Millionaires, by investing in equities, are not made overnight. It takes years of grinding in the form of research that a high level of patience should back. Daily news and temporary headwinds tend to distract investors. That’s when conviction and patience play a critical role. Apple (NASDAQ:AAPL) was the first trillion-dollar Company; others have followed. In the coming years, the markets will continue to reward quality businesses through swelling valuations. This column focuses on the potential next trillion-dollar companies to invest.
It’s worth noting that the focus is immediately on the technology sector when we talk about trillion-dollar companies. I agree that the world of technology is dynamic, and areas like artificial intelligence and robotics have a substantial addressable market.
I have discussed a few technology stocks in this column. At the same time, I have focused on companies that can surprise investors as potential next trillion-dollar companies. Let’s discuss the reasons to be bullish on these stories until 2030.
Rio Tinto (RIO)
Investors will be surprised as I talk about a cyclical industrial commodity stock on the list of the next trillion-dollar companies. There are two reasons for this bullish view. First, industrial commodities are possibly the most undervalued asset class based on 20-year CAGR returns for different assets. As an asset class, commodities are likely to catch up in the coming years.
Further, the demand for metals supporting the global energy transition will likely surge. Rio Tinto (NYSE:RIO) is attractive from this perspective as the Company focuses on metals positioned to benefit from the focus on green energy.
An important point to note is that Rio has an investment-grade balance sheet. Even with weakness in commodities, the Company delivered a free cash flow of $3.7 billion for the first half of 2023. With high financial flexibility, the Company is positioned to invest aggressively in lithium, copper, and aluminum. The outlook for this 5.47% dividend yield stock is therefore bullish.
Chevron Corporation (CVX)
I will talk about yet another cyclical stock that represents a potential next trillion-dollar company. Chevron Corporation (NYSE:CVX) is among the best oil and gas stocks. The recent correction is an excellent opportunity to enter a stock with an attractive dividend yield of 4.18%.
The first reason to like Chevron is the cash flow potential. Last year, Brent oil averaged $100.9 per barrel, and the Company reported an operating cash flow of $47.5 billion. Quality assets with an attractive break-even will continue to ensure that Chevron reports robust cash flows.
Along with the cash flow potential, Chevron has an investment-grade balance sheet. Recently, the Company announced the acquisition of Hess Corporation (NYSE:HES). Organic and acquisition-driven growth will ensure that production and cash flows continue to swell. Once Hess is acquired, Chevron expects to invest $19 to $22 billion annually.
I must add here that Chevron is also investing in renewable energy projects. In the next decade, this segment will be another key growth driver for the Company.
Costco Wholesale (COST)
Costco Wholesale (NASDAQ:COST) stock is another name I would add to the list of trillion-dollar companies. In my view, Costco is possibly the best bet among retail stocks. Of course, the company does not have an asset-light model, which is preferred nowadays when scanning for massive value creators.
However, there are two primary reasons to like Costco. First, the United States economy is driven by consumption spending. An essential part of this is retail expenditure. Costco will, therefore, continue to benefit from a robust omnichannel presence.
Further, Costco had 697 warehouses in the U.S. and Canada as of Q4 2023. The Company, however, has only five warehouses in China. There is ample scope for expansion in emerging Asia, and that’s a potential growth driver for the coming decade.
I must add that Costco reported $4.6 billion in membership revenue in the last financial year. This revenue will likely continue to swell as the Company expands present. Robust recurring revenue will support value creation.
Lockheed Martin (LMT)
I have intentionally avoided talking about technology names in the list of next trillion-dollar companies. Of course, I will discuss a few, but the focus is always on the technology sector as a massive value creator. There is ample quality outside the tech space that can deliver multi-bagger returns.
Lockheed Martin (NYSE:LMT) stock is a potential value creator if investors are willing to buy and hold until 2030. In 2022, global defense spending increased for the eighth consecutive year to $2.24 trillion. As points of friction increase globally, defense spending will likely accelerate. LMT stock has been subdued but looks poised for a big breakout rally.
I believe that there are three reasons to be bullish on Lockheed. First, the Company has an order backlog of $156 billion, and I expect continued acceleration in backlog, which will translate into higher cash flow.
Second, Lockheed is increasingly looking at international collaborations to boost growth. The Company’s recent orders include those from Norway, Korea, Philippines, among others. Additionally, Lockheed is investing in next-generation defense technology. This is likely to keep the Company ahead of the curve.
Biopharmaceutical stocks were in focus during the COVID-19 pandemic. However, the sector has been ignored in a post-pandemic world, and valuations are attractive. AstraZeneca (NASDAQ:AZN) is one stock I believe can be a potential multi-bagger by 2030.
First, I want to point out that various medical conditions are increasing globally. There is a continuous need for investment in research and development to discover drugs. As an example, globally, there were an estimated 20 million cases of cancer. Further, the cancer burden is expected to increase by 60% over the next two decades.
Coming to AstraZeneca, the Company has a deep pipeline of 172 projects. The pipeline of new molecular entities is for conditions that include oncology, respiratory, immunology, cardiovascular, and rare diseases, among others. A strong pipeline provides growth visibility for the coming years.
It’s worth noting that the Company has 30 potential Phase Three trials for the year. Of this, there are ten potential blockbuster opportunities. I would, therefore, remain bullish on healthy growth in the next few years.
Salesforce (NYSE:CRM) stock is an interesting bet among the potential trillion-dollar companies from the technology sector. At a forward price-earnings ratio of 26.3, CRM stock looks attractive and is poised to trend higher.
As an overview, Salesforce is a provider of customer relationship management technology. This description does not do complete justice to the Company’s potential with artificial intelligence likely to boost CRM growth. That’s one factor that still needs to be discounted in the stock.
From a financial perspective, it’s worth mentioning that Salesforce reported an operating cash flow of $5.3 billion for the first half of 2024. With an annual OCF potential of more than $10 billion, there is ample headroom to create value. Further, a strong cash buffer allows Salesforce to invest 3% to 4% of sales towards research and development.
Another critical point is that for Q2 2024, Salesforce reported 24% year-on-year revenue growth from Asia Pacific (APAC). This is significantly higher than the total revenue growth of 11%. Emerging markets will continue to be growth drivers in the coming years.
Li Auto (LI)
Li Auto (NASDAQ:LI) would be my wildest bet for the next trillion-dollar companies. Of course, I don’t expect it to happen anytime soon as I discuss 25x returns from current levels. However, I do believe that LI stock can create millionaires among investors willing to hold with patience for the next five to seven years.
One thing I like the most about Li Auto is that the Company executes its strategy perfectly. While few other Chinese EV stocks are pursuing aggressive global expansion, Li Auto is pursuing aggressive expansion within China. This is delivering results in the form of stellar delivery growth, and a narrow focus (for now) ensures that costs don’t go through the roof.
To put things into perspective, Li Auto reported a cash buffer of $12.13 billion as of Q3 2023. Further, the free cash flow for the quarter was $1.8 billion. Strong FCF allows the Company to invest in innovation and aggressive retail expansion. An annualized FCF potential of $6 to $8 billion indicates that the business is already a cash flow machine.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.