“A few good ideas are enough. And when you find a few good ideas, you have to act aggressively. That's the Munger system.” -Charlie Munger
Boom! $150,000 lands in your pocket out of nowhere.
What would you do? Buying a new car? Embarking on the vacation of a lifetime? Renovate your house?
If I were to find myself in such a hypothetical scenario, I know what I would do: I would follow Charlie Munger's advice and invest it – maybe $50,000 each in three stocks. Maybe it would look like this:
The first is Visa (NYSE:V)the world's largest payment processing company.
Note that I referred to Visa as a payment processing company rather than a credit card company. This is because Visa does not issue credit or debit cards. Indeed, contrary to popular belief, Visa does not offer credit to its customers, does not set rates and does not charge fees. Instead, Visa partners with financial institutions like banks and credit unions by offering access to the Visa-branded payment network (for a fee).
This is a key distinction because Visa has no credit risk. This also means that the company's revenue is largely tied to the volume of payments and transactions on its network.
Regardless, Visa's pragmatic business model has generated windfall gains for shareholders. Over the past decade, Visa stock has generated an annualized total return (price appreciation plus dividend payments) of 18.4%.
This means that $50,000 invested in Visa 10 years ago would be worth $271,000 today – which isn't too bad. However, I also have my eye on spicier choices.
2. Crowd strike
The next step is a younger, faster-growing company. It is Crowd strike (NASDAQ:CRWD), a leader in AI-powered cybersecurity solutions. While I like Visa for its steady growth, CrowdStrike is all about potential.
The company is growing revenue at a rate of 35% year-over-year since its last quarter (the three months ending October 31, 2023). Additionally, the overall cybersecurity market that CrowdStrike aims to serve is growing by leaps and bounds.
In short, it's because cybercrime is booming. Hackers – looking for money, political retaliation or chaos – are on a rampage right now. Large organizations, from large enterprises to governments and nonprofits, are all working to protect their networks, strengthen their defenses, and safeguard their data.
Specifically, some analysts expect the cybersecurity market to grow 50% to $274 billion by 2028, representing a significant opportunity for cybersecurity companies like CrowdStrike.
Regardless, CrowdStrike stock has rewarded investors since its debut in 2019. Its total return since then is more than 423%, or almost 43% per year.
In other words, $50,000 invested in CrowdStrike's IPO on June 12, 2019 would be worth $260,000 as of this writing.
That's an impressive return, and if CrowdStrike stock grows at this rate over the next decade, my hypothetical portfolio would be on track to hit $1 million.
However, I still have one last choice to make.
Finally, we arrive at Nvidia (NASDAQ:NVDA). In my opinion, no other stock can match Nvidia's combination of real results and potential.
As for the results, they are obvious. Meta Platforms, Microsoft, Amazon, You're here, and many others are buying every Nvidia AI chip they can get their hands on. And yet, the demand seems insatiable as the world can't get enough of artificial intelligence (AI).
For his part, Jensen Huang, CEO of Nvidia, put it this way: “For the first time ever, thanks to generative AI, computing technology will literally impact every industry and every country.”
So, given the massive demand for AI chips, it's no surprise that Nvidia has been one of the best stocks to own over the past 10 years.
Indeed, a $50,000 investment made in Nvidia stock 10 years ago would now be worth a staggering $9.2 million as of this writing.
It's hard to believe that a similar return is possible for Nvidia stock over the next 10 years, but no one really knows.
One thing is certain: the world desperately needs more AI products, and that means more AI chips. Nvidia is currently the market leader, but others, like AMD And Intel, I want to catch up. Additionally, some big tech names like Alphabet And Apple are developing their own AI chips, given the lucrative nature of the market.
Nvidia is nevertheless well positioned to benefit from the increase in demand for AI for many years. And that's why it takes last place in my hypothetical portfolio.
Should you invest $1,000 in Visa right now?
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, 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. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Jake Lerch holds positions at Alphabet, Amazon, CrowdStrike, Nvidia, Tesla and Visa. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Tesla and Visa. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Mad Motley has a disclosure policy.
Want $1 million in retirement? Invest $50,000 in these 3 stocks and wait a decade was originally published by The Motley Fool