Chances are you've heard of Shopify (NYSE: SHOP), the platform that's helping small and medium-sized businesses participate in the surging market for e-commerce. Its early lead in this industry has helped the stock nearly triple in its short life as a public company.
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Most stocks won't come close to that level of market-thumping returns without a few major, long-term competitive advantages. Below, Motley Fool investors highlight three such companies. Read on to find out why Wayfair (NYSE: W), NVIDIA (NASDAQ: NVDA), and Caretrust REIT (NASDAQ: CTRE) could outpace Shopify from here.
Invest in a decades-long trend (and get paid along the way)
Jason Hall (Caretrust REIT Inc): Just as Shopify is riding the trend of e-commerce growth, Caretrust REIT is set to profit from another huge trend. Over the next couple of decades, America's 65-plus population is going to double. And since this generation -- the baby boomers -- is almost certain to live longer than any prior generation, we are on track to see the biggest population of 80-plus Americans in history in the future. The catch is, there simply aren't enough senior housing, healthcare, and rehab facilities to meet the needs of this growing older population.
Caretrust is a small real estate investment trust that specializes in the kinds of facilities that are on track to be in short-supply without significant expansion. Since being taken public a few years ago, management has already more than doubled its property count; however, with less than 200 facilities in its portfolio, it's still a small fish in a very big -- and expanding -- pond.
If Caretrust management can continue to take advantage of the megatrend of aging baby boomers in coming decades, it very well could make for one of the best dividend growth investments out there. With a current yield of 4%, Caretrust is a great way for investors to get paid while riding a very long-term trend to build their wealth.
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Disrupting the furnishings industry
Demitri Kalogeropoulos (Wayfair): If you have any doubt that e-commerce companies can disrupt almost any retailing industry, you should take a look at Wayfair's latest earnings results. The home furnishings specialist has booked a 37% sales increase over the past nine months as its customer base passed 10 million people -- up from 7.4 million last year.
This founder-led business has bold plans aimed at continuing that strong momentum. CEO Niraj Shah and his team are investing in a proprietary shipping network that will allow for delivery of bulk furnishing items, including sofas and dining tables, in days rather than weeks. That infrastructure is already shortening the time between purchase and delivery and improving customer satisfaction in the process. Wayfair counted 61% of its sales as coming from repeat shoppers last quarter as the average order value ticked up to $250.
Like Shopify, Wayfair hasn't yet generated profits to speak of. Net loss worsened to $171 million over the past nine months from $150 million last year. That figure is being held back by investments in the business, including tech development and advertising. If you believe management, though, Wayfair should eventually reach adjusted profit margin of between 8% and 10%, compared to the 2% loss it has averaged over the past two years.
A stock with a chip on its shoulder
Dan Caplinger (NVIDIA): It might seem like a stretch to think that NVIDIA could have anywhere close to the growth potential Shopify has, given that the graphics chip giant already has a market cap of more than $125 billion. Yet NVIDIA's three-year total returns leave Shopify in the dust, and there are several catalysts that could boost NVIDIA even further.
NVIDIA's core business is strong, with solid demand for the company's chips for gaming applications. Moreover, the graphics-chip maker is seeing amazing growth in the data center arena, where sales more than doubled from year-ago levels in the third quarter of 2017. Looking further into the future, NVIDIA is working on the cutting edge of key initiatives like artificial intelligence in the self-driving car realm. And last but not least, NVIDIA is currently enjoying significant tailwinds from the success of bitcoin. With the digital cryptocurrency continuing to soar, mining activities are helping to provide at least a temporary boost to the company's sales and profits.
Shopify has good prospects, but NVIDIA has already established itself as an important leader in a much larger market. With continued effort, NVIDIA has the potential to keep outgrowing Shopify to become a true giant in the technology industry.
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