Investing in stocks is one of the smartest ways to build wealth, but stocks with multibagger potential are the ones that can truly make you rich. I call them monster stocks, and you'd be surprised to find some outside of the popular tech sector.
My idea of a monster stock is a company with economic and brand moats and that's driven its stock performance for years and should continue doing so. With their moats and growth catalysts, such companies can generate huge value for their shareholders over time. Here are three monster stocks with multibagger potential if you buy and hold them for 10 years.
A proven leader with big moats
If you own a Visa(NYSE: V) credit, debit, or prepaid card, you probably didn't know that the namesake company, Visa, didn't issue those cards. They're just co-branded cards, and every time you swipe them to pay for something, Visa only facilitates the transaction over its payments processing network by connecting you, the merchant, and the financial institutions, such as the card issuer and the merchant's bank. Visa charges fees for processing these payments that run into trillions of dollars today.
In the financial year 2024, Visa's network handled almost 310 billion transactions globally across cards and cash, totaling a whopping $15.9 trillion. Visa is a global leader in payments processing today, with nearly 4.7 billion cards worldwide.
Since Visa doesn't issue or manage cards or machines used for transactions, it has an asset-light, credit risk-free business that earns huge margins. In 2024, Visa earned an operating margin of 66% on revenue worth $36 billion. Besides revenue from processing payments, data, and cross-border transactions, Visa also earns from value-added services like risk and security solutions. Visa also pays a dividend that has grown steadily in recent years.
Visa's dominance, brand power, and network effects are just some of the moats that have powered the stock in the past. As more nations move from cash to digital payments, Visa should remain a monster stock for years to come.
This monster stock could surprise you
Would you ever expect a company that collects, manages, and recycles waste to be a monster stock? Boring stocks can often generate astounding returns, and Waste Management(NYSE: WM) is a classic example.
The key to Waste Management's success lies in the nature of its business, the size and scale of its operations, and efficient capital allocation. Waste Management is an industry leader and, therefore, enjoys economies of scale. Since the business of managing waste is immune to economic cycles, the company can generate recession-proof revenues and stable cash flows, which it uses judiciously to grow and reward shareholders.
Waste Management has increased its dividend for 22 consecutive years and grown it at a compound annual growth rate (CAGR) of around 6% in the past five years. That dividend growth has hugely boosted shareholders' total returns over the years. The stock has more than doubled investors' money in five years and generated jaw-dropping returns in 10 years.
Waste Management recently reported solid numbers for 2024 and this year is projecting nearly 18% growth in its free cash flow (FCF) at the midpoint of its guidance range. Here's the real deal: Waste Management acquired the largest medical waste management company in North America, Stericycle, for $7.2 billion in November 2024. The acquisition adds a high-potential new market to Waste Management's portfolio and could be its biggest growth catalyst, which is what makes it a monster stock you'd want to buy and hold for the next decade.
An offbeat stock with massive growth catalysts
With President Donald Trump slamming the brakes on the previous government's big moves to boost the electric vehicle (EV) industry in the U.S., you'd be wary of EV stocks now. However, there's one monster EV stock I've been drawn to for some years now and that continues to intrigue me: BYD (OTC: BYDDY), a company that's stealing the show in the world's largest EV market.
Sales of new energy vehicles (NEV) in China, including battery-electric vehicles, fuel-cell EVs, and plug-in hybrids, are skyrocketing. Sales surged 35% in 2024 and clocked nearly 80% growth last month, as per industry data. BYD is the market leader, with a 29.2% share in China's retail NEV market in February, according to the China Passenger Car Association. The second-rank holder, Geely, has only about 13% market share.
I first saw potential in BYD stock in early 2022 and believed it could give Tesla a run for its money. In February, while BYD's NEV retail sales jumped 73%, Tesla's sales fell 11% year over year in China.
BYD also builds commercial vehicles and is the world's second-largest producer of EV batteries behind CATL. It has also expanded its global footprint rapidly in recent years and is now present in nearly 90 countries and regions, with factories in Asia, Brazil, and Hungary, among others. With so much going on at BYD and its sales booming in China, this stock could generate monster returns over the next 10 years.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Visa. The Motley Fool recommends BYD Company and Waste Management. The Motley Fool has a disclosure policy.
