Want to become a millionaire? 2 stocks to buy and hold for the next decade

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Legendary investor Peter Lynch once gave this advice: “All you need for a successful investing life are a few big winners, and the pros of those will outweigh the cons of stocks that don’t work. . “Of course, no one likes to lose money, but even the best investors aren’t always right. Fortunately, stocks can only go down 100%, but there is no limit to the potential upside.

In fact, if you take a long-term mindset and build a diversified portfolio, some of these stocks will likely increase in value several times over. And these monster returns will more than make up for your losses. With that in mind, I think Holdings reached (NASDAQ: UPST) and DigitalOcean (NYSE: DOCN) are well positioned to multiply by five or more over the next decade, a rate that would turn $ 200,000 into at least $ 1 million.

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1. Holdings upstart

For more than thirty years, financial institutions have relied on the FICO score – a three-digit number that takes into account only 12 to 20 variables – to determine who is eligible for a loan and at what interest rate. But Upstart believes that an outdated system often fails to accurately quantify the risks. In turn, this means that many borrowers overpay for credit, while other creditworthy applicants are rejected for no good reason.

Upstart’s mission is to make consumer credit more accessible. The company relies on big data and artificial intelligence, collecting more than 1,600 data points per borrower, most of which are not taken into account by traditional credit models. For example, Upstart captures signals such as employment, educational background, and macroeconomic factors. The company then trains that data against 10.5 million reimbursement events (and it’s not over). This means that every time a borrower makes or misses a payment, Upstart’s AI models get a little smarter, creating a network effect.

Case in point: Compared to traditional lending models, Upstart can approve 27% more borrowers with an average 16% lower interest rate, according to the Consumer Financial Protection Bureau. It’s a compelling value proposition on both sides of the equation. Banks benefit by doing more business (with lower fraud and loss rates), while consumers benefit from better access to credit at lower interest rates.

Of course, Upstart benefits as well. The company’s turnover is growing like wildfire.

Metric

Q3 2020 (TTM)

Q3 2021 (TTM)

Switch

Returned

$ 213.9 million

$ 620.7 million

190%

Source: Upstart SEC Filings, Ycharts. TTM: 12 rolling months.

Last December, Upstart had 10 banks on its platform when it went public. That number has already tripled, but management still sees a lot of growth on the horizon. In a recent interview on CNBC’s Crazy MoneyCEO David Girouard said: “I would be shocked in a few years if we didn’t have hundreds of banks and credit unions on the platform.

Here’s the gist: Upstart funded loans totaled $ 8.9 billion in the past 12 months, which is just 1% of its market opportunity of $ 753 billion. For these reasons, I think this $ 14 billion fintech company could grow five-fold or even ten-fold over the next 10 years.

2. Digital ocean

Cloud computing has fundamentally changed the IT ecosystem. Businesses can now access services such as compute, storage, and networking over the Internet, allowing them to quickly build and scale applications without purchasing expensive hardware on-premises. However, cloud providers like Amazon and Microsoft tend to target large companies, which means their solutions are often too complex for small and medium-sized businesses (SMBs) or individual developers.

This is where DigitalOcean comes in. Its platform democratizes cloud computing, making it possible to deploy infrastructure and platform services in minutes without specialized training. This means developers can quickly access the resources needed to build, secure, and monitor scalable applications. DigitalOcean also provides developer tutorials and 24/7 technical support to every customer, regardless of size.

Collectively, these qualities differentiate DigitalOcean, helping the company to carve out a niche in the highly competitive cloud computing industry. As a result, its business is growing at a steady pace.

Metric

Q3 2020 (TTM)

Q3 2021 (TTM)

Switch

Customers

559,000

598,000

7%

Returned

$ 300.2 million

$ 396.4 million

32%

Source: DigitalOcean SEC Documents, YCharts. TTM = 12 rolling months.

Looking ahead, management estimates its addressable market at $ 116 billion by 2024, or 290 times TTM’s revenue. Most importantly, DigitalOcean’s focus on simplicity clearly resonates with customers. Its retention rate has increased for seven consecutive quarters, and it currently sits at 116%, meaning the average customer has spent 16% more in the past year.

Currently, DigitalOcean has a market cap of $ 8.9 billion – but given the breadth of the market, favorable winds from digital transformation, and the company’s differentiated business model, I wouldn’t be surprised to see this. title grow at least five times from its current level. value over the next decade.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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