3 Stocks That Could Be the Next Trillion-Dollar Tech Giants

 The trillion-dollar market cap club is an exclusive one, but it could grow in the years ahead. What other companies could grow to the size of businesses like Amazon and Apple? In this Fool Live video clip, recorded on March 8, Fool.com contributors Matt Frankel, CFP, and Jason Hall, along with chief growth officer Anand Chokkavelu, discuss three companies they could see reaching a trillion-dollar market cap in the not-too-distant future.

Where to invest $1,000 right now

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Pinterest made the list -- but there are 9 other stocks you may be overlooking.

See the 10 stocks

*Stock Advisor returns as of February 24, 2021

Anand Chokkavelu: What company could join big tech in the next five to 10 years? I will start with mine, which is salesforce.com (NYSE:CRM). I think Salesforce is an amazing business. Usually, I don't love a serial acquirer, but they have been

Jason Hall: They've shown they can do it. That's the thing.

Chokkavelu: Give me a couple of decades of performance, and I'm like, "OK, I believe you." I was a big Slack fan before the merger was announced or the acquisition. I think what Slack will enable Salesforce to do is just broaden its ability to deliver things. Just like when we're talking about Microsoft penetrating so many businesses, that's why Microsoft Teams does so well and get so much adoption because it's already there. I think Salesforce can be the next one, it's already a $200 billion market-cap company. It's not trailing by that much as a dark horse. But these are such behemoths that it is one. What about you two?

Matt Frankel: I'll go with one that's a little smaller, Pinterest (NYSE:PINS). I think Pinterest has the potential to be not only a Facebook-size social network eventually, but also has the potential to really get a big stake in e-commerce. I could see that becoming a trillion-dollar business at some point.

Hall: I'm going to cheat a little bit and say if we expand our view a little bit, Taiwan Semi (NYSE:TSM) already is. It's a $640 billion company. If you want to think about one that could grow into it, that's already in the S&P 500, NVIDIA (NASDAQ:NVDA). All of these companies, everything about them, everything that's happening in the world is going to drive the need for more semiconductors in every aspect of our lives. I think maybe NVIDIA is one that it's too easy to overlook.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anand Chokkavelu, CFA owns shares of Amazon, Pinterest, and Salesforce.com. Jason Hall owns shares of Amazon, NVIDIA, and Pinterest. Matthew Frankel, CFP owns shares of Apple and Pinterest and has the following options: short February 2021 $140.0 calls on Apple. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, Microsoft, NVIDIA, Pinterest, Salesforce.com, Slack Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon, long March 2023 $120.0 calls on Apple, short January 2022 $1940.0 calls on Amazon, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.

3 Materials Stocks Worth Adding to Your Portfolio

 Basic materials companies are the unsung heroes of an economic recovery. While vulnerable to times of slowing growth, many of these companies are first in line to benefit from rising industrial production. Demand for everything from chemicals, to plastics, to metals and minerals is rising. And that makes the materials sector worth a look. 

With that, we asked some of our contributors which basic materials stocks they thought stood out from the pack. They chose Celanese (NYSE:CE), Linde (NYSE:LIN), and Sherwin-Williams (NYSE:SHW). Here's why each company is worth adding to your portfolio right now. 

IMAGE SOURCE: GETTY IMAGES.

Celanese

Lee Samaha (Celanese): Global chemical and specialty materials company Celanese isn't a household name, but its products are everywhere. It produces intermediate chemicals used in a wide range of industries, including coatings, paints, adhesives, pharmaceuticals, automotive, consumer electronics, electrical appliances, and even food. In other words, Celanese processes raw materials into intermediate chemicals, which manufacturers then use to make finished products. As such, it's a near-term play on an economic recovery, and in particular the industrial economy, and it's also a medium-term play on the completion of its strategic targets through 2023.

Rising raw material costs are a concern, but Celanese tends to have long-term supply agreements and forward purchase contracts in place to mitigate the risk. Moreover, chemicals suppliers usually pass on price increases if end demand is strong enough, and with a recovering economy, that should be the case in 2021.

