These stocks have the potential to let investors live a life of luxury.
I often say that investing is like cooking. Having a great recipe doesn’t guarantee success, but it’s certainly a good start.
With that in mind, let’s put together an investment recipe: a hypothetical $50,000 portfolio.
Here’s what I’m thinking:
Image source: Getty Images.
walmart
First, allocate $20,000, or 40% of your hypothetical portfolio, to Walmart (WMT -0.17%).
While researching articles about the biggest companies of 2009, I discovered that of the top five companies from that year (by revenue), only one remains in the top five today. . Spoiler alert: It’s Walmart.
Clearly, the company has staying power. The rise of e-commerce has revolutionized the retail industry over the past 15 years. But Walmart hasn’t just survived, it’s thrived.
Over the past 12 months, the company generated more than $665 billion in sales. This is a first among all American companies. Since 2009, the company’s sales have increased by 65%. Much of that growth is due to Walmart expanding its focus to include e-commerce.
For example, in its most recent quarter (three months ending July 31), the company reported U.S. sales of $115 billion. Of that amount, about 17%, or nearly $19 billion, came from online orders. The company currently reports e-commerce growth of more than 20% in five of the past six quarters.
This means that given the rapid growth of e-commerce, Walmart has a good chance of becoming one of the five largest companies in the United States by sales within the next 15 years. This is great news for Walmart and future investors.
Duolingo
Next, allocate $5,000, or 10% of your hypothetical portfolio, to Duolingo (DUOL 0.03%).
When it comes to Duolingo, I’m inspired by one of my investing heroes, Peter Lynch, former manager of Fidelity Magellan Mutual Funds. He advised investors to “buy what you know.” When it comes to Duolingo, I know quite a bit.
For those of you who don’t know, let me give you a quick explanation about this company. We operate language learning apps that can be downloaded to smartphones and other devices. Users can start learning languages for free.
But this is no ordinary app. It’s highly addictive, thanks to its smart design and “gamification” features that make it feel more like playing a video game than conjugating verbs or memorizing vocabulary.
As a result, Duolingo has become a hit, gaining tons of new users and subscribers.
In its most recent quarter (three months ending June 30), the company surpassed 100 million monthly active users. Total subscribers increased by 52% year over year to 8 million.
These impressive user numbers also contribute to impressive financials. Revenues increased 41% year over year to $178 million, and net income increased more than six times the year-ago period to $24 million. And analysts expect the company to generate about $950 million in revenue next year, about 29% more than this year.
In summary, Duolingo has a lot of upside potential. I’m spicing up my investment recipe by allocating 10% of my hypothetical portfolio to this high flyer.
microsoft
Finally, allocate $25,000, or 50% of your hypothetical portfolio, to Microsoft (MSFT -0.76%).
The reason I’m so invested in Microsoft is simple. Because Microsoft is a great company with great leadership in a growing industry.
Everyone knows Microsoft. The company has been an iconic American company for decades, and many of its products are legendary. However, in addition to well-known software applications such as Office and Windows, the company also has large unrelated business segments such as gaming and cloud services.
When it comes to the company’s leadership, CEO Satya Nadella has been at the helm for over a decade and his track record is clear. That means he’s a winner. The company’s stock price has soared more than 1,300% during that time, with a compound annual growth rate of 28.4%. This is more than double the S&P 500’s return over the same period.
Total return level for MSFT. Data by YCharts.
But the most interesting thing about Microsoft is its future. The company is a leader in artificial intelligence (AI). A key partnership with ChatGPT maker OpenAI has integrated AI capabilities into the company’s iconic software suite, with more likely to come.
Finally, by allocating half of my $50,000 portfolio to Microsoft, I am confident that my recipe will have a strong foothold in one of the world’s largest and best-run companies. What’s more, it’s a stock that has significantly outperformed the benchmark S&P 500 for more than a decade.
