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These two supercharged growth stocks can get the job done if you have $ 3,000 and are looking to triple your money in a decade. Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) have generated over 1,000% returns for shareholders over the past decade. Of course, past performance doesn’t predict the future, but it does highlight a company’s potential.
To triple your money over a decade, an investment should earn a compound annual rate of just 12% per year. So if these two excellent companies can generate only a tiny fraction of the returns of the previous decade over the next decade, investors will meet the goal of tripling their money.
Image source: Getty Images.
Netflix, the pioneer of streaming content
Netflix’s growth is fueled by the shift in consumer tastes it has helped set in motion. More than ever, people prefer to stream their content instead of watching traditional cable or satellite TV. It’s not surprising. A streaming subscription goes with you wherever you can take your phone. In essence, cable TV can only be watched where you are connected via cable.
The huge advantage of streaming over traditional providers led Netflix to attract 214 million subscribers at the end of its fiscal third quarter, up from 195 million in the same period last year. The coronavirus pandemic fueled the fire of Netflix’s growth as millions of people avoiding public places sought home entertainment.
Impressively, Netflix is ​​maintaining, if not increasing, the total number of customers from the increased levels at the start of the pandemic. People who have joined the service remain.
Netflix is ​​also delivering the services that customers love more and more efficiently. Its operating profit margin increased from 4.3% in 2016 to 18.3% in 2020. Delivering a great product at a healthy and growing profit margin is the recipe for good shareholder returns.
Amazon, the e-commerce giant
Amazon is also propelling itself forward on the back of a massive shift in consumer behavior. People find it more convenient to buy products online rather than going to stores in person, which makes perfect sense. Buying online offers several conveniences, including 24/7 shopping, home delivery (often free), ease of price comparison, and more.
Perhaps this is the reason why from 2013 to 2019, e-commerce sales in the United States as a percentage of overall sales fell from 5.8% to 11%, according to Statista. In addition, the trend will not reverse and e-commerce sales are expected to reach 19.2% of overall sales by 2024.
Amazon sales have already grown from $ 74 billion to $ 386 billion from 2013 to 2020. While purchases continue to move online, it’s unclear how far Amazon sales will go.
Amazon’s operating profit margin is lower than Netflix’s, but it’s also moving in the right direction. From 2013 to 2020, it went from 1% to 5.9%.
Data by YCharts.
Overall, Netflix and Amazon are great companies that have proven they can deliver great returns to shareholders. To justify their purchase even more convincingly, they may both be at near their lowest price-to-earnings ratios in the past five years (see graph). Investors looking to triple their money over the next decade could dramatically increase their chances of buying Netflix and Amazon stocks.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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