Seasoned investors realize that many people have accumulated wealth through long-term investing in stocks. A million dollars is a significant amount of money, especially for retirement years. Most people do not realize that it’s an achievable amount of money to make via long-term, regular investing. Today’s article introduces seven stocks that could help you get on the road to become a millionaire.
In addition to including strong stocks in a portfolio, it is important to invest for the long-term. That is in part because of the concept of compound interest. Put another way, with time, even what looks like a modest amount invested in stocks could add up to substantial amounts.
With the Rule of 72, we can calculate how soon an investment could double in value due to compounding. If we take the number 72 and divide it by the annual return (percent), then we get the amount of time it takes for the investment to double.
Let’s assume an investment returns 10% a year. Then we have, 72/10 = 7.2. In other words, in about seven years, that investment would double in value.
In 2020, the S&P 500 index returned over 16%. The index may not necessarily repeat that strong performance year after year. However, the S&P’s returns over the decades show that annualized returns over time are around 7% to 10% for the index.
Further research could help investors find stocks that could have a stronger performance than the benchmark. Therefore, it pays to do your due diligence and stay invested in the markets regularly.
With that information, here are seven stocks that could make you a millionaire in 2021:
- Bandwidth (NASDAQ:BAND)
- Cloudera (NYSE:CLDR)
- Lovesac (NASDAQ:LOVE)
- Lowe’s Companies (NYSE:LOW)
- Synaptics (NASDAQ:SYNA)
- Teva Pharmaceutical Industries (NYSE:TEVA)
- Axon Enterprise (NASDAQ:AAXN)
Stocks That Could Make You a Millionaire: Bandwidth (BAND)
52-Week Range: $50.89 – $198.60
Raleigh, North Carolina-headquartered Bandwidth is a cloud-based communications platform-as-a-service provider (CPaaS). Put another way, its customers can create and operate voice or text communications across mobile applications or connected devices.
In late October, Bandwidth released Q3 results. Revenue hit $84.8 million, up 40% year-over-year (YoY). Non-GAAP net income was $6.5 million, or 24 cents per share. Free cash flow in the third quarter was $9.3 million.
CEO David Morken said, “We delivered our strongest quarter ever and are raising our annual revenue outlook. The strength in our business is fueled by our relentless focus on customer success and highlighted by our robust dollar-based net retention.”
BAND stock’s price-to-book (P/B) and price-to-sales (P/S) ratios are 11.98 and 12.75, respectively, making the valuation overstretched. In the case of an upcoming decline toward the $140 level, long-term investors would find a better value. Meanwhile, the company could find itself a takeover candidate.
52-Week Range: $4.76 – $15.50
Palo Alto, California-based Cloudera offers enterprise software for cloud platforms that can be used for data management and analytics.
In early December, it released Q3 results. Revenue was $217.9 million, an increase of 10%. Non-GAAP net income was $47.7 million, compared to the non-GAAP net loss of $7.9 million last year. Further, non-GAAP net income per share came in at 15 cents. A year ago, it had been a non-GAAP net loss of 3 cents per share. Cash and equivalents stood at $567.5 million.
CEO Rob Bearden cited, “We believe that Cloudera has never been better-positioned to capture more of the rapidly growing data management and analytics market opportunity for hybrid multi-cloud solutions. As a result, we have announced today that the board has authorized the repurchase of an additional $500 million in shares of our stock.”
CLDR stock’s forward price-to-earnings (P/E) and P/S ratios are 31.06 and 5.01, respectively. In April 2017, Cloudera went public at $15 per share. I expect the company to create shareholder value for many quarters to come.
52-Week Range: $3.99 – $52.00
Our next stock comes from outside the tech space. Stamford, Connecticut-based Lovesac manufactures modular couches and bean bags. It sells its products in showrooms, malls and online.
Q3 results released in December showed revenue of $74.7 million, compared to $52.1 million a year ago. E-commerce contributed significantly to the net sales increase of 43.5%. Additionally, net income was $2.5 million, representing earnings of 16 cents per share. A year ago, the numbers had been a net loss of $6.7 million, or a loss of 46 cents per share. Cash and equivalents as of Nov. 1, 2020, was $47.7 million as compared to $27.9 million in Q3 2019.
CEO Shawn Nelson stated, “Lovesac’s third quarter results exceeded our expectations on the top and bottom line, a strong affirmation that we continue to successfully navigate marketplace challenges. Highlights include strong topline growth of 43.5%, a total comparable sales increase of 53.5%, gross margin expansion of 487 bps and Adjusted EBITDA of $6.0 million. These results speak to the resiliency of our business model and the exceptional job our team has done to meet customer demand in a challenging and rapidly evolving environment.”
LOVE stock’s P/B and P/S ratios are 8.13 and 2.42, respectively. A potential decline toward $42.50 would improve the risk-return profile. It is a small-capitalization stock that could still grow significantly. It could also find itself a takeover candidate.