Over the medium term, management aims for adjusted earnings per share (EPS) of $13 to $14 in 2023, with operating cash flow of $4 billion to $5 billion from 2021 to 2023. Given that capital expenditure is forecast to be around $1.5 billion in the period, it implies $3 billion in free cash flow (FCF) through 2023, or about $1 billion in FCF a year. Based on the current market cap, Celanese would trade on less than 17.5 times FCF in 2023 and around 11.4 times the midpoint of earnings guidance for 2023. An excellent value.

Moreover, the operational enhancements made at the company over the last decade mean that Celanese's FCF substantially covers its dividend. As you can see below, FCF per share was markedly higher in the challenging year of 2020 than it was through nearly all the decade.

Don't be surprised if the company raises its dividend, makes more share buybacks, or invests in new projects or acquisitions to boost revenue growth beyond 2023. Celanese looks like an excellent value option to play a cyclical recovery in 2021 and beyond.

DATA BY YCHARTS

Time to gas up with a proven materials powerhouse

Scott Levine (Linde): Unlike the latest electric vehicle or cryptocurrency stocks, materials stocks often aren't the ones found in the headlines of business articles. But investing isn't a popularity contest; there's no reason to believe that your most successful investments have to be easily recognizable names. Take Middleby, a manufacturer of commercial cooking equipment, for example. Far from a household name, Middleby's stock has skyrocketed more than 15,000% over the past 20 years while the S&P 500 has risen 252%.

Now, consider the materials maven Linde. A global purveyor of industrial gases and engineering solutions, Linde is a materials company that people are unlikely to be discussing around the dinner table, yet it's a stock that has outperformed the market considerably over the past 20 years, climbing more than 1,100%. And there's good reason to believe the company will continue its impressive performance in the future. Since merging with Praxair in 2018, Linde has grown to be the top dog in its field as the world's largest producer of industrial gases. Its proficiency in engineering solutions, moreover, helps to distinguish it from competitors. From oil and gas, to energy storage, to hospitality, a wide range of industries rely on Linde's solutions.

One area in particular that I find compelling is its exposure to the burgeoning hydrogen economy. Whereas fuel cell companies like Plug Power and FuelCell Energy are positioning themselves to play prominent roles as hydrogen occupies a greater position on our energy landscape, as investments they are fraught with risk as they haven't proven that their endeavors can be profitable. Linde, on the other hand, is a mature company that doesn't rely so singularly on the growing emphasis on hydrogen, yet still stands to benefit considerably from it, especially considering its position. The company, for instance, proclaims that it's "the only company to cover every step in the hydrogen value chain from production and processing (including purification and liquefaction) through distribution and storage to everyday industrial and consumer applications" -- a fortuitous position for a potential multi-trillion opportunity. Illustrating its sought-after prowess in hydrogen, Linde announced last month that it had inked a deal to supply hydrogen and the related infrastructure to help power the world's first hydrogen-powered ferry, located in Norway.

While the hydrogen narrative plays out, investors can expect the company to prosper nonetheless. In 2020, for example, Linde reported adjusted EPS of $8.23, a 12% increase year over year, and management expects the bottom line to grow further in 2021, forecasting adjusted EPS of $9.10 to $9.30. The company plans to announce results from the first quarter of 2021 in early May -- an event interested investors would be wise to follow.

Paint your portfolio with profitability

Daniel Foelber (Sherwin-Williams): As Scott mentioned, materials companies rarely capture the spotlight like other sectors do. But Sherwin-Williams deserves some time in the sun. It has spent the last 10 years doing what it does best: crushing the market and raising its dividend. The company has raised its dividend for 40 consecutive years, making it a Dividend Aristocrat. There's just one issue: Its dividend yield is now only 0.9%. But this is because its share price has risen faster than the company can increase its quarterly payout, which is a great problem to have if you're a shareholder of Sherwin-Williams. To make it easier for investors to buy its stock, Sherwin-Williams issued a 3-for-1 stock split that went into effect on April 1. The stock split doesn't shrink the value of the Sherwin-Williams pie per se, it only triples the number of slices.

Sherwin-Williams' long-term success can be attributed to its high profitability across different markets. Its overall gross profit margin is consistently above 40% -- and it finished 2020 with a record-high operating margin of 15%. A 15% operating margin means Sherwin-Williams is pocketing $0.15 of every $1 it brings in. Few industrial or material companies are that efficient.  

