois-based financial services company that came into being following its spin-off from Morgan Stanley in 2007.
Discover Financial Services (NYSE:DFS) operates an efficient online bank and is also home to two notable payment gateways. The first is the credit card network that competes alongside American Express Company (NYSE:AXP), Mastercard Incorporated (NYSE:MA), and Visa Inc. (NYSE:V). The corporation also owns the Pulse payment network, which is an interbank electronics fund transfer system. In a research note issued on September 26, Kevin Barker at Piper Sandler gave Discover Financial Services (NYSE:DFS) an Overweight rating and a target price of $124. Experts believe that the credit card business fundamentals remain strong for Discover Financial Services (NYSE:DFS)
Discover Financial Services (NYSE:DFS) has experienced stable dividend growth over the last ten years, with the quarterly dividend per share expanding at a compound annual growth rate (CAGR) of 11.6%. The stock offers an annual forward dividend yield of 2.38% as of November 8. Discover Financial Services (NYSE:DFS) has maintained solid loan performance with decent delinquency rates this year despite the economic uncertainty. Analysts think the company’s consistent performance makes it one of the best long-term stocks to buy.
As of Q2 2022, Discover Financial Services (NYSE:DFS) was held by 39 hedge funds.
6. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 40
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is an Israel-based provider of residential, commercial, and large-scale photovoltaic (PV), energy storage, and backup solutions.
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is a key beneficiary of the Inflation Reduction Act (IRA). There is a wide belief that the legislation will ensure rapid decarbonization of the US economy and that companies like SolarEdge Technologies, Inc. (NASDAQ:SEDG) will pave the way toward clean energy. This will result in superior shareholder returns.
In an investor note published on August 8, Mark Strouse at JPMorgan increased the target price for SolarEdge Technologies, Inc. (NASDAQ:SEDG) from $373 to $419 and maintained an Overweight rating on the stock. The significant upward revision in target price was due to the expected impact of the IRA on the transition towards renewable energy. SolarEdge Technologies, Inc. (NASDAQ:SEDG) is expected to capitalize on the changing trends and increase its market share in the coming years, making it one of the best long-term stocks to have in your portfolio.
ClearBridge Investments discussed its outlook on SolarEdge Technologies, Inc. (NASDAQ:SEDG) in its Q2 2022 investor letter. Here’s what the firm said:
“We are well-positioned to participate in the accelerating energy transition. High and rising utility costs combined with policy support are driving increased penetration of home solar plus storage systems in Europe. Israel-based SolarEdge Technologies (NASDAQ:SEDG) expects to see significant growth in solar installations in this market led by Germany and Italy, among others, where consumers are not only demanding solar on the roof but a complete system solution including batteries. This phenomenon is accelerating revenue growth for these companies.”
In addition to popular stocks like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), growing companies like SolarEdge Technologies, Inc. (NASDAQ:SEDG) also offer an opportunity to earn strong returns over the next decade.
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Disclose. None. 10 Stocks That Will Make You Rich In 5-10 years is originally published on Insider Monkey.
