Most of us would love to have a portfolio full of “monster stocks” — growth stocks that have posted outsized gains over many years. Fortunately, there are more than a few of these stocks, and some are well worth considering for your long-term portfolio.
Here are five investments to consider for your monster-seeking portfolio.
Nvidia (NASDAQ: NVDA) has been an exceptional monster stock, averaging annual gains of 87% over the past five years and 75% over the past decade. Best of all, it still doesn’t seem that overvalued relative to past years. Its recent forward-looking price-to-earnings (P/E) ratio of 32, for example, is well below the five-year average of 41 — though both numbers are still on the higher side.
Nvidia has long been known as a gaming-chip semiconductor company, but it’s gotten a lot more involved in the artificial intelligence (AI) boom and is cranking out chips for data centers — millions of chips.
If you’re bullish on Nvidia, you might want to be bullish on Taiwan Semiconductor Manufacturing (NYSE: TSM), too. That’s because most semiconductor companies don’t actually make chips. They just design them. Relatively few companies actually manufacture chips, and Taiwan Semiconductor is the world’s biggest contract semiconductor chipmaker, making Nvidia chips and many others.
Taiwan Semiconductor has grown powerfully in recent years, averaging annual gains of 25.6% over the past decade. To put that in perspective, the S&P 500 has averaged annual returns close to 10% (ignoring inflation) over long periods, and over the last decade it has averaged around 13%.
At recent levels, the stock doesn’t appear to be a screaming bargain — or wildly overvalued — so proceed accordingly. Maybe buy into it incrementally if you’re so inclined, or just add it to your watch list. If you already own it, hanging on for many more years may pay off well.
Arista Networks (NYSE: ANET) is a cloud networking specialist, and another monster stock. It has averaged annual gains of about 40% over the past decade and nearly doubled in value over the past year. That has left its stock a bit richly valued, so this is more of a hold than a buy for more cautious investors. (Its recent forward P/E was 45, well above the five-year average of 30.)
There’s a lot to like about Arista, such as its prodigious free-cash-flow generation, robust profit margins, and gains in market share. That said, it does face some competition from Cisco Systems. In its third quarter, Arista reported revenue up 20% year over year and announced a (now-executed) 4-for-1 stock split.