SHW GROSS PROFIT MARGIN (ANNUAL) DATA BY YCHARTS

The pandemic is a great example of how Sherwin-Williams' three business segments work together to grow sales and net income. The company's Americas group, its largest division, consists of Sherwin-Williams-branded products for commercial and residential customers. Despite COVID-19-related challenges affecting its retail outlets, the division benefited from DIY home improvement projects. The consumer brands group, which holds non-Sherwin-Williams brands sold at Lowe's and other retail outlets, grew sales by 14% last year. Performance coatings, which is tied to industrial manufacturing and production, was hit hard by an economic slowdown but recovered well toward the end of the year. All in all, Sherwin-Williams was able to grow its adjusted EPS by 16% and generate a record-high $18.4 billion in revenue. In 2021, it expects the narrative to change, with the Americas group and performance coatings leading a 9% increase in adjusted EPS even after a strong 2020. 

Simply put, Sherwin-Williams is exposed to a lot of different sectors of the economy, giving it a business that can perform during good times and bad.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Selim Bassoul, former CEO, chairman, and president of Middleby, serves as Chief Innovator at The Motley Fool. Daniel Foelber has the following options: short May 2021 $25.0 puts on Plug Power and short September 2021 $25.0 puts on Plug Power. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Middleby. The Motley Fool recommends Lowes and Sherwin-Williams. The Motley Fool has a disclosure policy.

5 Stocks Under $49

We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true.

And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share!

You can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Click here to learn more.

Got $5,000? Here Are 3 Cathie Wood Stocks That Could Soar

 

These innovative companies could help take your portfolio to the next level.

Cathie Wood has become one of the investing world's most popular figures over the last year -- and for good reason. The founder and CEO of ARK Invest has helped put together a collection of actively managed exchange-traded funds (ETFs) that have absolutely crushed the market over the stretch, and she's shown a penchant for identifying innovative, tech-focused companies that have gone on to record huge gains.

With ARK funds putting up such incredible performance, we asked three Motley Fool contributors to dive into the list of individual stocks that Wood's company is backing and pick out some favorites. Read on for a look at three companies held in ARK funds that could be primed for massive wins. 

IMAGE SOURCE: GETTY IMAGES.

A revolution at the intersection of healthcare and tech

Keith Noonan (Teladoc Health): Think of all the time the average person has spent traveling to and from doctor's offices and flipping through magazines in waiting rooms. Some visits to medical centers obviously require in-person care, but imagine all of the potential time saved and convenience added if more appointments were conducted virtually.

Teladoc Health (NYSE:TDOC) is making that a reality and changing the face of healthcare -- connecting patients with doctors through video conferencing and other software support services. The company also stands as one of the largest combined holdings across Wood's ARK funds, and its stock has the makings of a long-term winner. 

Teladoc currently trades down roughly 37.5% from the 52-week high that it hit in February. The decline is partially the result of some broader pullback in stay-at-home stock valuations, but Amazon announcing plans to expand its teleconference health service business has been the bigger catalyst behind the sell-off. Amazon is certainly a resource-rich competitor, but the tech and e-commerce giant's entrance into telehealth probably won't end Teladoc's growth story.

The virtual health services category is growing rapidly and should easily support multiple winners. Spurred on by social-distancing conditions, Teladoc managed to grow its revenue 98% last year. People will be making more in-person visits to the doctor as pandemic-related restrictions ease, but the long-term growth for teleconference health services is just getting started. And the company's recent acquisition of preventative and chronic care specialist Livongo will help boost sales this year and drive growth down the line. 

Teladoc has a first-mover advantage in a category that has explosive potential, and virtual health services can provide both major quality of life improvements for patients who have difficulty traveling and greater convenience across the overall healthcare industry. With Teladoc trading well off its recent highs and offering big upside, risk-tolerant investors could see impressive returns from the stock. 

A below-the-radar EV stock

Jamal Carnette (Magna International): At $3.5 billion in assets under management, the ARK Autonomous Technology & Robotics ETF (NYSEMKT:ARKQ) tends to get overlooked outside of its significant Tesla stake. Despite Wood's reputation as a pure growth investor, tucked into its holdings are some value stocks, including ARK's 2% stake in automotive manufacturing company Magna International (NYSE:MGA).

