Building long-term wealth requires patience. Instead of short-term trading, it requires finding companies that can compound for decades. Long-term investment stocks will deliver outstanding returns in the long run as they increase revenues and compound earnings.
Selecting wealth building stocks requires an understanding of themes and trends underpinning growth. Secular trends can support growth for decades and the best-positioned growth stocks reap the benefits.
A great example is the rise in e-commerce and the decline in brick-and-mortar stores. Amazon (NASDAQ:AMZN) positioned itself as the lowest-cost online retailer with the widest selection, setting it up for two decades of stock price appreciation.
In the coming decades, there will be long-term investment stocks that will benefit from secular trends. These themes present huge total addressable markets for certain companies.
Thus, if you want to get rich with stocks, businesses taking part in or satisfying demand in these areas will be huge winners. Here are a few high return long-term stocks that will soar over the long term.
Lennar Corporation (LEN, LEN-B)
Generation X, Millennials and Generation Z are settling down later than the boomers did. Indeed, Redfin research shows that younger generations’ homeownership rates are tracking below that of the Boomer generation. Thus, there is a massive tailwind for home builders such as Lennar (NYSE:LEN, NYSE:LEN-B) as the gap closes.
Lennar is the second-largest home builder in the U.S. besides the household formation from millennials and Gen Zs, the company has another tailwind. The U.S. housing market is massively under supplied.
Home construction has lagged household formation since the Great Financial Crisis in 2008. As a result, U.S. housing has increasingly relied on sellers.
But that has changed after the Federal Reserve’s rate hikes this cycle. Mortgage rates have skyrocketed to above 7%. As a result, homeowners who financed their existing homes at 2-3% rates are reluctant to sell, leading to a highly under-supplied market.
In terms of financial performance, Lennar has had tremendous growth. Revenues soared from $3 billion in fiscal year 2010 to 32.8 billion in FY2022.
However, in the medium term, the company is experiencing revenue declines as the Covid-19-induced home-buying frenzy abates.
Second quarter 2023 revenues declined as average prices fell to $449,000 compared to over $500,000 in the previous year. Earnings were lower at $872 million versus $1.3 billion.
However, the report also highlighted a lot of green shoots. Volumes of home deliveries grew 3% YOY to 17,074. Meanwhile, costs declined, leading to a bounce back in gross margins. Management expects further cost declines as inflation in inputs like lumber moderates.
Lennar’s position as a national home builder sets it to serve an under-supplied market. Over the next decade, it will be one of the top wealth building stocks. As of this writing, the stock is up 38.5% year-to-date. But the stock is still cheap, trading at a forward price-to-earnings of 9.
Alphabet (GOOG, GOOGL)
Despite fears of competition from AI-powered Bing, Google’s parent company, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), has much going for it. In its core market – Search – it dominates the competition with over 85% market share on desktop and above 95% on mobile.
Beyond Search, Alphabet is appropriately positioned for growth in several secular trends.
It has been a leader in AI research since acquiring DeepMind in 2014. Its AI divisions have been training various LaMDA and PaLM models for several years.
Search has been using AI in its algorithms and in advertising to create prompts that encourage purchases.
Although Alphabet has been slow to release its AI products because of safety concerns, it’s now quickly bringing these innovations to market. During its Google I/O conference in May, the company announced several AI features that will integrate into Google Workspace and Search.
Another underappreciated business is YouTube. In video streaming, it’s a juggernaut and surpassed 80 million music and premium subscribers in September 2022. YouTube generated $6.7 billion in advertising revenues in Q1 2023. As streaming displaces traditional TV and cable, revenues will continue to grow.
Its fastest-growing division, Google Cloud, is in expansion mode. Last quarter’s revenues were $7.45 billion, growing 28% YOY.
Although the business competes with AWS and Azure, plenty of growth lies ahead. After all, McKinsey estimates that $3 trillion of EBITDA is up for grabs in the cloud by 2030.
Finally, Alphabet has been an innovation machine with a history of creating new businesses. For instance, its autonomous driving division, Waymo, wants to make self-driving a reality.
Considering these massive tailwinds and the history of innovation, it’s surprising that the market is treating Alphabet with skepticism. It trades at a forward P/E of 19.20, an opportunity for investors looking for long-term investment stocks.
Johnson & Johnson (JNJ)
According to Statista, global health spending per person will increase from $1,129 in 2019 to $1,515 in 2050.
There is no better way to play this trend than Johnson & Johnson (NYSE:JNJ), one of the largest pharmaceutical and MedTech companies globally.
This year, JNJ stock has underperformed for various reasons. Sector rotation from defensive stocks to growth has clearly hurt the stock. Another headwind has been the drug pricing provisions from the Inflation Reduction Act. Finally, its talc lawsuits have also been an overhang over the stock.
However, things are looking up for the stock. The company recently spun off Kenvue (NYSE:KVUE), its consumer products business. And management plans to complete the separation by year-end. Once completed, the company will be a more focused healthcare company.
With Johnson and Johnson, you enjoy the benefits of diversity and scale. The company has 26 platforms – 14 in pharmaceuticals and 12 in MedTech – with over $1 billion in sales. The breadth and necessity of its products make JNJ stock one of the best long-term investment stocks to buy.
The pharmaceutical portfolio is a best-in-class franchise. The segment produces top drugs, for instance, Darzalex for multiple myeloma and Invega for schizophrenia.
In medical devices, the company has a dominant position and is making innovations. In Q1 2023, medical device sales grew 7.3% to $ 7.48 billion.
The company is launching new products, such as its orthopedic total knee replacement system, VELYS. Already, it’s the fastest-growing system in the U.S.
Because of its leadership across pharma, orthopedics and surgery, and a robust second place in vision, the company will benefit from an aging global population. Its potent pharmaceuticals and MedTech franchise, an AAA rating and a healthy 2.90% dividend yield make JNJ stock the perfect Sleep Well at Night (SWAN) stock.
On the date of publication, Charles Munyi did not have (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.
