3 Dow Stocks That Can Turn $300,000 Into $1 Million By 2030
In two months the iconic Dow Jones industry average ( ^ DJI 0.44% ) celebrates its 126th “birthday”. Since its inception in May 1896, it has grown from an industry-dominated index of 12 stocks to one that now includes 30 highly successful and diverse multinational companies.
It’s also an index full of stocks that have a long history of making money for patient investors. Over the next eight years, three Dow stocks stand out as having a good chance of outperforming their peers. Invest $300,000 in these Dow components now, and they have the tools and intangibles needed to potentially make you a millionaire by 2030.
The Dow stock I’m most confident about rising 233% over the next eight years is a provider of cloud-based customer relationship management (CRM) software solutions salesforce.com (CRM -1.38% ). Salesforce has returned nearly 27% of annual earnings to shareholders since March 2005. In other words, it doubles every 2.7 years on average.
CRM software is used by consumer-centric businesses to improve existing customer relationships and increase sales. Some of the more common tasks that businesses use CRM software for include monitoring online marketing campaigns, handling product and service issues, and performing predictive sales analytics. The latter can be particularly helpful in determining which customers are most likely to purchase a new product or service.
As you might have guessed, CRM software is geared towards the service industry. However, in recent years it has made inroads into the financial, healthcare and industrial sectors. CRM software is projected to offer low double-digit annual global growth potential at least through the middle of the decade, if not beyond.
Salesforce is the undisputed #1 global CRM spend. Salesforce accounted for almost 24% of global CRM spend in the first half of 2021, according to a report by IDC. In comparison, the four closest competitors did not even have a combined market share of 20%. Salesforce is the leading provider of CRM solutions and probably won’t lose any significant share any time soon.
It’s also a company that has benefited immensely from inorganic growth. CEO and Founder Marc Benioff has made a number of amazing acquisitions including MuleSoft, Tableau Software and Slack Technologies. These agreements not only expand the company’s sales channels, but allow Salesforce to reach a broader audience of small and medium-sized businesses with its solutions ecosystem.
Benioff is forecasting full-year sales to nearly double by mid-decade ($50 billion in fiscal 2026), making Salesforce the fast-growing component of the Dow investors should own.
United Health Group
Another Dow stock that could turn a $300,000 investment into $1 million by 2030 is the insurance and healthcare solutions giant United Health Group (UNH -0.08% ). Over the past 25 years, UnitedHealth has averaged about a 19% annualized return. If we include dividends, that average annual yield jumps to about 20%. That means the company has doubled investors’ money every 3.6 years on average.
UnitedHealth is probably best known for its insurance segment. While health insurance tends to be a relatively slow-growing operating model, it’s very profitable. Insurance companies are usually able to pass on higher premiums to counter rising costs.
Aside from strong premium pricing power, UnitedHealth can continue to benefit from the existence of the Affordable Care Act (ACA) (sometimes referred to as “Obamacare”). Although the ACA requires insurers to accept people with pre-existing medical conditions, it also encouraged many healthier people to take out insurance as well.
But the real growth driver for UnitedHealth Group is its healthcare services subsidiary, Optum. Optum has three distinct segments that provide healthcare organizations with everything from pharmacy prescription refills to data analytics and software. Optum has consistently grown faster than the insurance segment and generally has higher margins as well. Thanks largely to Optum, Wall Street’s consensus estimate calls for UnitedHealth to grow its full-year revenue from $287.6 billion in 2021 to more than $497 billion by 2026. That’s incredible revenue growth for a megacap company.
I believe that at its current growth trajectory, UnitedHealth Group has the potential to more than triple its earnings per share to over $60 by 2030, which in turn should propel its shares much higher.
A third and final Dow stock with the ability to convert $300,000 into $1 million by 2030 is payment processor Visas (v 0.52% ). Over the past 14 years, Visa has produced an average annual total return, including dividends paid, of around 21%. That means investors’ money doubles every 3.4 years on average.
The most logical reason to buy Visa is the company’s cyclical ties. In short, it does well when the US and global economies are expanding, and struggles a bit during recessions when consumers and businesses are not spending as much. The fact is that recessions typically last a few months or a few quarters, while periods of economic boom are usually measured in years. Visa is the kind of company that allows patient investors to benefit from the natural long-term expansion of the U.S. and global economy.
But let’s be clear, it also doesn’t hurt that Visa controls much of the credit card market share by network purchase volume in the U.S. — the world’s largest consumer market. Between 2009 and 2018, no payment processor saw a greater increase in purchase volume share on the US network than Visa. In fact, Visa’s share in 2018 was 53.1%, 31 percentage points higher than its nearest competitor.
Additionally, Visa has a long runway to expand its payments infrastructure. It can do this through acquisitions, as was the case with Visa Europe in 2016, or it can move organically into underbanked markets like the Middle East, Africa and Southeast Asia. With much of the world still relying on cash for transactions, Visa seems to be sitting on a decade-old opportunity.
Finally, keep in mind that Visa only acts as a payment processor and not as a lender. Although lending would allow the company to reap the rewards of interest income and fees during long periods of economic growth, it would also be exposed to credit defaults during recessions. No lending means no capital to cover defaults. That’s why Visa recovers faster than virtually any other financial stock after a recession or economic downturn.
This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investing thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.