Stock returns of the last decade, and especially of the past 12 months, have shown how regular and long-term investing can net individuals significant fortunes. A large number of investors started the 2010s on the heels of the Great Recession. Yet, those who believed in the strength of the U.S. economy and jumped on the depressed stock prices enjoyed one of the longest bull markets in our history. A similar pattern happened over the past year. Therefore, today’s article introduces seven millionaire-maker stocks to buy in 2021.
A million dollars would be a considerable amount of money, especially for retirement years. Most people do not realize that it’s an achievable amount over the long-term, especially through regular investing. For instance, with the Rule of 72, we can calculate how soon an investment could double in value due to compounding. If we take the number 72 and divide it by the annual return (percent), then we get the amount of time it takes for the investment to double.
Let’s assume an investment returns 10% a year. Then we have, 72/10 = 7.2. In other words, in about seven years, that investment would double in value. Over the past year, the S&P 500 index returned over 15%. The index may not necessarily repeat that strong performance year after year. However, the S&P’s returns over the decades show that annualized returns over time are around 7% to 10% for the index. Put another way, in addition to including strong stocks in a portfolio, it is important to invest for the long-term.
With that information here are seven millionaire-maker stocks to buy:
- Cloudera (NYSE:CLDR)
- Electronic Arts (NASDAQ:EA)
- Facebook (NASDAQ:FB)
- Mastercard (NYSE:MA)
- PayPal (NASDAQ:PYPL)
- Sony (NYSE:SNE)
- Uber Technologies (NYSE:UBER)
Millionaire-Maker Stocks to Buy: Cloudera (CLDR)
52-week range: $6.31 – $19.35
1-year price change: Up about 85%
Palo Alto, California-based Cloudera offers enterprise software for cloud platforms that can be used for data management, analytics and machine learning. Over 60% of revenue comes from U.S.-based clients. Management is working to move most of its offering to a cloud-based subscription model, which would mean annualized recurring revenue (ARR) — a delight to investors’ ears.
In early December, the group released third-quarter results. Revenue came at $217.9 million, an increase of 10%. Non-GAAP net income was $49.3 million, compared to the non-GAAP net loss of $8.2 million last year. Non-GAAP net earnings-per-share (EPS) was 15 cents. A year ago, it had been a non-GAAP net loss of 3 cents per share. Cash and equivalents stood at $567.5 million.
CEO Rob Bearden said, “We believe that Cloudera has never been better-positioned to capture more of the rapidly growing data management and analytics market opportunity for hybrid multi-cloud solutions. As a result, we have announced today that the board has authorized the repurchase of an additional $500 million in shares of our stock.”
Since mid-February, shares have been weak. CLDR stock’s forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are 35.09 and 5.66, respectively. In April 2017, Cloudera went public at $15 per share. I expect the company to create shareholder value for many quarters to come. Any move toward the $10 level should improve the margin of safety.
Electronic Arts (EA)
52-week range: $88.43 – $150.30
1-year price change: Up about 65%
The growth of the gaming industry during the lockdown has brought gamers and investors into top-name studios. Therefore, our second stock is the Redwood City, California-based gaming group Electronic Arts, a leading name in digital interactive entertainment.
It has a portfolio of well-known titles such as EA Sports FIFA, Battlefield, Apex Legends, Formula One, The Sims, Madden NFL, Need for Speed, Project Cars and Titanfall. Over the years, the company has been successful in monetizing such games with add-on content.
In early February, EA announced mixed Q3 FY21 results. Net revenue came at $1.67 billion, up from $1.59 billion last year. But net income of $211 million was down from $346 million in Q3 2020. Diluted EPS also decreased from $1.18 to 72 cents. Operating cash flow was $1.12 billion. Investors noted the increased levels of player engagement.
The group’s FY21 ends on March 31, 2021. For the fiscal year, management expects net revenue to come at $5.6 billion. Projected net income of $742 million is likely to translate into diluted EPS of $2.54.
EA stock’s current P/E and P/S ratios are 21.23 and 6.61, respectively. It has recently announced it will acquire Glu Mobile (NASDAQ:GLUU). This move could provide tailwinds to EA’s mobile focus, an area which has been one of its weaker points. Investors are also excited about EA’s upcoming revival title, EA College Football. EA hasn’t released a college football title since 2013.
As economies open up, there could be an initial decline in the numbers of gamers spending more time in front of screens. Yet, a drop in the share price toward the $120 level could be seen as a good opportunity to buy EA stock.
52-week range: $142.25 – $304.67
1-year price change: Up about 65%
When volatility hits the market, I believe it is important to focus on stocks with strong underlying businesses. Based in California, Facebook is a well-known and successful social media giant. Its platforms include Instagram, Messenger, WhatsApp and Oculus — as well as its namesake, Facebook — all under one roof.
FB announced its Q4 financials on Jan. 27. Revenue was $28.07 billion. Net income increased 53% YoY and reached $11.22 billion. Diluted EPS went up from $2.56 in Q4 2019 to $3.88 in 2020. Free cash flow also increased by 90.5% YoY, jumping from $4.84 million to $9.22 million.
CFO David Wehner cited, “We expect year-over-year growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021. In the second half of the year, we will lap periods of increasingly strong growth, which will significantly pressure year-over-year growth rates.”
