This article was originally published on the Motley Fool.
Amazon.com, Inc. (NASDAQ:AMZN) is one of the best investing stories ever. To date, anyone smart — and lucky — enough to have bought shares the first day of trading and held them would be up a remarkable 45,900%. That’s a life-changing investment, turning every $1,000 invested in the company into $459,000.
Investment opportunities like that don’t happen very often. And while we’ll be the first to admit that it’s almost impossible to really know which stocks out there right now will deliver Amazon-like returns, that doesn’t mean you shouldn’t look for companies with the same kind of potential. And our contributors have identified three stocks with traits that could lead to life-changing returns for investors.
Keep reading to learn why e-commerce specialist Shopify Inc. (US) (NYSE:SHOP), online-only bank BofI Holding, Inc. (NASDAQ:BOFI), and senior housing and rehab property owner Caretrust REIT Inc. (NASDAQ:CTRE) have Amazon-like potential.
A company that battled Amazon — and won
Brian Stoffel (Shopify): When I think about finding the next Amazon.com, I think about finding companies that share a few key traits:
- A founder/CEO with significant skin in the game.
- A wide-moat business that has several opportunities for growth.
- Sales — though not necessarily profit — that are growing at amazing rates.
In all three of those respects, Shopify fits the bill. Shopify is a leading provider of e-commerce solutions to small and medium-sized businesses throughout the world. The company offers up its platform with a software-as-a-service (SaaS) business model.
CEO Tobias Lutke founded Shopify in 2004. Combined with his leadership team, Lutke and company own 14 million shares of Shopify, worth about $1 billion and representing almost 60% of voting rights .
Furthermore, Shopify is a wide-moat business. Small and medium-sized businesses can’t survive without an e-commerce presence in the age of the Internet. But these very same businesses can’t afford to spend all their time worrying about e-commerce — they need to focus on the things that make their products and services valuable and unique. That’s why once a vendor is signed on to Shopify’s platform, the switching costs — in terms of money spent, downtime, retraining, and headaches in general — are high.
Finally, the company is growing at amazing rates. Take a look at how sales and gross profit have jumped since 2012.
But perhaps most important, Shopify has gotten a huge vote of confidence from… Amazon. After trying to design its own e-commerce platform that vendors could use, Amazon decided it was best to partner with Shopify rather than compete against it. That speaks volumes.
This low-cost bank has room to run
Brian Feroldi (BofI Holding): There are plenty of numbers to watch in the banking sector, but one of the most important is the efficiency ratio. This figure measures the percentage of a bank’s total revenue that’s consumed…