Everyone and their dog is looking for millionaire-maker stocks that could set them up for life.
The truth is, it’s not so hard to find them. The difficult part is being able to hold them for 30 years to allow the miracle of compounding to take effect. Most people don’t have the diamond hands necessary to ride out the inevitable rough patches that every excellent company faces.
Financial experts suggest that time in the market rather than market timing creates lasting wealth.
The U.S. News and World Report discussed the 10 best-performing stocks of the past 30 years in May. Monster Beverage (NASDAQ:MNST) was the number one stock on the list, with a 30-year total return of 213,088%. A $10,000 investment over that time period turned into $21.3 million.
Could you retire on $21 million? Probably, with a bit of self-control.
But seriously, the 10 names in the U.S. News list are all reasonably familiar to investors. We all had an opportunity to ride along, but most of us weren’t patient enough.
For those who think they could be, here are three names to ride from $9,000 to $9 million. Over 30 years, that’s a compound annual growth rate of 25.9%. By comparison, turning $10,000 into $21.3 million is a compound annual growth rate of 29.1% over 30 years.
It won’t be easy, but we can all dream. Here are my three picks.
Ulta Beauty (ULTA)
The easiest way to find stocks that stand the test of time is to look for quality companies that continue to grow and reinvest their profits into more growth and profits — rinse and repeat. The power of compounding takes care of the rest.
I’ve always been a fan of Ulta Beauty (NASDAQ:ULTA). I saw its beauty business as more accessible to the average person than Sephora and others. I especially liked combining traditional cosmetics retailing with hair salons and other experiential ideas.
It also didn’t hurt that Ulta had a talented chief executive officer (CEO) for many years — Mary Dillon, the current CEO of Foot Locker (NYSE:FL), was the big cheese at Ulta between July 2013 and June 2021 — a period when its stock appreciated by more than 250% — and pushed the company to open stores across the country.
Now run by Dave Kimbell, Dillon’s second in command between December 2019 and his appointment to replace her in June 2021. Before becoming president, Kimbell was the company’s chief marketer for about five years.
In the 24 months Kimbell’s been in charge, ULTA stock has gained nearly 37%, almost 4x greater than the S&P 500.
I know what you’re thinking: That’s good, but it’s not 26% annually. True; however, I believe the company should revisit international expansion into Canada and elsewhere.
It has more than 1,350 stores across the U.S., almost all of them located off-mall, where it can generate an omnichannel experience its customers appreciate and support.
Here in Canada, I see Sephora and Lush in the malls. After that, it’s mostly drug stores like Shoppers Drug Mart controlling the market — a case of having the right idea at the wrong time.
Fair Isaac (FICO)
Regarding stock symbols, Fair Isaac (NYSE:FICO) has one of the most recognizable among U.S.-listed stocks. After all, who doesn’t know what a FICO score is?
In mid-June, I suggested that investors get out of FICO stock because it was trading at a premium. In the month since, it’s gained about 6%, nearly 200 basis points higher than the index. Over the past five years, it’s up 309% — 5x higher than the index.
Overall, I think this is an excellent company with a major emphasis on data analytics. To determine someone’s FICO score, it runs through copious amounts of data to come up with a number. However, it is what businesses can do with the FICO score data that makes Fair Isaac so valuable.
FICO was trading within $35 of an all-time high at the time. It’s now around $4 from it and likely to blow through over the summer.
In the big picture, artificial intelligence (AI) and financial data were made for each other. Fair Isaac will likely create more products, services and platforms to leverage its experience in credit scoring, etc.
While it is expensive relative to your average S&P 500 stock, I’ve concluded that you have to pay more for quality. FICO appears to be one of those stocks you add to your position whenever it has a bit of a correction.
A classic example would be during the pandemic years. Its shares corrected by more than 30% on at least two occasions before going on a massive run over the past 10 months.
Builders FirstSource (BLDR)
Investors need stronger hands regarding housing-related stocks such as Builders FirstSource (NYSE:BLDR). The slightest whiff of recession talk and investors hit the exits.
It’s perfectly understandable, which makes it more attractive as a long-term hold because there will be times when no one wants to own its stock; patient investors will pounce on those opportunities, and you can too.
In the meantime, BLDR is up 124% in 2023 and 704% over the past five years. If you bought its IPO shares in June 2005 at $16, you’d have a compound annual growth rate of 10.10%.
That percentage doesn’t sound great, but it only started scaling in the past few years. In 2004, it had revenue of $2.06 billion and an operating profit of $107.42 million. In 2022, its revenue was $22.73 billion, with $3.77 billion in operating profits. So, its operating margin has gone from 5.2% in 2004 to 16.6% in 2022, a three-fold increase in its margins.
The best part about its business is that it focuses on companies like Lennar (NYSE:LEN) and other large builders who need building supplies. Builders FirstSource will have a great business to run as long as there’s a housing shortage.
Its best days are ahead.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.