When it comes to investing in cybersecurity expert CrowdStrike Holdings (NASDAQ: CRWD), restaurant chain Portillo's (NASDAQ: PTLO), law-enforcement, technology-provider Axon Enterprise (NASDAQ: AXON), and digital-advertising specialist The Trade Desk (NASDAQ: TTD), I'm not necessarily saying these are timely trading opportunities. But these four stocks could help investors get rich, given a long enough time horizon.
When looking at the long term (I'm thinking well beyond five years), it's important to find businesses that are nowhere near exhausting the opportunities in their respective industries. And indeed, this quartet has what seems like endless room to safely grow for decades.
Therefore, if you're looking to invest $4,000 today and forget about it for the next five, 10, or even 20 years, then these four stocks could allow for that.
As an aside, investing budgets are personal, so take a personalized approach to my $4,000 suggestion. Perhaps this is a lot of money for your budget. If that's the case, consider splitting it up into four equal investments of $1,000. Whatever you personally decide, it's important never to invest too much money in a single stock; diversification is important for investors who want a high probability of success.
Given the personal nature of investing budgets, here are four stocks that could help make investors rich over the long term.
CrowdStrike is a cybersecurity company that consistently gets customers to spend more money. The company's cloud-based Falcon platform has more than 20 modules for customers to choose from, based on their individual needs. Generally speaking, customers increasingly discover their need for more protection over time and turn to CrowdStrike for more help.
CrowdStrike doesnt reportfinancial results for the third quarter of 2023 until the market closes on Nov. 28. But in the second quarter, management reported that 63% of customers used five or more software modules, but only 24% used seven or more. These percentages are growing, but it shows how much more growth potential CrowdStrike has within its existing customer base.
As a software business, CrowdStrike has recurring revenue. As of Q2, the company's annual recurring revenue (ARR) was at $2.93 billion. But within the next five to seven years, management expects module-adoption rates to surge, carrying its ARR over $10 billion. That would be massive for this business.
Cybersecurity is an industry full of complexities and jargon. If investing in cybersecurity stocks consequently feels out of your league, then the next stock offers a simpler business to sink your teeth into.
While CrowdStrike offers investors one of the hottest growth opportunities on the stock market, a restaurant stock such as Chicago's Portillo's won't provide the same level of exponential growth. But expanding from just 79 locations today to 600 locations in the next 20 years can be an enriching journey for shareholders nonetheless.
Portillo's is a restaurant with high average-unit volumes (annual sales per location) and strong restaurant-level profitability -- a great recipe for expanding by building new locations. Over the long term, management expects to grow its locations by 12% to 15% annually, leading to a high-teens compound annual growth rate (CAGR) for revenue.
Whether it's a flashy company or ho-hum, any business that can sustain a high-teens growth rate for many years will likely perform well on the stock market. For perspective, 600 locations would make Portillo's about as big as Cracker Barrel or Texas Roadhouse today, meaning its vision is definitely attainable. Moreover, both Cracker Barrel and Texas Roadhouse greatly rewarded shareholders when they were opening new locations at a strong pace.
It might be a quiet performer most years. But over the long term, I expect Portillo's stock to be a market-beating investment.
Much could be said about recent growth for Axon (it's had seven straight quarters of better-than 30% revenue growth). However, when thinking about this in terms of "getting rich," as the headline suggests, investors may wish to broaden their perspective and consider how much optionality this company has; optionality is the ability to expand into new markets and use cases.
For starters, the company has a sticky customer base; local law-enforcement agencies use Axon's Tasers, body cameras, and software. But increasingly, the company is finding customers at the federal government level, which is no small feat. It's finally getting some momentum, with half of its top deals in 2023's Q3 coming from federal customers. And management estimates that this is a $10 billion market. That's nearly seven times Axon's current trailing-12-month revenue.
Moreover, Axon has tremendous opportunity to grow in international markets. In Q3, just 17% of the company's revenue came from outside of the United States. That said, Axon's adoption rates overseas are promising, considering Q3 international revenue was up a whopping 52% year over year.
Finally, the sky is the limit with Axon's potential customer base. Management believes that its software could be used outside of law enforcement, such as in the justice system. Its software can help attorneys save time on paperwork, which could be a large, lucrative niche.
In summary, Axon's growth has been spectacular in the past. And there's no reason to believe that it can't keep growing into a powerhouse over the next decade or more.
4. The Trade Desk
Just like Axon, advertising-technology (adtech) company The Trade Desk has been a powerhouse for growth. Since the company went public in 2016, trailing-12-month revenue is up more than 1,100% and currently sits at $1.8 billion. But its past growth doesn't preclude more spectacular growth to come.
The Trade Desk is approaching digital advertising with its Unified ID 2.0 (UID2) solution. This system is a replacement for traditional third-party cookies and is being adopted by major players at a surprising pace. The company didn't make UID2 as a proprietary technology, so it won't be the sole beneficiary of its adoption. However, it will be a beneficiary because it favorably changes the system that digital advertising has been built on historically.
The Trade Desk offers programmatic advertising, which basically means it can be targeted to certain user demographics and hence more effective. Moreover, its results can be measured. And measurement is improving all the time thanks to partnerships such as its deal with retail giant Walmart. Thanks to this integration, advertisers can increasingly see whether ads directly lead to sales and fine-tune their approaches as needed.
The Trade Desk's software could sell itself for many years thanks to its clear value proposition to advertisers. As mentioned, the company has $1.8 billion in trailing-12-month revenue, which is substantial. However, it's operating in a space that's measured in the hundreds of billions of dollars, providing plenty of runway ahead.
A final note
As stated at the beginning, this isn't necessarily a timely list of investment opportunities. For some, valuations are high, reflecting strong bullish sentiment from the market. Sentiment, however, can fluctuate, and each stock could consequently see ups and downs.
This merely underscores the need to stay the course with CrowdStrike, Portillo's, Axon, and The Trade Desk. As long as these companies are still doing a good job at capturing their respective growth opportunities, investors should likely keep holding on for the ride.
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Jon Quast has positions in Axon Enterprise. The Motley Fool has positions in and recommends Axon Enterprise, CrowdStrike, Texas Roadhouse, The Trade Desk, and Walmart. The Motley Fool recommends Cracker Barrel Old Country Store. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.