Most investors dream of "life-changing" stocks -- investments that deliver such huge returns over the years that they really do change the way we live. Of course, out in the real world, many stocks that look like they could be life-changers turn out to be quite risky. Still, if you choose well, the rewards can be enormous.
With all of that in mind, we asked a team of Foolish investors to each name a stock with life-changing potential. Here's why they like Amazon.com (NASDAQ: AMZN), Alibaba Group Holding Ltd. (NYSE: BABA), and General Electric (NYSE: GE) at current prices.
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Lots of investors' lives changed already -- with more to come
John Rosevear (Amazon.com): Amazon has already been a life-changer for many investors, of course. But despite the company's amazing run over its first two decades, I think it's well-positioned to keep piling up outsized growth for years to come.
Think about it: Amazon is still, today, finding ways to generate significant revenue growth, quarter after quarter, by optimizing its current businesses and expanding into new ones, constantly. Just in the last year, Amazon has entered the grocery space with its acquisition of Whole Foods Market, has laid the groundwork for a major entry into the pharmacy market, and is clearly exploring a move into automotive retail.
As if that wasn't enough, Amazon is also busy building out its artificial-intelligence expertise and expanding its Amazon Web Services cloud-infrastructure business to capture a larger share of a rapidly growing market.
The upshot: Steady (and substantial) revenue growth, quarter after quarter. Even excluding the effects of the Whole Foods acquisition, Amazon's revenue grew 29% to $42.4 billion in the third quarter -- following a 25% year-over-year jump in the second quarter.
Of course, profits are hit-or-miss with Amazon, as CEO Jeff Bezos keeps plowing all available cash into new opportunities. But that's why I think Amazon will keep growing and rewarding shareholders for years to come.
Too big to comprehend
Cory Renauer (Alibaba Group Holding Ltd.): Imagine for a moment the sort of life-changing returns Amazon might generate for its shareholders if it also owned eBay, Paypal, Uber, and Twitter. In a sense, China's Alibaba is all these companies and a lot more.
While you might be familiar with Alibaba's services for large manufacturers, Taobao for independent sellers and Tmall for larger brands are also growing by leaps and bounds. In the month of June, 529 users accessed the company's retail marketplaces on mobile apps, which was 22 million more active users than just three months earlier. In fact, Alibaba's online retail operations command such a large swathe of the region's available market that its competitors have resorted to joining forces.
Credit cards were extremely rare when Jack Ma founded Alibaba in 1999, which helped the company's payment processing services quickly gain scale. Led by Ant Financial, the company's financial arm served over 630 million active users during the year ended in March.
When it comes to ride-hailing on the world's most populous continent, Alibaba has a large stake in Didi Chuxing. The popular app reigns supreme in Asia with around 17.5 million drivers compared to around 0.63 million registered with Uber. Although social media isn't the company's strongest suit, the company also owns around 31% of Weibo, a micro-blogging application with about 361 million monthly active users.
Alibaba shares look awfully pricey at around 18.3 times trailing sales, but it's growing by leaps and bounds. Total revenue for the latest quarter jumped 56% higher, driven in part by a cloud computing segment that grew 96% during the three months ended June compared to the previous-year period. With fingers in enough pies to bankrupt a bakery, this internet giant is poised to report eye-popping growth for many years to come.
Even an underperforming investment can change your life
Chuck Saletta (General Electric): Industrial titan General Electric (NYSE: GE) will always hold a place in my heart, even though I've sold a covered call against my position with the understanding that it may be soon be called away. While I expect to book a capital loss despite holding its shares for over 15 years, the choice to invest in General Electric radically changed my life for the better.
General Electric was the first individual stock purchase I ever made inside my IRA. By taking control of that account, I freed myself from the clutches of an over-priced and under-performing broker and started down the path of a lifetime of Foolish investing. That shift forced me to learn how to think about investing intelligently and develop an end-to-end strategy that has worked well, despite this one stock's struggles.
Believe it or not, General Electric once did look like an attractive investment. Three factors that made it look like it was worth investing back then still form the foundation of my end-to-end strategy today:
- Its once well-covered and growing dividend.
- Its apparently reasonable valuation compared to its then expected prospects.
- The diversification within its business lines.
A well-covered and growing dividend gives you as an investor an increasing and direct reward for the risks you take investing. A decent valuation provides you with some downside protection when the stock market's momentum runs out. And prudent diversification protects your end-to-end portfolio when an individual investment (such as General Electric in my case) doesn't work out.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chuck Saletta owns shares of General Electric, and is also short December 2017 $24 call options on General Electric. Cory Renauer has no position in any of the stocks mentioned. John Rosevear owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.