In the late 1950s, the average holding period for stocks was eight years. The average holding period had declined to 5.5 months as of June 2020. It’s unlikely to be any different in 2023. Of course, one reason for the decline in holding period is continued technological advancement that’s translates into new investment ideas. However, there is no doubt on the point that investor patience has declined. This column talks about seven long-term stocks that are likely to create value on a sustained basis.
I must add here that even quality blue-chip stocks can deliver long term returns that consistently bests the index. However, my focus in this column is on growth stocks that are worth holding until 2030. In my view, these long-term stocks can deliver 5x to 10x returns over the investment horizon.
Let’s discuss the reasons to be bullish on these growth stories.
Pinterest (PINS)
After trading at lows of $20.6 during the year, Pinterest (NYSE:PINS) stock has trended higher by 41% in the last six months. The downside in PINS stock was on account of growth and valuation adjustments in the post-pandemic world. With that factor being discounted and with a positive outlook for the advertising industry, I am bullish on further upside for PINS stock.
For Q3 2023, Pinterest reported revenue growth of 11% on a year-on-year basis to $763 million. This was the highest growth in the last five quarters. I believe the positive momentum is likely to sustain in the coming quarters.
Pinterest reported 258 million monthly active users for the rest of the world (ROW) in Q3. In comparison, the MAU for U.S. and Europe were 96 and 128 million. However, the average revenue per user for ROW was just 12 cents with the global average being $1.61. As emerging markets catch-up in terms of advertising spend, there is ample scope for revenue and cash flow upside even if MAUs remain stable. Pinterest is likely to report operating cash flow of $500 million for the year. As the ARPU swells, the business will be a cash flow machine.
Amdocs (DOX)
Amdocs (NASDAQ:DOX) stock looks interesting after remaining sideways in the last 12 months. At a forward price-earnings ratio of 13.6, the stock seems poised for a breakout rally. Further, DOX stock offers an attractive dividend yield of 1.96%.
As an overview, Amdocs is a provider of software and services to the media and telecommunication industry globally. For FY 2023, Amdocs reported revenue of $4.9 billion. Further, the company has a 12-month backlog of $4.15 billion, which provides clear revenue visibility.
Another positive is that Amdocs reported free cash flow of $698 million. As of September, Amdocs had a liquidity buffer of $1.2 billion. Financial flexibility is therefore high for organic and acquisition driven growth.
In November, Amdocs partnered with Nvidia (NASDAQ:NVDA) “to optimize large language models to speed adoption of generative AI applications and services across the $1.7 trillion telecommunications and media industries.” In a big addressable market, the free cash flow outlook for the coming years looks robust.
DraftKings (DKNG)
Considering the growth potential for the online sports betting (OSB) and iGaming industry in the United States, DraftKings (NASDAQ:DKNG) is a long term value creator. For year-to-date, DKNG has surged by 223% from oversold levels. The stock can be considered on corrections and consolidation.
Talking about the market size, DraftKings expects the total addressable market for OSB and iGaming to be $30 billion by 2030. This is just for the markets in which the Company is currently active. As more states legalize OSB and iGaming, the addressable market will swell.
However, the key game-changer for DraftKings in 2023 has been improvement in EBITDA margin. For the next financial year, DraftKings has guided for revenue and EBITDA of $4.65 billion and $400 million. It’s likely that EBITDA margin will continue to expand beyond 2024. This sets stage for healthy revenue growth coupled with upside in cash flows.
Kinross Gold (KGC)
As gold trends higher on the prospects of multiple rate cuts, I am bullish on gold mining stocks. Further, factors like inflation and geopolitical tension support gold upside through the decade. Among emerging names, I like Kinross Gold (NYSE:KGC) and I believe that the stock is a potential multibagger.
It’s worth noting that KGC stock trades at an attractive forward price-earnings ratio of 15.3. Further, the stock offers a dividend yield of 1.94%. I expect healthy dividend growth in the coming years.
Coming to the fundamentals, Kinross reported a liquidity buffer of $2 billion. Further, the Company is on track to deliver annual operating cash flow of $1.6 billion to $2 billion. With high financial flexibility, Kinross is positioned for organic and acquisition driven growth.
I anticipate acquisitions with the Company guiding for stable production growth through 2025. The sale of Russian assets in 2022 was a setback that’s likely to be compensated with an opportunistic acquisition.
Piedmont Lithium (PLL)
Piedmont Lithium (NASDAQ:PLL) is among the deeply undervalued lithium stocks to buy for the long term. The correction in PLL stock has been driven by a decline in lithium prices. However, the long-term outlook for lithium is positive and Piedmont has quality assets. I expect multibagger returns in the next few years.
It’s worth noting that Piedmont has commenced lithium concentrate shipments in Q3. For the quarter, the Company reported revenue and EBITDA of $47.1 million and $16.2 million respectively. I expect the current EBITDA margin of 34.3% to improve significantly as lithium trends higher.
From a growth perspective, the commencement of lithium concentrate sales from the Quebec asset is just the beginning. Piedmont expect to ramp-up production from 56,500ktpy in 2023 to 525,000ktpa in 2026. This would translate into stellar revenue and cash flow growth. The recent correction in PLL stock therefore offers a golden opportunity for long term exposure.
Coupang (CPNG)
Coupang (NYSE:CPNG) stock has been almost sideways in the last 12 months. I expect upside after an extended period of consolidation as business metrics improve. It’s worth noting that e-commerce stocks have witnessed valuation readjustments after the pandemic. This seems like a good time to buy some of the best e-commerce stocks for the long term. CPNG stock looks attractive for multibagger returns in the next five years.
For Q3 2023, Coupang reported net revenue of $6.2 billion that was higher by 21% on a year-on-year basis. For the same period, the EBITDA was $239 million with an EBITDA margin of 3.9%.
An important point to note is that for trailing-twelve-months, Coupang reported free cash flow of $1.9 billion. The bottom-line for valuation is FCF and I expect cash flows to swell further on operating leverage. My view is underscored by the point that the Company expects “consolidated margin to continue its march upwards on an annual basis.”
Further, active customer growth has been healthy on a year-on-year basis. With multiple positive business metrics, I am bullish on CPNG stock.
Miniso Group (MNSO)
Moving from e-commerce to the brick-and-mortar model, Miniso (NYSE:MNSO) is a lifestyle retailer that’s worth holding for the next few years. With global presence, Miniso has a big addressable market. Further, with an attractive pricing and a dynamic product portfolio, the Company has been successful in attracting consumers.
For Q1 2024, Miniso reported revenue growth of 36.7% on a year-on-year basis to $519.6 million. For the same period, adjusted EBITDA increased by 52.8% on a year-on-year basis to $139 million. I expect robust growth to sustain on the back of higher revenue per customer coupled with aggressive store expansion. As of Q1 2024, Miniso reported 6,115 stores globally. On a year-on-year basis, the number of stores increased by 819. With an asset-light model, EBITDA margin is likely to remain healthy. I must add that Miniso initiated dividends this year. It’s likely that dividend growth will be robust considering the current growth momentum.
On the date of publication, Faisal Humayun 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.
