Whether you’re a new or seasoned investor, you’ve been given a not-so-subtle reminder over the past few months that stock market corrections are a normal and inevitable part of the investing cycle. Since the year began, the broad-based S&P 500 and widely followed Dow Jones Industrial Average dipped into official correction territory (down at least 10%), while the tech-focused Nasdaq Composite briefly fell into a bear market.
There’s no question that big declines in the indexes can be unnerving. But it’s important to recognize that stock market corrections rarely last long. What’s more, every crash and correction throughout history has proven to be an ideal buying opportunity for patient investors. Buying high-quality stocks during pullbacks and allowing your investment thesis to play out over time is a moneymaking strategy.
With that being said, the recent market correction has made three supercharged growth stocks particularly attractive. If you were to invest $250,000 into these companies, they have all the tools needed to make you a millionaire by 2030.
The first supercharged growth stock that should handsomely reward patient investors by the turn of the decade is telehealth giant Teladoc Health ( TDOC -1.35% ).
Teladoc is one of dozens of high-growth companies that benefited immensely during the initial stages of the COVID-19 pandemic, but has been pummeled over valuation and growth concerns ever since. It’s also paid a price (literally and figuratively) for its acquisition of Livongo Health in late 2020, which resulted in wider-than-expected losses in 2020 and 2021.
In spite of these near-term challenges, nothing suggests that Teladoc’s focus has strayed or that its competitive advantages have waned one bit. For example, the company’s sales grew by an annual average of 74% between 2013 and 2019 (prior to the pandemic). In the wake of the pandemic, sales growth should continue to top 20% on an annual basis.
What Teladoc’s sales growth demonstrates is that we’re witnessing a shift in how personalized care is administered. Even though virtual visits aren’t feasible for every appointment, Teladoc’s platform is giving patients and physicians a powerful tool to improve overall outcomes. Virtual visits are more convenient for patients, and they allow physicians to easily keep tabs on patients with chronic illnesses. The end result should be less money out of health insurers’ pockets (so they’re going to promote telemedicine visits).
Although the Livongo acquisition was, in hindsight, grossly overpriced, the deal nonetheless gives Teladoc the opportunity to cross-sell its solutions, and cater to chronically ill people who’d benefit most from its personalized care services. Additionally, the one-time costs associated with this deal won’t be adversely affecting Teladoc’s bottom line in 2022 and beyond.
Following close to an 80% retracement, shares of Teladoc can now be purchased for about five times last year’s sales. But if Teladoc continues to grow by 20% annually, it’ll be generating closer to $10.5 billion in sales by 2030. That would give it a price-to-sales ratio of 1. In other words, if Teladoc simply maintains its existing price-to-sales multiple, investors should have no problem turning $250,000 into $1 million.
Another supercharged growth stock with all the tools and intangibles needed to quadruple investors’ money over the next eight years is marijuana stock Jushi Holdings ( JUSHF -1.71% ).
Few industries have been more universally disliked by the investing community over the past year than U.S. pot stocks. The expectation with a Democrat-led Congress and Joe Biden in the Oval Office was that federal legalization, or at the very least cannabis banking reforms, would become a reality. Thus far, these expectations haven’t come to fruition, and investors clearly aren’t happy about it.
However, federal legalization isn’t a necessity for large-scale multi-state operators (MSOs) like Jushi to thrive. With approximately three-quarters of all U.S. states legalizing weed in some capacity, there’s more than enough organic opportunity for these companies to grow quickly and generate profits.
Jushi is a relatively small player among the best-known MSOs. As of earlier this month, it had 29 operating dispensaries in a half-dozen states, with plans to broaden its portfolio to about 40 operating dispensaries by the end of 2022.
What makes this company so unique is its focus on limited-license markets, such as Virginia, Illinois, Pennsylvania, and Massachusetts. Limited-license states purposely cap how many retail licenses are issued in total, as well as to single businesses. It’s a way of ensuring that small players like Jushi have a fair chance to build up their brand(s) and garner a loyal following without being steamrolled by an MSO with deeper pockets.
Interestingly, though, Jushi hasn’t been afraid to pull the trigger on acquisitions. It closed the buyout of NuLeaf just two weeks ago, which’ll bolster its vertically integrated presence in Nevada. It also bought its way into the highly lucrative California pot market last year.
But perhaps the best thing about Jushi is management aligning their wallets with those of their shareholders. Approximately $45 million of the first $250 million in capital raised came from insiders and executives. We’ve also witnessed CEO Jim Cacioppo buying shares of the company on the open market. When execs have skin in the game, good things often happen.
A third supercharged growth stock that can turn a $250,000 initial investment into a cool million by 2030 is Singapore-based Sea Limited ( SE -3.95% ).
Like Teladoc, Sea has been crushed in recent months. A forecast calling for slower growth in 2022 hasn’t sat well with investors who have come to expect jaw-dropping revenue growth from the company. Sea also noted that it could take until 2025 before two of its key segments can “substantially self-fund their long-term growth.” That’s a bit longer than some optimists were counting on.
While near-term losses aren’t ideal, Sea’s three operating segments are growing like wildfire and paint a picture of a future mega-cap company.
For the moment, Sea’s gaming division, known as Garena, is the only one generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA). What makes Garena so intriguing is that 11.8% of the company’s 654 million quarterly active users (QAUs) were paying to play. The pay-to-play conversion ratio for mobile gaming is typically in the low single digits. As long as Sea can maintain this level of engagement, mobile gaming should be a financial bright spot.
The second key segment is its SeaMoney financial service products. Since the emerging markets Sea targets in Southeastern Asia and South America can lack access to basic banking services, the company’s digital wallet solutions can fill a big role in democratizing finance for burgeoning middle classes in these regions. SeaMoney tallied nearly 46 million QAUs to end 2021.
But the segment that has investors most excited is e-commerce platform Shopee. In all of 2018, Shopee saw $10 billion in gross merchandise value (GMV) traverse its platform. In just the fourth quarter of 2021, Sea recognized $18.2 billion in GMV via Shopee. Online ordering demand is soaring in Southeastern Asia and Brazil, which should help Sea scale its e-commerce operations over time and reduce its losses.
Patient investors could witness Sea Limited doubling its sales a couple of times over the next eight years.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.