Growth Stocks To Hold for 10 Years: Warren Buffett has proven himself to be one of the greatest investors of all time. He built a fortune by carefully selecting high-quality assets that could be purchased for a fair price. Through his efforts, Class A stock in his holding company, Berkshire Hathaway, has returned nearly 6,500 percent since it launched.
With inflation at 40-year highs, interest rates rising, and growth stocks losing up to 80 percent of their value in a matter of months, it’s no wonder investors are backing away from riskier companies.
Instead, they are moving their money to traditional favorites that stay steady in the face of market volatility – for example, energy, consumer staples, and in light of the Russian invasion of Ukraine, defense.
However, following the crowd out of growth stocks and into these seemingly lower-risk options isn’t necessarily the best strategy – at least not for those who subscribe to Warren Buffett’s philosophy. One of the most often repeated Warren Buffett quotes is, “Be fearful when others are greedy. Be greedy when others are fearful.”
In other words, now that the price of growth stocks has dropped, it’s time to buy into high-quality companies with solid long-term prospects. These are three growth stocks to hold for ten years.
Will Lululemon Stock Go Up?
Lululemon stock went down nearly 35 percent over the past six months, and some investors are convinced that the company has lost its edge. However, a closer look reveals that the recent drop in share price simply brings the stock out of overvalued territory, making it a smart choice for those with an eye on long-term returns.
Between 2019 and 2021, Lululemon grew its market share considerably as demand for attractive athletic apparel skyrocketed. Revenue nearly doubled during that same period, and the company recently announced its plan to continue on its growth trajectory.
In April 2022, Lululemon told shareholders that it will focus on three strategic pillars to double its 2021 revenue of $6.25 billion over the next five years.
By 2026, the company intends to deliver $12.5 billion in sales by expanding its market, adding new, innovative products to its existing collection, and creating the sort of customer experience that ensures enduring loyalty to the brand.
Among other moves, Lululemon is launching a subscription service that gives members access to fitness classes, events, and exclusive products.
In addition, over the next five years, it has bold but achievable goals that include doubling digital sales, quadrupling international revenue, and doubling revenue on its men’s lines. Lululemon plans to open brick-and-mortar locations in parts of Europe, including Italy and Spain, to encourage growth of its international business.
There is no guarantee that the company will be successful in meeting its five-year objectives, but assuming careful attention to fundamental financial health along the way, all signs point to strong growth through 2026 and beyond. That’s good news for shareholders – especially those that buy Lululemon stock at the current reduced price.
What Does Upstart Do?
Upstart is disrupting traditional lending by making the FICO credit score system obsolete.
Instead of relying on a handful of factors to determine creditworthiness, Upstart’s artificial intelligence (AI) powered platform evaluates credit risk based on more than 1,500 unique data points. Examples include level of education, grade point average, and employment stability.
As a result of these efforts, Upstart has made it possible for many more borrowers to access funds without the steep interest rates associated with payday loan programs.
In fact, Upstart customers pay an average of ten percent less on their loans than they would with an equivalent traditional loan and 26 percent more borrowers qualify under Upstart’s model than through the FICO score model.
To date, Upstart (UPST) has originated more than $25.4 billion in loans, and 74 percent of those were fully automated. That means lower expenses for lenders, which benefits those on both sides of the transaction.
Upstart stock peaked in October 2021 at more than $400 per share. Since then, it has lost more than 80 percent of its value.
The biggest decline came after the company reported its first-quarter 2022 earnings in May. The results for the quarter weren’t bad – in fact, revenues continued to grow – but the company reduced its guidance for the second quarter and full-year 2022 based on changing economic conditions.
The new forecast – $1.25 billion for the year vs. previous guidance of $1.4 billion – still represents strong growth. Meanwhile, the company remains profitable, and in fact, first-quarter UPST earnings were up 209 percent year-over-year.
Shareholders’ sudden exit after the reduced 2022 forecast appears to be a textbook example of fear over logic. That’s good news for investors who choose to buy Upstart stock now – or, as Warren Buffett put it, “Be greedy when others are fearful.”
Will Spotify Stock Recover?
Spotify (SPOT) has long been the market leader in streaming music. It controls a third of the global market, which is double that of its closest competitors – Apple Music, Amazon Music, and TenCent Music.
Yet despite its dominance from a subscriber perspective, Spotify stock has gone down steadily since its February 2021 peak. In the past six months, shares lost more than 60 percent of their value.
Part of the decline can be attributed to the general selloff of tech stocks, but that’s not the entire story. Competition among streaming music providers is fierce, and until recently, there was little Spotify could do to differentiate itself. Unlike streaming video services, streaming music companies offered an essentially identical library. However, that’s beginning to change.
Spotify still gives its subscribers a customized music experience that supplements users’ selections with personalized recommendations. That feature is relatively standard across the industry. What sets Spotify apart is the opportunities available to content creators. Members can build their own small businesses by adding content to the platform and monetizing distribution to Spotify members.
Better still, Spotify is expanding into podcasts and audiobooks, some of which are exclusive to the platform. When combined with original content from member creators, Spotify has more to offer than its music streaming peers. That means a competitive advantage that can’t be duplicated.
Spotify isn’t turning a profit quite yet, despite increases in revenue. The good news is that the company is reinvesting in the business to encourage long-term growth, which bodes well for future profitability.
A more telling figure is Spotify’s average revenue per user which dropped quite a bit in 2020 and early 2021. That number is now on its way up, and the business is making it a top priority.
Increased average revenue per user is expected to deliver meaningful profits over the next five to ten years. If all goes as planned, those who buy Spotify stock at the current low price will realize substantial long-term returns.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.