So I am not really a prediction guy, and I really don’t like making bold statements about the future, however I thought it would be fun to put down a stock that I think will have e a tremendous future over the next 10 years. This led me to write this article, especially since I spend so much time researching companies and stock performance. There are some no-brainer companies that should be the pick like Amazon, Google, Facebook, Johnson & Johnson, Microsoft, and Apple, but whats the fun in picking one everyone else already knows all about. Also these behemoths will probably have tremendous decade long returns, they likely won’t get you 500% returns or more, like I am thinking about with my decade long pick.
Here’s some of the criteria I look for in a long term growth play:
- Small to Mid cap companies with room to grow long into the future
- Recession resilient products or services
- Market leader or ability to grow into becoming a market leader
Now that we have some context and criteria let’s get straight into it.
My Decade Stock Pick
My decade stock pick is Five Below (FIVE) which is a discount retailer that sells items that mostly all cost below $5 dollars, obviously, but have also recently introduced some items up to $10. The main reason I am so bullish on Five Below is that it has some incredible store expansion goals for the future, and are only around 1/3 of the way to their initial store count goal of 2,500 as shown in the graphic below:
So as you can see in the graphic Five Below has not really expanded yet to the North West part of the United States but has plans to. The store growth alone accounts for 23% compound annual growth rate, which gets me all kinds of excited. They have also strategically added or will be adding 3 new regional distribution centers (Mid-west, West-coast, & South-west) to handle the expansion and growth areas as shown below:
Five is led by a very experienced team including their CEO Joel Anderson who is a former Walmart executive, I also like that the chairman & co-founder (2002) is still on the leadership team and actively involved. Five Below is priced like a growth stock and has a high multiple P/E (price to earnings) but that is to be expected since they do not pay a dividend and are reinvesting everything back into company expansion. As of the time of writing FIVE is trading at a stock price of around $126 and a forward P/E of around 35. I do however believe that once expansion slows, they will switch over to becoming a dividend paying company (could be 8-10 years from now). How nice would that be to have racked up a bunch of their shares during this high growth period, and then after some years start getting paid dividends as well.
Five Below should continue to grow and be alright even during economic downturns since they provide quality products at a discount. Although the only risk I see is their target market is a younger demographic from tween to under 45 years old. That takes off a lot of that older money off the table from many in retirement age, but I would guess lots of grandparents still shop there or would take the grand-kids shopping there even though they are not the target audience.
I also did a little deeper dive into Five Below over on my YouTube channel as well, if you want to go check that out: