Stock investing can be a great way for you to grow your wealth and retire early. You don’t need to be a millionaire or have a lot of high priced stock market investments to retire early.
In this article, I’ll share with you the stocks I believe will help you retire early by making you a millionaire in 5 years.
Key Points
- Patience is the key to big gains with this assortment of small-cap and large-cap growth stocks.
Though there are a lot of ways to build wealth, few, if any, have been more consistent over the long run than the stock market. Compared to other investment vehicles, such as bonds and commodities, none can match the long-term average annual return of the benchmark indexes.
But you don’t have to settle for market-matching returns. The following five innovative stocks all possess the tools and growth outlooks to make their shareholders rich. All that’s required from investors is the patience to allow their investment thesis to play out.
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Teladoc Health
Some folks might call telehealth giant Teladoc Health (NYSE:TDOC) a one-hit wonder. After all, it was in the right place at the right time when the coronavirus pandemic hit. But focusing on a single year would ignore a very clear sales trend and treatment shift that we’ve been witnessing in the U.S. healthcare space.
In the six years leading up to the pandemic, Teladoc Health averaged annual revenue growth of 74%. That’s not a one-hit wonder. The company’s telemedicine services are making it more convenient for patients to get in touch with their doctor or a specialist, and it’s also making life easier on physicians by giving them an avenue to keep in touch with chronically ill patients. Although telehealth won’t replace all visits, a more personalized and convenient healthcare system can lead to improved outcomes for high-risk patients. That’s a recipe for less money out of the pockets of health insurers.
Teladoc also differentiated itself by acquiring leading applied health signals company Livongo Health during the fourth quarter. Livongo collects huge amounts of data on patients with chronic illnesses and leans on artificial intelligence to send its members tips and nudges to help them lead healthier lives. At the time it was acquired, the company was already profitable on a recurring basis, despite the fact that it had penetrated only a little over 1% of the U.S. diabetes market.
Teladoc Health is the face of personalized care in the 2020s and beyond, which gives it a good shot to make its shareholders rich.
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EverQuote
Small-cap stocks have the ability to make investors rich, too. For instance, online insurance marketplace EverQuote (NASDAQ:EVER) finds itself at the center of a steadily growing industry.
Whereas advertising and distribution within the insurance industry are expected to grow by an average of 4% annually through 2024, EverQuote anticipates that digital insurance advertising will grow by 16% annually over the same period. The company’s online marketplace helps consumers quickly price out policies, while at the same time allowing auto insurers to get the best bang for their advertising buck. Approximately 1 out of 5 consumers pricing a policy on EverQuote’s marketplace makes a purchase. This shift to digital advertising should allow EverQuote to sustain a double-digit growth rate for a long time to come.
What’s more, EverQuote is moving beyond auto insurance and into other verticals. Its marketplace now accommodates rental, home, health, and life insurance policies. Even though these new verticals represents a smaller percentage of total sales than auto insurance, revenue growth from these ancillary verticals has been superior to auto policies — 25% sales growth from auto policies in Q1 2021 vs. 41% from non-auto policies.
When EverQuote makes the turn to recurring profitability within the next year or two, the sky could be the limit.
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Vertex Pharmaceuticals
Specialty biotech stock Vertex Pharmaceuticals (NASDAQ:VRTX) is another company with all the tools necessary to make its shareholders rich.
Whereas most biotech stocks are losing money and in search of their first blockbuster drug, Vertex has made a habit of developing drugs that generate $1 billion or more in annual sales. More specifically, its success is tied to the multiple generations of gene-based therapies developed to treat cystic fibrosis (CF), a genetic disease characterized by thick mucus production that can obstruct the lungs and pancreas.
The company’s newest CF treatment, a combination therapy known as Trikafta, was approved by the U.S. Food and Drug Administration five months ahead of schedule and brought in almost $3.9 billion in its first year on pharmacy shelves. Targeting the most dominant CF mutation — a mutation roughly 90% of patients have — should allow Trikafta to eventually hit $6 billion in annual sales.
Vertex’s success in treating CF has turned it into a veritable cash cow. It ended March with over $6.9 billion in cash and cash equivalents, which’ll ultimately fund the nearly one dozen drugs being developed internally. Further, this cash could be used as an acquisition stepping stone. In terms of growth and value, Vertex is tough to beat in the biotech arena.
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Larsen & Toubro
L&T is a big beneficiary of the various infrastructure proposals announced in the recent Budget and the company has not only had a great execution history but has also exhibited financial strength and created value over the years. The company has delivered ROEs of 14% consistently over the last 10 years with operating margins of over 15% over this period. Yet, it continues to trade at attractive valuations with a PE under 15x, making it an attractive value-buy.
Dr Reddy’s
Now, with the rise in Covid-19 cases and need for medical support, demand for drugs has skyrocketed and boosted sales of players like Dr Reddy’s who has been a consistent performer by delivering stable net profit growth at 14% CAGR over the last 10 years. Pharma stocks have been underperformers since the past few years and the with a number of tailwinds on their side currently, things seem to be rosy especially for this stock.
Dr Lal Pathlabs
Dr Lal Pathlabs too has been witnessing a rise in testing diagnostic volumes around COVID-19. But had it not been for Covid, it would have still performed well given that it’s been a consistent cashflow generator and has delivered ROCEs in excess of 30%.
Vinati Organics
In line with rising pharma, the growth in specialty chemical stocks is recently trending. With China being at a disadvantage, exports from India have ramped up and Vinati Organics is a strong contender as a leading producer of IBB. It has delivered ROCEs of over 35% over the last 10 years and has growing profits at 24% CAGR.
