For many, the No. 1 goal of investing is to build wealth in retirement. Whether in 10 years or 40, this end goal should always be kept in mind -- it's a long game. There may be macroeconomic swings, tariff volatility, and recessionary periods in between, but smart investors know that the best thing to do is keep your head down and buy high-quality businesses to hold for the long haul.
If you want $1 million in retirement, then you should put $200,000 spread equally into these three stocks and sit patiently for a decade. By the end, they should be worth $1 million or more.
1. Alphabet's AI dominance
First is one of the largest and best-run businesses in the world: Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL). The technology giant is the owner of Google, Google Cloud, YouTube, and other start-ups that propelled its valuation to a market cap of $1.8 trillion. In order to fulfill my estimate of this basket turning $200,000 into $1 million, Alphabet stock will need to produce a fivefold total return over the next 10 years. That is easily doable.
The company's revenue grew 15% year over year in 2024 in constant currency to $350 billion, driven by growth across the board at its technology subsidiaries. Google Cloud is growing especially quickly due to artificial intelligence (AI), with 30% revenue growth last quarter. Profit margins are expanding, with operating margin going from 27% in 2023 to 32% in 2024. This margin expansion is a key reason why operating earnings have grown so quickly for Alphabet.
On top of this, Alphabet returns a ton of capital to shareholders in the form of buybacks and dividends. Its dividend currently yields 0.5%, with shares outstanding down 10.8% in the last 10 years. Combine everything together, and this is why Alphabet's earnings per share (EPS) has grown by 670% in the last 10 years. With a current price-to-earnings ratio (P/E) of 19, which is well below its 10-year average, Alphabet stock looks cheap at these levels. If it can grow its EPS at a significant clip over the next 10 years just as it did over the last 10, I think the stock can go up by around 5 times over the next 10 years, including dividends.
2. A take rate on global travel
Airbnb(NASDAQ: ABNB) revolutionized modern travel with its short-term rental platform over a decade ago. Today, as a publicly traded company and one of the largest initial public offerings (IPOs) of the last few years, it is a global giant in travel. Last year, customers spent $81.8 billion on Airbnb. Revenue grew 12% year over year to $11.1 billion, giving it a long runway to grow as it tries to capture a bigger piece of the trillions of dollars spent on travel every year.
In order to 5 times over the next decade, Airbnb will need to put up some durable revenue and earnings growth. I believe it is set up to do just that. The majority of the company's bookings come from a few markets such as North America and western Europe -- specifically France and the United Kingdom. It is now working to increase supply of lodgings in Germany, east Asia, and Latin America, which are all large travel markets.
To further add some fuel to the fire, Airbnb management seeks to expand Airbnb's services outside of its core services. These could include adjacent services such as house cleaning, flights, or even tours and experiences for local travelers. This should expand Airbnb's total addressable market and keep revenue growing at a double-digit rate for the rest of the decade.
Earnings should grow even quicker with plenty of room for profit margin expansion. Airbnb's operating margin was 23% over the last 12 months, even as it pushes aggressively to advertise itself in international markets and is working hard on these new product lines. Over the next 10 years, I expect Airbnb's profit margins to expand as it hits increasing scale. Add it on top of durable revenue growth, and it looks plausible that Airbnb's stock will grow fivefold over the next 10 years.
The last stock on the list is Taiwan Semiconductor Manufacturing(NYSE: TSM). It is the bedrock of the semiconductor industry, which is the key input to the fast-growing AI sector. For example, when Alphabet needs more computing power for its data centers, it turns to Taiwan Semiconductor Manufacturing -- TSMC for short -- or a third party that worked with TSMC to build its own computer chips.
This enviable position as one of the only companies able to produce cutting-edge computer chips at scale has allowed TSMC to produce outsize growth for its business. In 2024, the company's high performance compute (HPC) revenue that encompasses AI customers grew 51% year over year and is now the majority of TSMC's business. These large customers are a key reason why TSMC's EPS is up close to 300% in the last 10 years.
Industry analysts expect spending on AI to grow from $184 billion in 2024 to $826 billion in 2030. If this materializes, a lot of this growth will go to TSMC. This should lead to even faster EPS growth for the company over the next 10 years, which is why I think the stock can 5 times over that period.
Combined, Alphabet, Airbnb, and TSMC are three fantastic long-term holds for your portfolio and can turn $200,000 into $1 million in 10 years.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Brett Schafer has positions in Alphabet. The Motley Fool has positions in and recommends Airbnb, Alphabet, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
