3 under-loved stocks that could double your money by 2030
Looking to get rich on the stock market? One of the best ways to do this is to invest in strong companies that can thrive no matter what the market throws at them. A well-run business is one with stable revenues, including during economic downturns. It should also have an edge that helps it thrive or at least a viable plan to achieve profitability.
Unfortunately, sometimes companies that tick all of these boxes tend to slip under the radar of the meme stock crowd. It is therefore necessary to go in search of them more often. To help you in that search, here are three under-loved, yet successful companies with stocks capable of achieving a 10% annual growth rate – the amount needed to double your investment by 2030.
progressive (RMP -0.42%) writes auto and home insurance policies for individuals and businesses. While insurance is admittedly not the most exciting business, the way Progressive executes it can only excite investors.
Progressive was the first insurance company to use the driving behavior of its customers to price its insurance policies. The company rolled out this technology, called telematics, in 2004 and made it widely available to customers in 2011. The technology has been hugely successful, making Progressive one of the best in the industry when it comes to pricing policies.
Insurers use a measure called the combined ratio to see how well they write policies. The combined ratio is the ratio of claims plus expenses to total premiums collected. Over 20 years, Progressive’s combined ratio has averaged 91% (lower is better), smashing the industry average of 100% over the same period.
Progressive is also in a good position to increase its premiums in this inflationary environment that we are experiencing. The company quickly adapted to rising claims costs from last year and increased its net earned premiums by 12% over last year.
Shares of Progressive have returned investors about 26% annually over the past decade. With its ability to price insurance policies better than others, there’s no reason it can’t achieve a 10% annual growth rate and double your money in the years to come.
2. Chicken head insurance
Chicken head insurance (GSHD 2.85%) is a company that sells insurance under a franchise model. It was founded in 2003 and has been a listed company since 2018.
Goosehead takes a unique approach to selling insurance, leveraging technology that allows it to onboard franchisees at a blistering pace. From 2018 to 2021, Goosehead grew its franchise count from 646 locations to over 2,151, a 50% annual growth rate.
Goosehead is aggressively increasing the number of its franchises, as it sees this as the key to increasing profit margins and cash flow in the future. During its initial franchise agreement, Goosehead collects a 20% royalty from its franchisee. After this initial period, which lasts approximately 10 years, Goosehead’s royalty then increases to 50%, setting it up for a future of strong cash flow.
The insurance agency achieved solid growth, with premiums generated through its franchise channel increasing 52% annually. He incurred higher expenses to onboard and train new franchisees. However, with a strategy of consistent growth and execution, I believe Goosehead can be an excellent long-term performer over the next decade and beyond.
3. Marsh and McLennan
Marsh and McLennan (MMC 0.29%) helps companies manage risk and advises them on labor issues. Although it’s not the most exciting activity, what’s exciting is the cash flow it generates.
Over the past decade, the company has grown its net profit by 13% per year. Its free cash flow, or cash left over after paying expenses and capital expenditures, has grown 10% annually.
The firm has benefited from strong demand for its advice, especially as companies navigate the uncertainties surrounding the pandemic, global supply chain issues and the transition to cleaner energy. It also benefited from higher insurance premiums, which boosted its commission income.
Marsh & McLennan is in a great place to thrive, and CEO Dan Glaser said “when the world is unstable, demand for our services increases”. The company is expected to perform well even during an economic downturn. According to Glaser, the company has increased its earnings per share in every recession since 1962, making it another great stock that could double your money in years to come.
Courtney Carlsen holds positions in Progressive. The Motley Fool holds positions and recommends Goosehead Insurance, Inc. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.