It’s easy to claim to be a long-term investor during a bull market, but that optimism can quickly fade once a bear market starts. During those times, it’s more helpful to remember that the market has consistently generated bigger gains for investors who managed to hold firm through the peaks and troughs than for those investors who tried to time the market.
With that investing advice in mind, I’d like to highlight a trio of evergreen growth stocks that should make it easier to stick to the plan as they have a good chance of continuing to climb in price over the next few decades. They are: LVMH Moet Hennessy L.V. (OTC: LVMUY), Taiwan Semiconductor Manufacturing (NYSE: TSM), and PayPal Holdings (NASDAQ: PYPL). Let’s find out a bit more about these three surefire stocks.
LVMH is the world’s largest luxury company. The French company’s portfolio, which is spread across 75 holdings, includes iconic brands like Louis Vuitton, Dior, Hennessy, Sephora, and Tiffany & Co.
LVMH is a great long-term investment for two straightforward reasons: Affluent customers usually continue shopping through economic upturns and downturns, and high-end brands face less competition than cheaper brands.
LVMH’s revenue declined 17% in 2020, with a 16% drop in organic sales, as its profit from recurring operations slipped 28%. That slowdown seems bleak, but it was mainly caused by pandemic-related closures.
On the bright side, LVMH’s fashion and leather goods segment, which generates nearly half its revenue, recovered in the second half of 2020, with accelerating sales in China and the U.S. Its other businesses, including the selective retailing group that houses Sephora and its DFS stores, should also stabilize after the pandemic ends.
That’s why analysts expect LVMH’s revenue and earnings to rise 25% and 63%, respectively, this year. LVMH’s stock might not seem cheap at 36 times forward earnings, but I believe its resilience and well-diversified portfolio of high-end brands easily justify that slight premium.
In the past, many processing chipmakers manufactured their own chips. But as the chips became smaller and more difficult to manufacture, many chipmakers instead outsourced their production to third-party foundries better equipped to execute the chip-making process efficiently.
Today, only three foundries can manufacture the world’s most advanced chips: TSMC, Samsung, and Intel (NASDAQ: INTC). However, Intel — which mainly produces its own chips at its foundries — has gradually fallen behind TSMC and Samsung in the “process race” to create smaller and more powerful chips.
TSMC remains slightly ahead of Samsung in that race, which makes it the biggest “pure-play” chip foundry in the world.
Most “fabless” chipmakers, including AMD, Qualcomm, and Apple, now rely on TSMC to manufacture their newest 5nm and 7nm chips. Even Intel, which is eager to resolve its own manufacturing issues, recently agreed to outsource some of its chips to TSMC.
In other words, TSMC is becoming the ultimate gatekeeper to the world’s semiconductor market, and the surging demand for chips worldwide will likely drive its stock much higher.
TSMC’s revenue and earnings rose 25% and 50%, respectively, in 2020. Analysts expect its revenue and earnings to grow another 20% and 17% respectively, this year — and its stock still looks reasonably valued at 27 times forward earnings.
PayPal is one of the world’s largest online payment companies. Its number of active accounts grew 24% to 377 million in 2020, its number of transactions jumped 25% to 15.4 billion, and its TPV (total payment volume) surged 31% to $936 billion.
PayPal’s peer-to-peer payments app, Venmo, accounted for $159 billion of its TPV during the year, up 56% from a year ago. Its merchant services volume also increased 33% as businesses shifted more of their payments online to offset their lower brick-and-mortar sales throughout the pandemic.
PayPal’s revenue and earnings grew 22% and 31%, respectively, in 2020. It expects its revenue and earnings to grow another 19% and 17%, respectively, this year.
PayPal also started allowing its users to buy, hold, and sell Bitcoin and other cryptocurrencies last year. That move won’t make it a major Bitcoin player like Square anytime soon, but it ensures that its payment platform will keep pace with the latest fintech trends.
PayPal’s stock might seem pricey at over 40 times forward earnings, but its first-mover’s advantage in online payments, its sprawling presence in over 200 countries, and its robust growth rates all support its higher valuation and make it a great long-term investment.
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Leo Sun owns shares of Apple, LVMH Moet Hennessy L.V. (ADR), and Square. The Motley Fool owns shares of and recommends Apple, Bitcoin, PayPal Holdings, Qualcomm, Square, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2022 $75.0 calls on PayPal Holdings, long January 2023 $57.5 calls on Intel, long March 2023 $120.0 calls on Apple, short January 2023 $57.5 puts on Intel, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.