It’s normal for investors to feel a mix of happiness and worry when a stock they own rises higher. The happiness comes from the large unrealized gains they are sitting on, while the worry comes from losing these gains if the stock price falls back to previous levels. Therefore, stocks that have risen in value normally gain a large lead as investors worry that these gains cannot be sustained.
Such fears may be unfounded, as stocks that have done well may demonstrate the ability to continue growing. These growth stocks typically have catalysts that can take their businesses to the next level and a strong competitive position that allows them to withstand the competition. Stocks like these are ideal candidates to own for the long term because they can help grow your wealth and allow you to retire comfortably.
Here are three stocks that have soared lately but also qualify as great buy-and-hold candidates over the long term.
The streaming giant’s earnings momentum has continued into the first nine months of this year. Revenue rose 15.5% year-over-year to $28.8 billion, while operating income rose 49% year-over-year to $8.1 billion. Net income was $6.8 billion, up 53% from a year ago. Netflix continued to generate large amounts of free cash flow, reaching $5.5 billion, up 4% year over year through the first three quarters of 2024. Paid memberships reached a record high of 282.7 million, representing an increase of 14.4% year-on-year. A one-year jump after the company added nearly 35 million new subscribers in just one year.
More growth is in store for Netflix, as the service takes up just under 10% of TV time in some of the world’s largest countries. Management sees a huge opportunity to recruit more members, while continuing to invest in its broad content offering with a steady stream of new films and TV series. As of June 2024, 40% of US TV screen time is taken up by streaming TV, of which Netflix has an 8.4% share. This is much higher than competitors such as Disney‘s Disney+ (2%) and Amazon‘s Prime Video (3.1%) and implies that the company has a strong competitive position that can help it recruit more members.
Netflix is ​​also expanding its offering to include major live events to attract a broader audience, while the new ad tier is almost two years old and gaining strong popularity. Management believes the ad tier will reach critical scale in 2025, which could help Netflix continue to grow its ad membership in 2026 and beyond. With these multiple growth drivers, it makes sense to hold onto Netflix stock for the long term.
Royal Caribbean Cruises (NYSE: RCL) is a market leader in the cruise ship industry with a fleet of 68 ships from five brands sailing to approximately 1,000 destinations. The company’s shares are up 68% year to date, but investors could be waiting for more as there are multiple tailwinds that could help the company grow further.
Royal Caribbean recovered quickly from the pandemic – 2021 revenues were just $1.5 billion with losses of $5.3 billion, but the cruise line saw revenues rise to $13.9 billion in 2023, accompanied by a net income of $1.7 billion. The company’s resilience allowed it to turn its losses into profits, while free cash flow also rose from negative $4 billion in 2021 to positive $580 million in 2023.
Royal Caribbean’s performance has continued to improve this year, with revenue up 20% year-on-year to $12.7 billion in the first nine months of 2024. Operating profit rose 51% year-on-year to $3 .5 billion, while net profit rose 63.7% year-on-year to $2.3 billion. Free cash flow was $1.1 billion, and the cruise line also paid a quarterly dividend of $0.40, effectively restoring the dividend suspended during the pandemic.
The company is gearing up for the 2026 to 2027 season with the launch of its fifth ship, Celebrity Xcel, which will sail in Europe and join the company’s Edge Series ships. These ships allow customers to sail through the four popular regions of the Caribbean, Europe, Alaska and Australia. In August, the company signed an agreement with a Finnish shipbuilder to order a fourth Icon Class ship for delivery in 2027. The agreement also includes options for a fifth and sixth ship within the same class. These orders demonstrate the strong demand for Royal Caribbean’s services and investors can look forward to increased bookings which should translate into increased revenues and profits.
Intuitive surgery (NASDAQ: ISRG) is a medical equipment and device company that produces products and services to advance minimally invasive care. The company is known for its da Vinci surgery system that makes surgery less invasive and more effective. Intuitive Surgical shares are up about 53% year to date, but the company has plenty of room for further growth. Intuitive Surgical has shown steady growth over the years, with total revenue increasing from $5.7 billion in 2021 to $7.1 billion in 2023. Net income improved from $1.7 billion to $1.8 billion over the same period. The company also generated average annual free cash flow of $1.2 billion during these three years.
The company continued to perform well in the first nine months of this year. Revenue rose 14.3% year-over-year to $5.9 billion, while operating income rose 22.6% year-over-year to $1.6 billion. Net profit was $1.6 billion, up 37% year over year from $1.1 billion. Intuitive Surgical’s da Vinci system had an installed base of 9,539 as of September 30, with nearly 5,600 in the US and the remainder outside the US.
Management reported that global urology, gynecology and general surgery procedures are increasing rapidly, with approximately 2.25 million procedures occurring in 2023 alone, an increase of 22% year over year. The interesting thing to note is that the increase in the number of procedures will continue to drive the growth in the number of machines installed, which bodes well for the Da Vinci system.
In March, the company introduced its fifth-generation robotic system called da Vinci 5, which features improved accuracy and precision. This new version also enables higher quality 3D image display and processing. In a first, da Vinci 5 includes force sensing technology that reduces force applied to tissue by 43%, allowing surgeons to inflict less trauma on sensitive tissue. Management will continue to expand the indications for its system and launch new platforms in different regions to pursue growth. The addressable market for soft tissue procedures is approximately 21 million, giving Intuitive Surgical plenty of room to grow further.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Yang has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, Intuitive Surgical, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.
3 Rising Stocks to Hold for the Next 20 Years was originally published by The Motley Fool
