Investing isn't always all about profits and share gains. Some companies earn your investment by changing the world for the better. If, by doing so, shareholders end up with life-changing stock returns, that's a win-win-win situation.
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We asked three of The Motley Fool's top contributors to share their finest life-changing businesses and investments. Read on to see how Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), NxStage Medical (NASDAQ: NXTM), and Chuy's Holdings (NASDAQ: CHUY) earned their places in this exclusive list.
Making life easier for dialysis patients
Dan Caplinger (NxStage Medical): The rise of diabetes and related diseases has dramatically increased the number of patients who need dialysis treatments, and traditional options for getting dialysis involve lengthy, inconvenient visits to clinics on a frequent basis. NxStage Medical is seeking to change that with home-dialysis equipment that allows its customers to get life-saving treatment on their schedule and in the comfort of their own homes. Many patients have embraced NxStage's System One platform, and sales of the device for home use have been growing even faster than NxStage's other distribution channels.
Looking forward, NxStage wants to carry System One even further. By the end of the year, the company expects to have its new system for peritoneal dialysis launched, which would allow patients to treat themselves anywhere they can maintain a clean space, including both home and work. Although physicians have to determine whether peritoneal dialysis is a good option for each patient, NxStage believes that anything that makes dialysis treatment more convenient and comfortable is worth pursuing.
NxStage does face some challenges, as it has said recently that sales growth hadn't been as strong as it had hoped. However, the company's long-term prospects are still sound, and NxStage hopes that future developments will raise awareness and drive revenue growth in the future.
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A small restaurant chain with very big ambitions
Jason Hall (Chuy's Holdings): Over the past year, shares of Tex-Mex chain Chuy's Holdings have fallen 36% from the peak. And not for no reason -- after all, many casual sit-down restaurants have struggled with some of the same challenges Chuy's has recently faced, primarily a slight dip in traffic at restaurants open more than one year. However, I'm of the opinion that this has created an opportunity.
At last report, Chuy's operates less than 85 total restaurants in 16 states, and given the popularity of Mexican cuisine, the chain could potentially operate hundreds of locations, especially with its focus on high-quality, low-cost cuisine.
And even with this low-cost focus, Chuy's restaurants deliver solid economic results, including restaurant-level operating margins above 19% and average per-unit three-year cash returns of around 30%.
So what makes Chuy's a potential life-changing investment? With a market cap of barely over $405 million at recent prices, and a steady rate of double-digit store and revenue growth that could last for a decade or even more, there's tremendous opportunity in this small chain. The key? Whether or not the chain's appeal will scale up from a few dozen, and be as successful in hundreds of locations.
But with its stock trading at 24 times trailing earnings, it's cheap enough that, even if Chuy's doesn't turn into a 10-bagger, there's still a good shot for market-beating returns.
"M" is for corporate makeover
Anders Bylund (Alphabet): Oh sure, you're already using Alphabet's Google-branded search tools every day. Maybe you have an Android phone in your pocket, too, plus there's a Chromecast attached to your living room TV, and your kids use Chromebook computers in school. All of these life-changing products are already firmly established leaders in their respective fields. So where does the company go from here?
Alphabet is wriggling out of the online business cocoon that brought it this far. Over the next decade or so, you'll see the company evolving into a multi-industry conglomerate with lots of real-world consumer interaction.
To wit, Alphabet already sells Nest-branded smart thermostats and smoke alarms, and the company runs a high-speed internet access service. Looking further down the road, Alphabet subsidiary Waymo is an early leader in developing self-driving cars. The Verily research lab is developing smart contact lenses with built-in glucose checking features for diabetics, and is exploring new robotic surgery techniques in a partnership with Johnson & Johnson. Under the Calico banner, Alphabet hopes to halt human aging -- just for starters.
If that's not a life-changing batch of projects, I don't know what is. And Alphabet is very likely working on many more game changers behind the scenes, not yet ready to share with the public. This company is rebuilding itself to become a cross-disciplinary business with centennial staying power. A core tenet of that strategy involves running businesses that make life better on a global scale, making Alphabet itself indispensable.
That's life-changing news for investors, too.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Alphabet (A shares). Dan Caplinger owns shares of Chuy's Holdings. Jason Hall owns shares of Alphabet (A shares) and Chuy's Holdings. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Chuy's Holdings, Johnson & Johnson, and NxStage Medical. The Motley Fool has the following options: short October 2017 $30 puts on Chuy's Holdings. The Motley Fool has a disclosure policy.