Emerson Electric Company
- Annual dividend: $2.00
- Oct. 9, 2020 price: $69.95
- Dividend yield: 2.86%
Headquartered in Ferguson, Missouri, Emerson Electric is a Fortune 500 company that provides engineering and automation services to a broad range of consumer, commercial and industrial markets. It was founded more than a century ago.
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Aflac Inc.
- Annual dividend: $1.12
- Oct. 9, 2020 price: $38.10
- Dividend yield: 2.94%
Although Aflac is known as much for its mascot duck as its insurance, investors appreciate the company’s status as the biggest supplier of supplemental workplace insurance in the U.S. It covers 50 million people worldwide.
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Archer Daniels Midland
- Annual dividend: $1.44
- Oct. 9, 2020 price: $48.97
- Dividend yield: 2.94%
Food processing and commodities trading giant ADM does business on every continent except Antarctica — and business is good. The company posted $65 billion in net sales in 2019 alone.
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Pepsico Inc.
- Annual dividend: $4.09
- Oct. 9, 2020 price: $138.44
- Dividend yield: 2.95%
Pepsico is best known for its iconic namesake soft drink, but the company’s success comes from much more than just Pepsi-Cola. Among its brands and divisions are Frito-Lay, Quaker Foods, Lipton, Doritos, Gatorade, Lay’s, Ruffles, Tostitos and Tropicana.
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Cincinnati Financial
- Annual dividend: $2.40
- Oct. 9, 2020 price: $79.69
- Dividend yield: 3.01%
Casualty and property insurance are the core of Cincinnati Financial’s business, but the company manages a number of subsidiaries that deal with products and services such as life insurance, specialty underwriter’s insurance, underwriting, and leasing and financing services.
General Dynamics Corp.
- Annual dividend: $4.40
- Oct. 9, 2020 price: $143.66
- Dividend yield: 3.06%
General Dynamics is one of the biggest defense and aerospace companies in the world and one of the biggest companies period in terms of revenue. Its sprawling portfolio of products and services includes shipbuilding and ship repairs, IT and C4ISR solutions, weapons systems and munitions, combat vehicles and business aviation.Building Wealth.
Genuine Parts Company
- Annual dividend: $3.16
- Oct. 9, 2020 price: $100.39
- Dividend yield: 3.15%
Genuine Parts Company, which employs around 50,000 workers, does most of its business in the automotive replacements parts market. Industrial replacement parts and materials represent a smaller but still significant portion of its business as well.
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Kotak Mahindra Bank
Amidst the pandemic, the government took effective steps to ensure that credit availability was not an issue for businesses. In fact, the RBI reduced interest rates and announced moratoriums for borrowers to give them relief. While this was a positive step, many banks have been cautious and made sufficient provisions to safeguard their assets. Kotak Mahindra Bank is one such bank which raised funds at the start of the pandemic and has been extremely cautious when it comes to lending. It has been maintaining the quality of its book and has been consistently delivering 20%+ CAGR growth in profits since past 10 years.
HDFC Ltd
Another player benefitting from lower rates is HDFC Ltd. This NBFC has the brand, an experienced leadership team and the market share in loans which makes it a true leader.
Raytheon Technologies Corp.
- Annual dividend: $1.90
- Oct. 9, 2020 price: $59.91
- Dividend yield: 3.17%
Raytheon Technologies is one of the biggest aerospace research, development and manufacturing companies in the world. It’s also one of the biggest U.S. government private contractors, bringing in billions from advanced systems and technologies like aerostructures, avionics, drones and air defense systems.
Coca-Cola Company
- Annual dividend: $1.64
- Oct. 9, 2020 price: $50.81
- Dividend yield: 3.23%
Like its chief competitor Pepsico, the Coca-Cola Company is most famous for its universally known flagship soft drink. But also like Pepsi, that’s just the start. Coca-Cola also owns popular brands like Fanta, Dasani, Minute Maid, Schweppes, Honest Tea and Vitamin Water.
Nucor Corp.
- Annual dividend: $1.61
- Oct. 9, 2020 price: $48.86
- Dividend yield: 3.30%
Headquartered in Charlotte, Nucor is the largest steel producer in the U.S. It serves most major industries that use steel and steel products, including the construction, automotive, agricultural, oil and gas, transportation and infrastructure industries.
Pidilite Ltd
Pidilite Ltd too has been another promising player in the chemicals space. The company has a near-monopoly in both industrial and consumer adhesives as well as associated solutions. It has leveraged its position well enough to consistently deliver excellent shareholder returns and can be a good buy for your portfolio.
Coforge
Further adding on to the defensives in your portfolio, a mid-cap IT player such as Coforge can be a good pick because it has been continuously increasing its deal wins and has been ramping up on acquisitions to boost its capabilities in the BPM and digital solutions space, thereby benefitting shareholders. With the tech upcycle in place, quality players such as Coforge stand to continue delivering impressive returns to shareholders over the long term.
Conclusion
The stock market opens at 9:30 a.m. ET and closes at 4:00 p.m. ET on weekdays, and the shortened trading day of 1:00 to 4:00 p.m. ET on Wednesdays, which is known as a “half day”, is also used by some stock exchanges and stock markets in certain national securities exchanges to list futures contracts that expire in the last half of the month (such as Dow Jones Industrial Average futures (DJIA), S&P 500 index (SPX), NASDAQ 100 (NDX), and others).