Investors who have been able to take the emotion out of investing, find and own great businesses, and stick to a long-term time horizon have had little trouble earning healthy annualized rates of return on their investments. Simply put, the data show that buy-and-hold investing is one of the simplest and best strategies to build wealth. And that means it’ll probably continue to be one of the best strategies.
With that in mind, we recently asked three contributors at The Motley Fool for one of their best stocks to buy and hold for the next two decades. Here’s why they chose…
Finally profitable and rapidly growing
Maxx Chatsko (Enphase Energy): Considering this solar stock is trading at a historically expensive valuation relative to book value right now, a long-term mindset might be the only way to rationalize new purchases of shares. But that’s not such a bad thing.
The amount of electricity that utility-scale and small-scale solar installations provide in the United States grew 25% year over year in 2018, according to data published by the U.S. Energy Information Administration. That means solar power generated about 2.5% of the country’s electricity last year. The EIA expects that figure to grow another 35% by the end of 2020, although most past estimates have actually underestimated solar’s growth.
The point is that an annual growth clip in the double digits is expected to continue for solar energy for the foreseeable future — and that’s great news for Enphase Energy. The company engineers and supplies various hardware components that make solar modules work seamlessly with existing grid infrastructure or a new energy storage device. The business finally became profitable in the fourth quarter of 2018 and expects significant growth in the year ahead. In fact, it’s growing so quickly that some of its parts suppliers are having trouble keeping up.
Enphase Energy expects first-quarter 2019 revenue to soar 32% from the year-ago period, thanks in part to the ramp-up of a supply contract that will see its microinverters put into solar modules that SunPower manufactures. That deal alone will add about $65 million in annual revenue at a gross margin of 34% once the supply spigot is fully opened at the end of this year. When combined with growing demand from all other customers, it’s no surprise the business expects to be comfortably profitable.
That said, fourth-quarter 2018 operating margin was still just…
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