I’m a growth investor at heart. Value investing can build great fortunes, and a hefty chunk of my portfolio is devoted to stable long-term wealth builders — diversification is important, after all. But it’s so much fun to look for tomorrow’s big winners today.
I have a few success stories under my belt, but they all took years to develop. My Netflix (NASDAQ: NFLX) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) buys are up by more than 1,000% each, but I started them in 2011 and 2010, respectively.
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So I’m always looking for the next Netflix or Alphabet. What stocks can I buy today to collect huge returns over the next decade or two?
My best ideas right now include media-streaming technology expert Roku (NASDAQ: ROKU) and restaurant management software maker Toast (NYSE: TOST). These growth stories are in their early chapters, and I expect them to continue winning for a very long time.
Here’s why I see market-stomping returns in the long run from Toast and Roku.
The business models are very different, but Toast and Roku have a lot in common.
Both companies are staring down enormous markets in the long run. Toast’s radically simplified restaurant management system has been installed in 127,000 locations so far, and that’s just 14.5% of the American restaurant market.
Roku has reached 85.5 million media-streaming households, with annualized platform revenues (service fees and ad sales) of $3.6 billion. The Emarketer firm estimates the domestic TV advertising market to be worth more than $90 billion this year.
And both companies have a lot of international growth to explore if and when they run out of greenfield growth opportunities in the U.S.
So Toast and Roku are staring down massive long-term growth opportunities, and they are off to an impressive start. Roku’s sales quadrupled over the last five years. Toast’s quadrupled in three years. Both companies have seen solid cash profits in recent quarters, paid down their long-term debt balances to zero, and amassed billion-dollar cash reserves.
Investors have embraced Toast recently, sending the stock price 120% higher year to date. The stock isn’t cheap, trading at 50 times forward earnings estimates and 4.9 times trailing sales — but I think it’s worth every penny of that premium price.
Roku, on the other hand, keeps doing everything right while the stock price is going down. After losing 21% of its value in 2024, Roku’s shares are valued at just 2.5 times sales. Viewed in a different light, Roku’s stock price stands 85% below its all-time highs.