Investors are always looking for ways to build wealth with minimal risk. For many decades, bonds have fulfilled this role admirably. Whether it’s a federally backed U.S. Treasury, municipal bond, or investment-grade corporate debt, bonds have provided investors with near-guaranteed returns and income.
But with the US inflation rate hitting a 40-year high of 7.5% in January (on a yearly basis), the nominal yield on most investment-grade bonds produces a real-money loss after factoring in rising prices. In other words, despite their near-guaranteed returns, bonds aren’t helping investors build real wealth right now.
If you want to grow your nest egg, the right move might be to forget about bonds — at least until inflation subsides — and buy game-changing growth stocks instead. Although the risk increases when investing in stocks, the potential return is also catapulted higher.
The following four growth stocks have the potential to double your money by 2025.
Just because a company has a large market cap doesn’t mean it can’t double in the short term. e-commerce giant Amazon ( AMZN -1.33% ) is the perfect example of a megacap company that continues to grow at a blistering pace that could reasonably double by the middle of the decade.
Most people know Amazon because of its leading online marketplace. According to an August report from eMarketer, Amazon is estimated to have brought in 41.4% of all online sales in the United States in 2021.
However, Amazon’s online retail margins are nothing out of the ordinary. To supplement those wafer-thin margins, the company is promoting its Prime memberships. Annual fees paid by 200 million Prime members worldwide help Amazon lower prices for brick-and-mortar retailers. It’s also worth noting that paying members are much more likely to spend more and stay within Amazon’s ecosystem of products and services.
But the big opportunity with Amazon is its cloud infrastructure services segment, Amazon Web Services (AWS). Even though AWS represents a relatively small percentage of net sales, it produces the lion’s share of operating profit. In fact, Amazon’s fastest-growing operating segments, such as AWS, advertising, and subscriptions, generate its juiciest margins. As AWS becomes a larger component of total sales, Amazon’s operating cash flow will skyrocket.
What if I told you that a furniture stock is not only a growing business, but could double your money by the middle of the decade? If you don’t believe me, take a closer look at how Lovebag ( LOVE -0.20% ) disrupts heavy industry.
Traditionally, furniture companies rely heavily on foot traffic and buy their products from the same group of wholesalers. Lovesac has differentiated itself in two main ways.
First of all, Lovesac’s furniture is unique. Although it was initially known for its pouf (bag) style chairs, around 85% of its revenue today comes from its sectional sofas called sactionals. Sactionals can be rearranged in dozens of ways to ensure they fit most living spaces. They also have around 200 choices of machine washable covers, which means they will match any color or theme of a home. Best of all, the yarn used in these covers is made entirely from recycled plastic water bottles. It’s function, choice and respect for the environment, all in one product.
Second, Lovesac impressed with its omnichannel presence. At the height of the pandemic, the company moved almost half of its sales online. He also supplemented sales by building in-store and online partnerships with major brands, as well as operating pop-up showrooms. The key here is that not relying solely on physical showrooms reduced its overhead and made the company extremely profitable long before Wall Street forecasts.
Planet 13 farms
Another growth stock that can circle bonds through 2025 and potentially help you double your money is the marijuana stock. Planet 13 farms ( PLNH.F -2.76% ).
Some investors have likely avoided putting their money to work in US cannabis companies because the weed is not yet federally legal. What they forget, however, is that more than two-thirds of all states have legalized cannabis to some degree, and the federal government maintains a hands-off approach to regulation (i.e. , allowing states to regulate their own pot industries). It’s a recipe for a single multi-state operator (MSO) like Planet 13 to thrive.
While most MSOs have chosen to establish a presence in as many legalized states as is reasonable, Planet 13 has only two operating dispensaries. But the difference is that Planet 13’s dispensaries cater as much to nostalgia and experience as they do to selling. Its Las Vegas SuperStore is larger than average walmartwhile its Orange County SuperStore spans 55,000 square feet.
In addition to an unparalleled selection, Planet 13 has embraced technology, customization and exclusive products with open arms. Its Las Vegas location uses self-paid kiosks and provides personal friends. During this time, the company introduced its own vaping products to boost its margins.
As Planet 13 turns the corner on recurring profitability and offers a unique operational approach, it should have no trouble showing the green to its shareholders.
A fourth high-growth stock that will make you forget about bonds is the cloud-based lending platform Assets received ( UPST -6.86% ).
Traditionally, the loan process for personal loans can be slow and expensive. It can take weeks for loan seekers to provide all relevant information and for banks to process this data and issue an approval or denial. With Upstart’s platform, artificial intelligence (AI) and machine learning do the hard work to determine a candidate’s creditworthiness. In about two-thirds of all cases, an approval or denial can be issued on the spot. Not only does this save banks money, it actually democratizes the lending process and makes it fairer for those with less than superb credit scores.
What investors will really appreciate about Upstart is that 94% of its revenue in the last quarter came from bank fees and services with no credit exposure. This means that as the Federal Reserve tightens monetary policy, a modest or sharp increase in delinquencies will not hurt Upstart’s operating model or growth potential.
Speaking of growth, Upstart is only just beginning to scratch the surface when it comes to its total addressable market. So far, he has mainly focused on personal loans. But with the acquisition of Prodigy Software last year, it can now tackle a $727 billion auto loan origination market (more than 7 times larger than the personal loan market) . If it goes well, mortgage originations could be the next area dominated by this AI lending platform.
Even after its huge post-earnings acceleration, Upstart can double for investors by 2025.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging 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 wealthier.