While the GDP growth rates for the U.S. and Canadian economies have been similar in the last few decades, stock market investors south of the border have generated outsized gains compared to their counterparts in Canada. For example, the S&P 500 has returned 360% to investors in the last 10 years compared to TSX returns of just 145%.
The U.S. economy is the largest in the world and is also home to some of the biggest companies at the global level. These heavyweights sell their products and services to consumers and enterprises across regions and geographies, allowing them to target multiple growth markets.
Keeping these factors in mind, let’s look at three U.S. growth stocks that should find a place in every Canadian portfolio.
The largest company in the world, Apple (NASDAQ:AAPL) is valued at a market cap of $2.34 trillion. In the last decade, AAPL stock has returned over 1,100% to investors and remains a high-quality growth stock.
The iPhone is Apple’s flagship product that generates a majority of sales. However, Apple has successfully created an ecosystem that ensures repeat purchases of its products due to high customer engagement rates. It also provides several subscription services that include Apple Music, Apple Care, Apple TV+, and Apple Arcade, making the company’s Services business the fastest-growing and most profitable vertical.
Apple is among the most popular brands in the world, and with a cash balance of $61.7 billion, it has enough liquidity to grow inorganically or enter other high-growth business segments such as electric cars.
Over the years, Apple has entered various business segments, including smartphones, tablets, and wearables, while managing to dominate each of these verticals within a few years. There is no reason why the tech giant should not be able to replicate its success in 2021 and beyond.
Another multi-trillion-dollar giant, Microsoft (NASDAQ:MSFT), has transformed the way it operates in the last decade. In the last 10 years, MSFT stock has even surpassed Apple in cumulative gains, rising 1,250% since October 2011.
Microsoft enjoys an 87.6% share in the desktop operating system segment, and its installed base of personal computers might touch 500 million by the end of 2021, according to research company Gartner. A majority of these desktops have several Microsoft Office modules installed, which provides an indication of the company’s gigantic scale in just one business.
Further, Microsoft also derives significant revenue from subscriptions fees, cloud computing, and its Xbox business. In the fiscal fourth quarter of 2021, MSFT sales were up 21% year over year at $46 billion, which is quite astonishing for a company this big. Its GAAP net income also rose by 50% to $16.5 billion, indicating a profit margin of 36%.
The final stock on this list is Amazon (NASDAQ:AMZN), a company valued at a market cap of $1.65 trillion, which has returned 1,370% to investors in the last 10 years. The world’s largest online retailer, Amazon leads several other segments such as the public cloud. It is also the third-largest digital advertising platform in the world, one of the biggest online streaming players, and it owns the most popular game streaming platform Twitch.
In the first six months of 2021, Amazon’s sales stood at $222 billion, which was 35% higher compared to the year-ago period. Its net income almost doubled year over year to $16 billion in this period.
The e-commerce giant has historically sacrificed profitability for top-line growth and is forecast to increase sales by 23.3% to $476 billion in 2021 and by 18.3% to $563 billion in 2022. But its earnings have more than doubled each year in the last five years and might expand at an annual rate of 36% in the next five years.
The Foolish takeaway
We can see that each of these tech stalwarts command trillion-dollar valuations but continue to grow at an enviable rate. Their leadership position across multiple businesses, strong balance sheets, and expanding suite of products and services make the stocks a top bet for long-term investors.