The daily ups and downs of the market can distract and keep you focused on the short term. But in reality, real wealth is made when you think in terms of years, buying great companies and letting them create value for their shareholders over time.
Naturally, the next question is which stocks will do that for my portfolio? Consider that a decade ago the S&P 500's largest companies included names like IBM and General Electric. There's a good chance that today's most significant corporations lose their spots over the next decade.
So which companies could rule the S&P 500 in the 2030s and create immense wealth along the way? Here are three growth stocks to buy and hold for the next 10 years and beyond.
1. Snowflake
It seems that artificial intelligence (AI) could change society over the coming decade, which has investors scrambling to pile into household names like Nvidia. However, AI needs to be trained on data, which could make Snowflake (SNOW -0.90%) a tremendous winner moving forward.
Snowflake is a company that lets users store and analyze data on the cloud. More specifically, the company's Snowflake Marketplace, where users can pay to access third-party data and integrate it with their own, could play a huge role in helping companies train future AI models.
Snowflake charges based on usage, which could embed growth into the company over time. Remember, data isn't destroyed, and more is generated over time. According to estimates, the world's total amount of data will grow more than 10-fold from 2015 levels by 2025. Meanwhile, Snowflake could still be in its early years. The company works with just 8,167 customers today, and there are millions of companies worldwide. That's essentially a greenfield of opportunity for Snowflake as data becomes critical to the modern enterprise.
The company's revenue is outrunning its spending, which puts Snowflake on a path for rapid earnings growth over the coming years. Analysts believe the company could quadruple its earnings-per-share (EPS) to more than $2 over the next four years, pricing the stock at a hefty future price-to-earnings ratio (P/E) of 76. However, if you're thinking 10 years and beyond, Snowflake could grow into its valuation and then some.
2. Visa
You probably don't pay for things with cash as often as you used to. The broader economy is moving increasingly into non-cash payment methods like digital wallets, debit, and credit cards. Assuming you use any of those, you've probably done business with Visa (V -0.86%) and not realized it. Visa is a payment network, meaning it's the communication line between banks and other financial institutions where your money is and the stores you are swiping your payment card at.
Think of Visa as the toll booth of the economy. It facilitates secure transactions and takes a small percentage of the transaction as a fee in exchange for this service. Now think of all the transactions happening every second across the world. It shouldn't surprise you that Visa has been a remarkably successful company and stock over the past decade. Visa now does $31 billion in annual revenue (that's a lot of fees), and the stock has appreciated by 400% over the past decade.
Visa seems poised to do more of the same, which lands it on this list. The company prints cash profits, turning every $0.45 of revenue into free cash flow. Analysts believe the company will grow EPS by an average of 15% annually over the next three to five years, driven by steady growth and cash profits that can repurchase shares. The stock also trades at a PEG ratio of just 1.7, signaling that Visa is reasonably valued given its growth prospects. Investors buying and holding Visa could be very happy a decade from now.
3. Tesla
You might see electric vehicle company Tesla (TSLA -0.25%) on this list and wonder why, given the company's existing place among the S&P 500's largest names. Tesla has indeed made investors fortunes already on the back of pioneering the electric vehicle industry. However, a closer look reveals that the company's golden years could still be ahead.
Tesla has built multiple factories to manufacture its top-selling Model 3 and Model Y vehicles, but it's what's on the way that should have investors excited about the future.
The launch of Tesla's first passenger truck, the Cybertruck, should be coming soon -- potentially later this year. Additionally, Tesla has spent years working on autonomous driving, which Elon Musk believes could take the business to new heights. Thinking even longer term, there are smaller projects in the works with huge potential, like Tesla Bot and Tesla's energy storage business.
The market has consistently valued Tesla stock as more than a vehicle company, but it's hard to call shares cheap after they've run 100% since the beginning of the year. Analysts believe the company's EPS could nearly triple by 2030 to more than $10 per share, but that would still value shares at a future P/E of 25.
Instead, consider putting Tesla on your watchlist and waiting for a market correction to knock the stock down to a more reasonable price. While Tesla's future seems very bright, shares may have gotten a little too hot in the near term.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Snowflake, Tesla, and Visa. The Motley Fool has a disclosure policy.