Last year was difficult for the company: Sales dipped 17% to $32.7 billion mostly because of the pandemic. Analysts are bullish on the company and expect growth to resume, forecasting $40.6 billion in revenue this year. Despite the return to growth, shares still trade at only 12 times forward earnings and 0.8 times sales, both metrics less than half of the greater S&P 500.

The bulk of Magna's revenue is as a traditional automotive supplier with expertise in contract manufacturing and parts like body exteriors and powertrains. Magna has a long track record of partnership success with Ford and General Motors, and analysts expect revenue to increase with increased economic activity.

However, it's likely Wood is looking beyond the current year and to Magna's future opportunities. The company is quickly becoming an innovator in electric powertrains, announcing a major joint venture with LG Electronics and landing a significant deal with EV company Fisker to manufacture its electric Ocean SUV last year.

The LG/Magna joint venture appears to be on the cusp of a groundbreaking win. Speculation is the companies are on the verge of inking a deal to handle the initial production for Apple's clandestine electric car project nicknamed Titan. Magna is quickly becoming a critical supplier to electric vehicle companies and should benefit from the growth of electric vehicles, regardless of which company's name is on the hood.

The e-commerce innovator

Joe Tenebruso (Shopify): Shopify (NYSE:SHOP) is a top-10 holding for Wood in the ARK Innovation ETF (NYSEMKT:ARKK) and rightfully so. Retail sales are rapidly shifting online -- and Shopify is helping more than a million merchants around the world adapt to this massive global trend. 

Shopify lies at the center of e-commerce and entrepreneurship. It provides top-tier online retail software at prices that are affordable to individual entrepreneurs and small businesses, with plans that start as low as $9 per month. Services include payment processing, fulfillment, shipping, business financing, and a host of other e-commerce solutions.

Shopify's sales have boomed during the coronavirus pandemic along with those of its merchant customers. Its revenue rocketed 86% to $2.9 billion in 2020, as gross merchandise volume (GMV) -- essentially, the total dollar amount of sales merchants generated on its commerce platform -- surged 96%, to $119.6 billion. 

Moreover, Shopify's profitability is rapidly improving as it scales its operations. Its adjusted operating income soared nearly tenfold to $437.4 million, as its adjusted operating margin improved to 15%, up from 3% in 2019. 

Best of all, Shopify has tremendous room for expansion still ahead. E-commerce sales in the U.S. and many other nations still comprise less than 20% of total retail sales. Yet these percentages are rising steadily, and if they ever approach the level at which China stands today -- with online retail sales accounting for more than half of total retail sales -- Shopify's revenue and profits could continue to grow exponentially over the next decade. 

Should you invest $1,000 in Shopify Inc. right now?

Before you consider Shopify Inc., you'll want to hear this.

Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now... and Shopify Inc. wasn't one of them.

The online investing service they've run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys.

See the 10 stocks

*Stock Advisor returns as of February 24, 2021

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jamal Carnette, CFA owns shares of Amazon and Ford. Joe Tenebruso owns shares of Amazon and has the following options: long January 2023 $2400.0 calls on Amazon. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Shopify, Teladoc Health, and Tesla. The Motley Fool recommends Magna Int'l and recommends the following options: long January 2022 $1920.0 calls on Amazon, long March 2023 $120.0 calls on Apple, short January 2022 $1940.0 calls on Amazon, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.

The Motley Fool Makes 5G Buy Alert

5G is one of the greatest arrivals in technology since the birth of the internet.

And in 2021 and beyond we could see an onslaught of new wealth-building opportunities that would potentially dwarf any that came before them.

• Bigger than the dot-com boom
• Bigger than the Bitcoin boom of 2017
• Bigger than pot stocks

There’s a perfect storm being created by some of the biggest tech titans in the world… with each one fighting tooth and nail to win the 5G arms race.

But the smart money is doing something different…

Fortunately, our team at Motley Fool Rule Breakers has identified one under-the-radar California company that’s cleverly positioned itself to dominate the 5G industry with its unique business model and technology.

Simply click here to get the full story now.