3 Stocks That Could Create Lasting Generational Wealth
Creating wealth for yourself can be supremely satisfying, reducing or wiping out the worries of running out of money in retirement. If you're really good at saving and investing, though, you may be able to do better than just create wealth for yourself. You may create lasting generational wealth, providing for your children and their children and so on.
The most promising stocks for creating lasting generational wealth are those with seemingly long runways to keep growing. Here are three to consider.
1. Alphabet
Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has already made many investors millionaires and seems able to keep doing so. Clearly, one of its biggest businesses is the dominant Google search engine, which generates big bucks via digital ads. In the company's fourth quarter, "Google Search & other" provided a whopping 56% of Alphabet's revenue. When you add in YouTube advertising and Google Network dollars, they amount to 76% of total revenue.
YouTube is another dominant online destination for millions, and Alphabet is also home to the widespread Android mobile operating system, the Chrome browser, Google Cloud, the Google Play app store, smart thermostat maker Nest, and Fitbit, among others. It even has its own artificial intelligence (AI) model, Gemini. It can be hard for huge companies to grow huger, but revenue advanced by 13% year over year in the fourth quarter of 2023, while operating income jumped 30%.
Better still, Alphabet's stock seems appealingly valued at recent levels, with a recent forward-looking price-to-earnings (P/E) ratio of 20, below its five-year average of 24.
2. MercadoLibre
MercadoLibre (NASDAQ: MELI) isn't a household name in the U.S., but it's a dominant -- and growing -- enterprise in Latin America. It's often described as a mix between Amazon and a company like PayPal, as it's a major e-commerce business coupled with a fintech one, facilitating financial transactions electronically. Indeed, MercadoLibre has even launched its own version of Amazon's Prime service.
The company, claiming "the largest e-commerce and payments ecosystem in Latin America," operates in Argentina, Brazil, Mexico, Colombia, Chile, Venezuela, Peru, and 11 other countries. It's growing briskly, too, with fourth-quarter net revenue up 83% year over year on a currency-neutral basis to $4.3 billion and gross merchandise volume up 79% to $13.5 billion.
A competitive advantage of MercadoLibre is its vertical integration. The company features not only online marketplaces and digital finance but also logistics services, credit solutions, and advertising services. There are risks, of course, but the company has multiple irons in the fire and isn't wholly dependent on any single one.
MercadoLibre's recent forward-looking price-to-earnings (P/E) ratio of 47 is steep but still below its five-year average of 110. So, the stock appears to be not quite a bargain but valued lower than it has been in the past.
3. Invesco Nasdaq 100 ETF
The Invesco Nasdaq 100 ETF (NASDAQ: QQQM) is an exchange-traded fund (ETF) -- a fund (encompassing some 100 companies in this case) that trades more like a stock than a mutual fund. The ETF tracks the Nasdaq-100 index, which focuses on 100 of the largest non-financial companies (domestic and international) in the Nasdaq. Here are the top 10 most recent holdings and the percentage of the ETF each represents:
Holding | Percentage of ETF's value |
|---|---|
Microsoft | 8.78% |
Apple | 7.66% |
Nvidia | 6.46% |
Broadcom | 4.43% |
Advanced Micro Devices | 2.41% |
Adobe | 1.94% |
Cisco Systems | 1.49% |
Qualcomm | 1.42% |
Intel | 1.40% |
Intuit | 1.36% |
Source: Invesco.com, as of March 11, 2024. EFT = exchange-traded fund.
Trying to figure out which businesses will be thriving over decades and helping shareholders build lasting generational wealth can be hard. However, with this single ETF, you'll quickly own 100 companies, with heavy weightings in the companies above. Better still, if some of these companies falter in the years ahead, the index will replace them with better growers. (It's hard to beat index funds when you're looking for easy and powerful investments.)
The ETF is fairly new. It has averaged annual gains of 12.8% over the past three years. The returns have been lumpy, though: The ETF gained 27.5% in 2021, sank 32.5% in 2022, and soared 55% in 2023. Its annual fee (expense ratio) is a low 0.15%.
So, give these securities some consideration for berths in your portfolio. Know, too, that there are many other companies that can serve you well as you aim to build a bigger nest egg for yourself and your heirs. Just be sure to buy into any when they're undervalued or reasonably valued -- not grossly overvalued.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Adobe, Alphabet, Amazon, Apple, MercadoLibre, Microsoft, Nvidia, PayPal, and Qualcomm. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Cisco Systems, Intuit, MercadoLibre, Microsoft, Nvidia, PayPal, and Qualcomm. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, short March 2024 $67.50 calls on PayPal, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
3 Stocks That Could Create Lasting Generational Wealth was originally published by The Motley Fool