One important thing to note is that Facebook’s advertising business model relies on heavy data collection. There have been growing concerns about potential privacy and legislative issues when it comes to that advertising. That’s not just in the States, but also overseas, especially in Europe. Therefore, it may be easy to overlook the company’s strong financial results and earnings potential.
However, I believe 2021 will be another year of double-digit growth for FB shareholders. Currently, FB stock’s forward P/E and P/S ratios are 22.78 and 8.58, respectively. Any decline toward the $250 level would make it one of the best “buy-and-hold” stocks on the Street.
52-week range: $199.99 – $389.50
1-year price change: Up about 65%
Most investors search for businesses in segments that show secular growth trends, such as financial technology (fintech). Mastercard is one of those stocks. It connects global consumers, financial institutions, and businesses, enabling them to use electronic forms of payment. Its brands include MasterCard, Maestro and Cirrus.
The company reported fourth-quarter and full-year 2020 results in late January. Net revenue was $4.1 billion, down 7% from the prior year period. This decline was due to a significant decrease in cross-border volume, down 29% YoY. Management highlighted the decline in travel spending during the pandemic.
Net income was $1.8 billion, down 15% YoY. Diluted earnings-per-share was $1.78 per share, down 14% from $2.07 a year ago. Cash and equivalents stood at 12.4 billion at the end of 2020. The group generates revenue based on payment volume traffic in its network. Therefore, its profitability depends on businesses and consumers spending more.
Investors were interested to learn about the company’s plans for participating in the growth of cryptocurrencies. Mastercard will provide merchants with the opportunity to receive payments in Bitcoin (CCC:BTC-USD) later this year. This move seems to be a significant milestone for cryptos, as Mastercard would become a major platform for these digital assets.
While the company endured YoY revenue and margin declines in the past year, I find MA stock’s prospects to be bright. The shares could act as a proxy for investing in the global recovery, and potentially have double-digit growth rates. Finally, its current dividend yield stands at 0.5%. The company is well-suited for buy-and-hold investors, who are patient enough to become millionaires.
52-week range: $82.07 – $309.14
1-year price change: Up about 183%
Our next stock, PayPal, is also from the fintech segment. Its combined payment solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products. It is one of the strongest names in online money transfer services.
The group also enables U.S.-based users to buy and sell Bitcoin on its PayPal platform. In the case of wide adoption of digital currencies, it is likely to have significant first-mover advantage.
Management has capitalized on the digitalization trends of the past year and delivered strong growth. The company announced Q4 and full year 2020 results on Feb. 3. Quarterly revenue came at $6.12 billion, up 23% YoY. Non-GAAP net income was $1.3 billion, showing a 30% YoY growth. Non-GAAP earnings-per-share was $1.08, an increase of 29% from Q4 2020. PayPal generated $1.35 billion in cash flow, a 46% YoY increase. Free cash flow was $1.12 billion, an increase of 50% YoY. Overall, the company has a strong balance sheet as well as operating margins.
PYPL stock’s forward P/E and P/S ratios are 55.25 and 13.91, respectively. Given the impressive run-up in price over the past year, the valuation is on the frothy side. Yet, PayPal’s digital payment products are likely to stay in high demand. Its market capitalization (cap) is about $290 billion, meaning there is still room for growth. Although there is likely to be occasional pullbacks in the share price, I expect PYPL stock to create shareholder value for many quarters to come.
52-week range: $51.58 – $118.50
1-year price change: Up about 91%
Tokyo-based Sony is a conglomerate consisting of five main business segments, including game and network services, music, pictures, electronics products and solutions, imaging and sensing solutions and financial services.
Its latest gaming console, the PlayStation 5 (PS5), has put the Japanese electronics master on many investors’ radar screen. The pandemic has meant a surge in demand for consoles like the PS5. Gaming is a crucial driver of SNE stock and is likely to benefit specifically from developments in 5G. Speed means next to no buffering or load time in these consoles, as well as superior image quality.
According to the quarterly metrics announced in early February, sales reached nearly 2.7 trillion JPY, an increase of 9% year-over-year. Net income was 371.9 million JPY, up 62% YoY. Diluted EPS came at 297.35 JPY, an increase of 62%. Sony is a well-managed company with a strong balance sheet.
SNE stock’s forward P/E and P/S ratios are 20.24 and 1.68, respectively. Gaming stocks have recently been in the limelight due to the global chip shortage. As a result, the SNE share price has come under pressure. Further decline, especially below the $100 level, would give long-term investors a good entry point into the shares. The company’s best days are possibly yet to come.
Uber Technologies (UBER)
52-week range: $19.73 – $64.05
1-year price change: Up about 65%
Growth-oriented tech investors have been a big fan of Uber. The San Francisco, California-based company’s platform matches carriers with customers to move people, food and things through cities, both stateside and overseas. The platform is best known for its Uber ride-hailing app, its core business. Yet despite the declines in taxi rides during the pandemic, Uber’s food delivery business was a bright star for the company’s bottom line.
According to the most recent earnings announced in late February, Q4 revenue was $3.2 billion, down 16% YoY. Net loss was $968 million, an improvement of 12% compared the loss of $1.1 billion a year ago. Net loss included $236 million in stock-based compensation expense. Diluted loss-per-share was 54 cents.
UBER stock’s P/S and price-to-book ratios are 8.98 and 8.65, respectively. As economies start going back to “normal,” Uber could potentially see considerable upside in the coming quarters, especially in its ridesharing operations. Any potential decline toward the $50 level would improve the risk/return profile for long-term investors.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.