Lowe’s Companies (LOW)
52-Week Range: $60.00 – $180.67
Dividend Yield: 1.44%
Mooresville, North Carolina-based home improvement retailer Lowe’s operates around 2,400 stores in the U.S., Canada and Mexico. 2020 was a banner year for the company as well as its peers, such as Home Depot (NYSE:HD). LOW stock was up more than 38% in 2020, while HD shares returned about 23%.
Q3 metrics showed sales of $22.3 billion, a 28% YoY increase from $17.4 billion in the third quarter of 2019. Net earnings of $692 million translated into diluted earnings per share of 91 cents. As of Oct. 30, 2020, cash and equivalents stood at $8.25 billion, compared to $794 million in Q3 of the previous year.
CEO Marvin R. Ellison said, “Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores.”
LOW stock’s forward P/E and P/S ratios stand at 17.99 and 1.45, respectively. Any decline toward $150 would improve the margin of safety for long-term investors.
52-Week Range: $44.41 – $107.43
San Jose, California-based Synaptics develops human interface solutions used in electronic products, such as fingerprint sensors, touch screen controllers and multimedia processors. Smartphones, tablets, personal computers (PCs), the Internet of Things (IoT), as well as various devices in automobiles all rely on technology offered by Synaptics.
In early November, Synaptics released FY2021 Q1 results. Revenue was $328.4 million, compared to $339.9 million a year ago. Non-GAAP net income was $66.7 million, or $1.85 per diluted share. In 2019, the comparable metrics had been $41 million and $1.22 per diluted share. Additionally, cash and equivalents stood at $243.9 million.
CEO Michael Hurlston cited, “Synaptics delivered a strong start to our fiscal year with first quarter revenues exceeding the mid-point of our guidance, gross margins above the high-end of our guidance, and the highest operating margins for the company in more than six years.”
Dean Butler, chief financial officer, also added, “For our second fiscal quarter, we see continuing strong demand for our products and enter the quarter with a strong backlog. Our fiscal Q2 represents a number of important milestones for Synaptics as we anticipate achieving certain key metrics of the financial model we outlined earlier this year, with non-GAAP gross margins above 50% and non-GAAP operating margins above 20%. We also anticipate IoT to be our largest revenue contributor for Q2, surpassing our Mobile products for the first time.”
The stock’s forward P/E and P/S ratios stand at 14.86 and 2.71, respectively. Long-term investors would find a better value in the case of a short-term decline toward $95.
Teva Pharmaceutical Industries (TEVA)
52-Week Range: $6.25 – $13.76
Israel-based Teva Pharmaceutical Industries is a global pharmaceutical company focusing on generic, specialty and over-the-counter (OTC) products. It also provides contract manufacturing services and an out-licensing platform to other pharmaceutical companies.
Q3 revenue was $3.98 billion, a decrease of 3% YoY. The decline was mostly due to lower revenue in generics and OTC products. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share (EPS) were $637 million and 58 cents, respectively.
Free cash flow was $506 million in the third quarter of 2020, a decrease from $551 million in Q3 2019. The decrease resulted mainly from lower cash flow generated from operating activities.
CEO Kåre Schultz said, “The quarter saw continued strong performance from our key growth drivers, led by AUSTEDO® and the biosimilar TRUXIMA®, while the market share of AJOVY® continued to grow in the U.S. and Europe … Over the past three years we have reduced our net debt by more than $10 billion to $23.8 billion. This debt reduction, and the continued improvement of our profitability, keeps us on track to achieve our long-term financial targets by the end of 2023.”
Teva stock’s forward P/E and P/S ratios are 3.63 and 0.63, respectively. Long-term investors may want to do more research on the shares.
Axon Enterprise (AAXN)
52-Week Range: $50.05 – $134.73
Not every company may necessarily appeal to every investor. For instance, if you follow certain environmental, social and governance (ESG) principles in your stock-selection process, you may want to avoid stocks in certain industries. Our final stock may be one of those businesses. Scottsdale, Arizona-based Axon Enterprise provides law enforcement technology solutions.
InvestorPlace readers are likely to know the company for its tasers and body cameras. It also has a range of cloud-based digital evidence and security management software.
Q3 results announced in November showed revenue of $166 million, up 27% YoY. Furthermore, net loss in the third quarter was a little less than $1 million, compared to net income of $6 million in the third quarter of 2019. Non-GAAP EPS stood at 40 cents, compared to 28 cents a year ago. Impressively, Axon currently has zero debt. Cash and equivalents totaled $628 million.
CEO Rick Smith cited, “We drove bookings growth of 62% sequentially and 56% year over year, aided by robust North American demand for body cameras and cloud software, and a rebound in TASER demand driven by the US federal and corrections markets. High-margin annual recurring revenue topped $200 million, doubling in two years’ time.”
AAXN stock’s forward P/E and P/S ratios are 96.15 and 12.11, respectively. As these metrics are on the frothy side, there could soon be profit-taking in the shares. However, in the long-term, I believe the company is likely to continue to grow its operations and revenue.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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