I am a growth investor through and through. Value investing can make big fortunes, and a good portion of my portfolio is for stable, long-term wealth builders; After all, diversification is important. But it’s so much fun to start looking for tomorrow’s big winners today.
I have a few success stories under my belt, but they took years to develop. Mine Netflix (NASDAQ:NFLX) And Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) purchases are up over 1,000% each, but I started in 2011 and 2010 respectively.
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So I’m always looking for the next Netflix or Alphabet. What stocks can I buy today to earn huge returns over the next decade or two?
My best ideas at the moment are an expert in media streaming technology Roku (NASDAQ: ROKU) and restaurant management software maker Toast (NYSE: TOST). These growth stories are still in their infancy and I expect them to continue winning for a very long time.
This is why I see long-term market-boosting returns from Toast and Roku.
The business models are very different, but Toast and Roku have a lot in common.
Both companies are targeting huge markets in the long term. Toast’s radically simplified restaurant management system has been installed in 127,000 locations to date, which represents just 14.5% of the U.S. restaurant market.
Roku has reached 85.5 million media streaming households, with annualized platform revenues (service fees and ad sales) of $3.6 billion. The company Emarketer estimates that the domestic TV advertising market will be worth more than $90 billion this year.
And both companies have plenty of international growth to explore if and when greenfield growth opportunities in the US run out
So Toast and Roku are looking at huge long-term growth opportunities, and they’re off to an impressive start. Roku’s revenue has quadrupled in the past five years. Toast has quadrupled in three years. Both companies have posted solid cash profits in recent quarters, paying down their long-term debt to zero and building billions in cash reserves.
Investors have recently embraced Toast, sending the stock price up 120% so far this year. The stock isn’t cheap, trading at 50 times forward earnings estimates and 4.9 times trailing revenue – but I think it’s worth every penny of that premium price.
Roku, on the other hand, continues to do everything right while its stock price falls. After losing 21% of its value by 2024, Roku’s stock is valued at just 2.5 times sales. Looked at in another light, Roku’s stock price is 85% below its all-time high.
