No matter how far the S&P 500 runs, some stocks hold such massive growth potential that they'd be too compelling to pass up even at current prices. Because for a growth stock, what seems overvalued today would still appear cheap if you looked back some years later. You just wouldn't want to miss out on those years of market-beating returns.
So we asked three of our Motley Fool contributors to pick one stock today that they believe is poised for huge growth in coming years. Here's why premium cooler manufacturer Yeti (NYSE: YETI), financial payments processor Visa (NYSE: V), and marijuana producer Aurora Cannabis (NYSE: ACB) made the cut.
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More than what it seems
Rich Duprey (Yeti): Right now high-priced coolers are Yeti's mainstay, though it actually sells more drinkware and accessories as it becomes more of a lifestyle company. And if it was content to stay in that lane and simply be a niche manufacturer of high-quality, durable coolers, it could easily be ignored because the market for expensive coolers is fairly limited. Low-cost models from Coleman and Igloo serve the purpose for the vast majority of consumers.
But Yeti seems to have ideas about growing bigger, much bigger, and its recent introduction of the Loadout GoBox 30 storage container shows it has a much larger upside than what it's already enjoying.
The GoBox is an exceptionally durable gear storage box, much like its coolers are certified bear-proof (yes, there is such a thing). It's meant to serve as a secure container for the rough-and-tumble world of the outdoors, but can also be used to stow away other items as well. And that's where the potential comes in as Yeti begins exploring other markets where safe, secure, and tough storage is essential, like job box and truck bed boxes, toolboxes, and more.
Because the Yeti name is already associated with strength and quality, it should be fairly easy to expand into other verticals. Of course, Yeti has yet to announce any such lens-widening initiatives, but the GoBox suggests it has those ideas in mind, and investors may want to make a bet here that it's not about to stop at simply stowing gear. At 25% off its high point following its IPO last year, this may be the spot to lock it in.
Time to invest in this megatrend
Neha Chamaria (Visa): With technological advancement, more nations across the globe are realizing the role of financial inclusion in economic development, which simply means providing the unbanked population access to basic financial services -- from banking to credit to insurance -- partly through the use of financial technology, or fintech. Combined, financial inclusion and fintech spans everything, from online and anytime-banking services, digitized payments, mobile wallets, payments apps, to data security and more. Yet nearly 80% of all transactions in the world are cash-driven today.
So what's the inference here? As financial inclusion gathers steam, cash will no longer be the king in most parts of the world some decades from now. Financial companies that join this journey should unsurprisingly benefit, especially the ones already making inroads into high potential cash-to-cashless regions. Visa, one of the world's largest payments processing companies, is a prime candidate.
Chances are you already use a Visa card -- the company, after all, had 3.36 billion debit and credit cards in global circulation as of the end of the second quarter. Now those cards are issued by financial institutions like banks and not Visa. All Visa does is process payments made through its co-branded cards and earn fees in return based on payment and transactions volumes that currently run into trillions of dollars. One can safely expect Visa's card base and revenue to rise as the world's banked population expands and e-commerce grows, both of which should boost demand for plastic money.
The opportunity is huge, but that's not the only reason why Visa shares could grow manifold in the coming years. Visa should continue to earn high operating margins and steady cash flows thanks to an asset-light business, which should eventually reflect in its share price. Combined, Visa stands a solid chance to earn market-beating returns for patient shareholders.
A top dog in the cannabis space
George Budwell (Aurora Cannabis): Marijuana is already a $150 billion-a-year industry, according to the United Nations. While most of this value remains in the hands of illicit black-market sellers, the slow march toward legalization across the globe could transfer the bulk of these sales to so-called white-market vendors in the coming decade. If that wasn't enough, the cannabis market is also forecast to get a major boost from derivative products such as sleep aids, prescription medications, cannabis-infused beverages, among many others. Some, in turn, think the industry could eventually achieve total sales of an eye-popping $500 billion by 2030.
The problem for investors, though, is that most pot companies are expected to either go bankrupt or get bought out well before the industry realizes even a fraction of this awe-inspiring growth potential. But investors do have a few attractive options nonetheless. For instance, Canada's Aurora Cannabis should not only be able to survive this industrywide bottleneck, but it has the pieces in place to actually became a titan of the industry. What's the lowdown?
Aurora is on track to become Canada's largest pot producer by next year. With a fully funded capacity of 625,000 kilograms per year, Aurora has the capacity necessary to grab the lion's share of the Canadian adult-use recreational and medical marijuana markets soon. Aurora's superior economy of scale over the rest of the field should also translate into higher gross margins, and hence profits, once the company gets through its costly build-out stage. As an important side note, the company has raced out to become the leader in international pot sales as well. That's an encouraging sign that Aurora can indeed maintain its status as a top dog of the emerging cannabis space for a long time to come.
Bottom line: Aurora's staying power should allow it to capitalize on this rapidly rising tide, making it a great pick for long-term-oriented investors.
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George Budwell has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Visa. The Motley Fool has a disclosure policy.