It does not take a lot of skill to build wealth. What you do need, however, is patience to hold on to long-term winners through good times and bad.
The key is to select a basket of high-quality, well-run businesses with great prospects for continued growth. Such growth stocks can increase revenue, market share, and cash flow over the years. And as they grow, investors will benefit from a rising share price.
The starting point is to identify stocks that not only have a strong brand but also a long track record of performance. And they should be market leaders within their respective industries.
It's also important to look for sustainable trends or catalysts that will allow these businesses to keep growing. Armed with this list of stocks, all you need to do is to regularly buy some shares and then keep them in your portfolio for the long run.
Here is a selection of three stocks that I believe possess the above characteristics to qualify them as buy-and-hold selections for the long term.
Image source: Getty images.
Monster Beverage
Monster Beverage (MNST -1.23%) sells energy drinks under brand names such as Monster Energy, Reign, and Predator. According to Statista, Monster Beverage came in second in the U.S. energy drinks market in 2023 with a market share of 29.7%, behind leader Red Bull (39.5%).
Together, these two companies dominate the energy drink market with a share of nearly 70%; the next largest player is Celsius with just a 5.9% market share.
Even with a large market share, the company has proved that it can still grow its top and bottom lines. For 2023, revenue rose 13.1% year over year to $7.1 billion, while operating income climbed 23.3% to $1.9 billion. Net income for the year surged by nearly 37% to $1.6 billion.
Monster also generated positive free cash flow of $1.5 billion for 2023, more than double the $676 million of a year ago.
This strong performance has continued into the first quarter of 2024. Revenue rose 11.8% year over year to $1.9 billion, with operating income increasing by the same percentage to $$542 million. Net income came in at $442 million, growing by 11.2% year over year. The business produced positive free cash flow of $337.5 million for the quarter.
Monster continues to launch new products into existing markets and is pushing to enter new markets. Java Monster Irish Crème was released in the U.S. during the quarter, and Predator Energy, an affordable energy drink, was launched in the Philippines.
Management plans to target countries in Africa, Asia-Pacific, and Latin America -- including the launch of Predator in Bangladesh, China, and Pakistan and the launch of Fury in Colombia and Ecuador.
Monster's constant output of new products and its push to expand its market presence should ensure that the business can continue to grow revenue and net income.
Sea Limited
Sea Limited (SE -4.15%) operates three core businesses: digital entertainment (Garena), e-commerce (Shopee), and digital financial services (SeaMoney).
Garena's Free Fire continues to rank as one of the largest mobile games in the world, according to Sensor Tower. Although the game has been around for seven years, it was the most downloaded mobile game in the first quarter of 2024.
Shopee has the highest gross merchandise value (GMV) among e-commerce players in Southeast Asia. Its GMV stood at $47.9 billion, far ahead of the second-largest player Lazada's $20.1 billion and third-place Tokopedia's $18.4 billion.
Sea Limited demonstrated its financial strength by reporting its first annual profit since its initial public offering in 2017. Net income was $150.7 million for 2023 on the back of a 4.9% year-over-year rise in total revenue. Although it reported a net loss of $23.7 million for the first quarter of 2024, management attributed that to increased marketing spending to ensure Shopee maintains its market share. Those efforts paid off as Shopee reported its highest-ever GMV, revenue, and quarterly orders.
At Garena, the first quarter's paying-user ratio improved from 7.7% a year ago to 8.2% after several consecutive quarters of decline. Active users increased by 21% year over year to 594.7 million in the quarter, while paying users saw a 13.6% increase to 45.8 million.
With these results, investors should feel confident that management can deliver on its promise of consistent and profitable growth while maintaining its dominant market share in both e-commerce and gaming.
Coupang
Coupang (CPNG -0.66%) is the leading e-commerce provider in South Korea along with providing a range of services such as restaurant deliveries, video streaming, and financial technology services. According to research firm Euromonitor, Coupang has pushed ahead of the pack in market share in South Korea, going from 5.8% in 2017 to 22.5% by 2022.
The company turned profitable in 2023, with net income of $1.4 billion on an 18.5% year-over-year increase in sales to $24.4 billion. It also generated positive free cash flow of $1.8 billion, reversing the free cash outflow of $259 million in the previous year. Its WOW membership program, which offers perks such as free shipping and same-day delivery, saw a 27% year-over-year increase in membership to 14 million.
Coupang announced the acquisition of Farfetch Holdings in December of 2023 to gain a foothold in the global luxury goods market. Farfetch sells apparel, footwear, and accessories online from brands such as Versace and Prada, among others. This acquisition will allow the company to offer a wider selection of goods on its platform.
For the first quarter of 2024, Coupang once again demonstrated healthy growth. Revenue when including Farfetch jumped 23% year over year to $7.1 billion. Excluding Farfetch, growth was still healthy at 18% year over year. Net income came in lower at $5 million as the Farfetch acquisition contributed losses; excluding the luxury retailer, Coupang would have reported a net income of $98 million, slightly above the $91 million a year ago.
Free cash flow tripled year over year for the trailing-12-month period, going from $500 million to $1.5 billion. With its dominant position and recent acquisition of Farfetch, Coupang looks well positioned to continue growing.
