The stock market’s volatility in recent years has left investors uncertain, witnessing periods of decline and surges. Despite a strong start in 2024, predicting the market’s exact trajectory in the coming weeks and months remains uncertain.
For investors focused on quality businesses capable of sustained long-term growth, the emphasis should not be on short-term market predictions. Attempting to time the market is a strategy that seldom leads to significant returns.
Even with a modest sum, such as $500, investors have the opportunity to become partial owners of businesses deemed compelling for long-term growth. Here are two noteworthy stocks that stand to benefit from a potential bull market streak, offering the prospect of favorable returns over the next five to 10 years.
1. Teladoc Health
Teladoc Health (NYSE: TDOC) has faced a challenging market environment, witnessing its shares decline by more than 30% since the beginning of the year. As a long-term shareholder navigating through the stock’s turbulence amid shifting investor sentiment, I can attest to the roller-coaster ride.
Despite the recent struggles, I continue to hold onto this stock due to my belief in its fundamental value proposition, its leadership position within a vast and expanding market, and the growing demand for the solutions it offers to a global healthcare consumer base.
While acknowledging that Teladoc may not be suitable for every investor, for those with a well-diversified portfolio aiming to capitalize on the future of telehealth, Teladoc appears to be a potentially undervalued investment with significant long-term potential.
When I refer to the long term, I’m not talking about the next couple of years but rather the next five to ten years. Examining Teladoc’s recent financial performance reveals challenges, including impairment charges related to writedowns of pandemic-era acquisitions and declining revenue. However, it’s crucial to dissect these elements individually.
The impairment charges, while impacting the balance sheet, were non-cash in nature, representing accounting adjustments rather than actual operational losses. Teladoc has consistently narrowed its net losses, with a full-year 2023 net loss of $220 million, a significant improvement from just under $14 billion in 2022.
Regarding revenue growth, Teladoc, now at a more mature stage, has shifted from the exceptional growth witnessed during the pandemic, a trajectory unlikely to be sustainable in the long term. Nonetheless, the company continues to exhibit growth, with 2023 revenue reaching $2.6 billion, an 8% increase from the previous year. Operating cash flow for the 12-month period rose by 85% year-over-year to $350 million, and free cash flow surged by 1,041%, totaling $194 million.
Comparing the 2023 revenue figure to Teladoc’s 2019 revenue, a pre-pandemic period, reveals a robust four-year increase of approximately 370%. The stock, currently trading at a price-to-sales multiple of 0.9, presents an attractive valuation. Even a modest investment in this stock has the potential to yield returns over the long term for patient investors.
2. Green Thumb Industries
Green Thumb Industries (OTC: GTBIF) is a prominent cannabis cultivator and retailer with a focus on both medicinal and recreational products. As of the latest update, the company operates 92 retail locations nationwide, strategically positioning itself in over a dozen diverse markets.
Green Thumb has strategically concentrated its operations in some of the most lucrative cannabis markets across the United States. Key states in its portfolio include Florida, the largest medical cannabis market in the country, where the company recently inaugurated its 15th dispensary. Additionally, it holds a substantial presence in other crucial markets such as Illinois, Massachusetts, Minnesota, and Nevada.
Navigating the complex landscape of piecemeal cannabis legislation in the U.S., Green Thumb Industries distinguishes itself by steadily expanding its footprint in core target markets and diversifying its product offerings across both medical and adult-use categories. Unlike many competitors facing challenges in the evolving legal landscape, Green Thumb Industries stands out as one of the few marijuana businesses demonstrating consistent revenue growth and profitability according to generally accepted accounting principles (GAAP).
In 2023, the company reported revenue of $1.1 billion, reflecting a 4% increase from the previous year. Net income for the same period reached $36 million, marking a threefold increase from the prior year. Notably, Green Thumb Industries generated operating cash flow of $225 million in 2023, representing a significant 42% surge compared to 2022.
Over the trailing five-year period, Green Thumb Industries has achieved impressive growth, with annual revenue expanding by 90%, while annual profits have seen a remarkable 142% increase during the same timeframe. While investing in the marijuana industry involves a certain level of risk, Green Thumb Industries stands out as a profitable pot stock with promising prospects, making it an appealing choice for investors with a well-diversified portfolio looking to capitalize on the potential of this burgeoning industry still in its early stages.
