The stock market is not a get-rich-quick scheme. While it could happen if you’re lucky, that’s not the way to approach investing. But stocks are a way to get rich. You just need to set the appropriate goals for generating fabulous wealth over time.
That means don’t buy penny stocks. More often than not, they are story stocks in search of a reason to exist, latching onto whatever trend is hot at the moment. They are also ripe for manipulation. Instead of creating wealth, penny stocks will destroy it. Instead, seek out quality, long-term growth stocks that can appreciate in value over many years.
Year-over-year (YOY) Walmart (NYSE:WMT) is a rather sleepy investment. Yet since its IPO in 1970, the grocery store giant has returned almost 300,000% compared to a 5,000% return by the S&P 500. A $10,000 investment in WMT stock when it went public would be worth $29.8 million today. And that doesn’t even include dividends.
Creating life-altering, generational wealth by investing in stocks is still possible today. You just need to look far enough into the future to visualize a company’s potential. The three long-term growth stocks below represent the same opportunity and can make you tremendously rich over the next 25 years.
Caterpillar (CAT)
Heavy equipment manufacturer Caterpillar (NYSE:CAT) is a stock you should consider owning for long-term wealth generation. Although the stock is up 11% year-to-date (YTD), it has pulled back 14% from its 52-week high.
Back in April when it had just hit that peak, I noted investors might want to sell the stock. I wrote that because Caterpillar is a cyclical company, “It’s an example of a stock I would normally recommend holding long-term but could see someone wanting to take profits before a downturn arrived.”
For a long-term investor, particularly one looking out to the year 2050, such gyrations are less of a concern. You may realize a few extra percentage points of gains by waiting but few people can exactly time a top or bottom. It is far better to buy a stock and regularly add to your position. That’s because over the years Caterpillar has been a superb stock to own.
While CAT has been publicly traded since 1925, just since the beginning of 2000 it has a total return over 6,000% compared to a 500% return by the benchmark index.
Big Cat has paid a dividend every year since 1933 and has raised the payout for 31 consecutive years, making it a Dividend Aristocrat. The dividend yields a respectable 1.7% annually.
The equipment maker will have its ups and downs in the years to come. But in 25 years, you can rest easy knowing your investment will be worth substantially more than it is today.
Jefferies Financial Group (JEF)
Investment bank Jefferies Financial Group (NYSE:JEF) makes its money on deal-making. Through capital markets activities, underwriting, financial advisory and asset management services, the firm has its hand in every corner of the market.
It seems clear a current roaring bull market will benefit JEF more than a black swan event like the 2020 pandemic. However, because the investment bank went public in 1983, it has been through its share of business and economic cycles. Over that time it has tripled the returns of the S&P 500, 9,600% to 3,200%. It is up nearly 1,000% since 2000, or twice the index’s gains.
Jefferies has been through many iterations. Originally founded in 1962, it was acquired and merged with various other financial services firms. In 2012 it merged with Leucadia National, which was often referred to as a mini Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) because of the similarities in its operations. In 2018, Leucadia changed its name to Jefferies Financial Group.
The investment bank has a long, rich history of paying and growing its dividend. Over the past decade, it has increased the payout at a compounded annual growth rate of almost 19% and over the last five years has raised it by 22% annually. The dividend yields 2.8% a year. Jefferies is a favorite investment of Warren Buffett and is one of his highest-yielding stocks.
Kroger (KR)
If you are looking for a long-term growth stock most similar to Walmart, then Kroger (NYSE:KR) should be on your list. It is the largest pure-play supermarket stock with over 2,700 stores.
Publicly traded since 1977, a $10,000 investment at the time would be worth $5.5 million today. Not too shabby for doing little more than putting the stock in your portfolio and forgetting about it.
The grocery store chain is attempting to acquire rival Albertsons (NYSE:ACI). However, it is running into interference from the Federal Trade Commission (FTC). The regulatory agency has opposed virtually every large acquisition made and last month announced it was suing Kroger to block the merger on antitrust grounds.
The position displays ignorance of the many competitive threats grocers face in the marketplace. Beyond the likes of Walmart and Costco (NASDAQ:COST) in the brick-and-mortar space, there are online grocers as well. Those include giants like Amazon (NASDAQ:AMZN) and Walmart to smaller operations like third party delivery services such as Maplebear’s (NASDAQ:CART) Instacart services.
Although the FTC typically loses in court when it sues, even if successful in this instance Kroger doesn’t need Albertsons to thrive. Also, investors will do well, all the while enjoying a dividend that currently yields 1.7% annually.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
