5 Monster Stocks to Own for the Next 5 Years (and Ideally Beyond) — Including Nvidia

Most of us would like to have a portfolio full of “monster stocks” – growth stocks that have produced impressive returns over many years. Fortunately, there are many of these stocks, and some are worth considering for your long-term portfolio.

Here are five investments to consider for your monster-seeking portfolio.

Image source: Getty Images.

1. Nvidia

Nvidia (NVDA -1.10%) is an exceptional monster stock, returning an average of 87% per year over the past five years and 75% over the past 10 years. Best of all, it still doesn’t seem that overvalued compared to past years. For example, the company’s recent forward price/earnings ratio (P/E) is 32 times, which is well below the average of 41 times over the past five years, but both numbers are still at high levels.

Nvidia has long been known as a gaming chip semiconductor company, but it’s also heavily involved in the artificial intelligence (AI) boom, producing chips for data centers — millions of them.

2. Taiwan Semiconductor Manufacturing

If you’re bullish on Nvidia, you might also want to be bullish on Taiwan Semiconductor Manufacturing (TSM 0.04%)too. That’s because most semiconductor companies don’t actually manufacture chips. They’re just designing. Relatively few companies actually make chips, and Taiwan Semiconductor is the world’s largest contract semiconductor chip maker, making Nvidia chips and many others.

Taiwan Semiconductor has experienced strong growth in recent years, with an average annual growth rate of 25.6% over the past 10 years. To put this into perspective, the S&P 500’s long-term average annual return has been close to 10% (ignoring inflation), and over the past 10 years it has averaged about 13%.

At recent levels, the stock doesn’t look very cheap or significantly overvalued, so proceed accordingly. If you feel like it, buy some or add it to your watchlist. If you already own one, you may be able to make a good profit from using it for many more years.

3. Arista Networks

Arista Networks (ANET 2.02%) is a cloud networking specialist and another monster stock. It has averaged about 40% annual appreciation over the past decade, and has nearly doubled in value over the past year. That makes the company’s stock a little more valuable, and more cautious investors might consider it more of a hold than a buy. (Recent forward P/E ratio is 45 times, which is much higher than the average of 30 times over the past five years.)

Arista has a lot to like about, including incredible free cash flow generation, solid profit margins, and growing market share. However, it faces competition from Cisco Systems. In the third quarter, Arista reported a 20% year-over-year increase in sales and announced a 4-for-1 stock split (which is currently in effect).

4. Axon Enterprise

axon enterprise (Axon 1.96%) has returned an average of 36% per year over the past 10 years, and its near-term forward P/E ratio of 95 appears overvalued, well above the past five-year average of 71. Law enforcement technology experts (think TASER and cloud-based body camera recording) have been steadily growing their businesses.

When Axon announced its third-quarter earnings in November, my colleague John Quast said: “By expanding into new areas and product offerings, the company continues to grow over 25% for 11 consecutive quarters, with third-quarter revenue up 32% year-over-year” to $544 million for the year. reach. ”

So while this monster stock may be best held rather than bought at recent levels, it might be worth keeping an eye on it through a stock watchlist and hoping for a rebound.

5. SPDR S&P 500 ETF

SPDR S&P 500 ETF (spy 0.14%) It’s not exactly a stock. It’s an exchange-traded fund (ETF), a fund that trades like stocks. It is also a low-fee S&P 500 index fund. I bring this stock up because if you’re looking to build wealth, finding good growth stocks can be exciting, even if they don’t necessarily perform as well as you’d like. .

A more volatile approach is to simply invest in the stock market through the S&P 500, which makes up about 80% of the U.S. stock market. It’s no slouch, having posted double-digit profits multiple times in recent years. And even if you only average 6% or 8%, you can still build wealth. Here’s how a $7,000 annual investment would grow.

Data source: Author calculations.

The S&P 500 is also showing some impressive performance. So when it comes to saving for retirement, investing, or achieving other long-term goals, invest in stocks and funds that give you comfort and hope.