Growth stocks and stocks growing under the influence of a bear or bull market trend are two different things. The first are stocks with solid growth histories and strong underlying businesses that allow the stock to sustain a decent growth pace over a relatively long period.
The second can be virtually any stock that manages to ride the right trend, and while they do present amazing growth opportunities, the risk of losing all the growth by not exiting at the right time is always there.
So, two should be on your radar if you want to keep your growth predictable and buy stocks that you can hold for the next decade.
A waste management company
While it’s not a utility business per se, Waste Connections (TSX:WCN) falls quite close and offers the same level of business reliability and consistency. Waste management businesses offer an essential service that people usually pay for monthly, just as regularly as their utility bills, and the turnover rate is usually quite low.
Add the massive magnitude of Waste Connecting, spanning 43 US states and six Canadian provinces, to the equation, and the stability factor is significantly enhanced. Plus, the company has significant growth avenues in commercial areas and green recycling, something it already heavily engages in.
From an investment perspective, Waste Connection is a powerful growth pick. It has risen 92% in the last five years to a market capitalization of about $63 billion.
That kind of growth usually doesn’t sit well with the slightly high valuation, but considering the growth pace and stability Waste Connection offers, a bit of overvaluation is not a terrible price to pay. It also offers dividends, but the yield is paltry (0.64% right now).
A retail chain
Dollarama (TSX:DOL) is the largest dollar store chain in Canada, with about 1,500 stores, and it has a growing presence in Peru and Colombia (with over 400 stores). It’s also one of the most compelling retail stocks in Canada, with a market capitalization of about $36 billion and a stellar growth record.
In the last five years alone, the stock rose by about 160%. If it sticks to this rate of growth, it may offer 3 times growth to its investors in the next decade.
That’s good news for investors who have yet to buy this stock as well, as they will be able to benefit from its decent growth pace.
It’s overvalued but not by a dangerous degree, and if the company sticks to its goal of over 2,000 stores in Canada before the end of this decade and there are no negative internal catalysts or external financial catalysts to ruin its trajectory, there might be a decent chance for the growth rate to sustain.
Foolish takeaway
The two stocks are worth holding for decades for a couple of reasons – the underlying businesses and growth consistency. The underlying businesses are likely to remain relevant for decades to come and barring some extreme factors, may even thrive.
This may lead to consistent stock growth, which would be highly profitable if you hold these stocks long term like for say, a decade.
