Sometimes, the old financial adages are spot on. For example, it does take money to make money. And the expression that "time is money" is correct in many ways.
But it's also true that some investment alternatives require much less time to make you money than others.Want $1 million in retirement? Invest $250,000 in these three stocks and wait a decade.
1. Vertex Pharmaceuticals
An $83,333 investment (roughly one-third of $250,000) in Vertex Pharmaceuticals (VRTX 0.14%) made in October 2013 would now be worth nearly $393,000. Can Vertex deliver a similar return over the next 10 years? I think it just might come close.
Vertex still has plenty of room for growth in the cystic fibrosis market. There are at least another 20,000 patients that can be treated with the company's current therapies. Vertex's messenger RNA therapy in development could add another 5,000 or so cystic fibrosis patients. Altogether, there's another 30% or so of the addressable market for its treatments that it has yet to tap -- and it doesn't have any competition in that indication.
However, I expect that Vertex will enjoy a much bigger boost from its efforts to expand beyond treating cystic fibrosis. Regulatory approvals for exa-cel -- a gene-editing treatment that looks to provide a functional cure for the rare blood disorders sickle cell disease and transfusion-dependent beta-thalassemia -- should be just months away. Vertex's non-opioid pain drug candidate VX-548 could be hot on its heels, with late-stage clinical studies on track to wrap up by the end of 2023.
Vertex is also evaluating inaxaplin in a pivotal trial in targeting the underlying cause of APOL1-mediated kidney disease (AMKD). There are no approved drugs for AMKD -- and that condition affects more patients worldwide than cystic fibrosis.
If that's not enough, Vertex's pipeline also features three programs that hold the potential to cure type 1 diabetes. Successful results from clinical studies with these therapies over the next few years could light a fire beneath the biotech stock.
2. TransMedics Group
The global organ transplant market totaled close to $8.7 billion last year, and is forecast to grow to $21.6 billion by 2030, according to Fortune Business Insights.TransMedics Group's (TMDX -1.93%) market share in that is around 2% right now. I think TransMedics will easily be able to deliver the 4x gain we need over the next decade. My confidence is based on the way the company is disrupting the organ transplant market.
It's shocking how few donor organs actually make it to their intended recipients using the cold storage method of transportation that has been the standard for years. Roughly 60% of donor livers are ultimately transplanted to recipients. The numbers are worse for hearts and lungs -- 28% and 18%, respectively.
TransMedics Group's Organ Care System (OCS) keeps organs alive during transit. In clinical studies, more than 80% of donor lungs and hearts made it to recipients. Donor liver utilization increased by 2x. Severe post-transplant complications were reduced across the board.
One of the biggest impediments to TransMedics' growth has been that it doesn't control the entire end-to-end logistics process involved with organ transplants. That will change, though, with the company's recent acquisition of charter flight operator Summit Aviation. This transaction will enable TransMedics to build out its own nationwide air logistics network dedicated to supporting organ transplants.
3. Brookfield Renewable
Brookfield Renewable (BEP -0.21%) (BEPC 0.36%) expects to deliver total annual returns of 12% to 15% over the long term. If the renewable energy provider can hit the upper end of that range, it would translate into a 4x gain over the next 10 years. I like its chances.
The company's distributions alone get us nearly halfway to the needed level of return. The limited partnership's distribution yield currently stands at close to 6.9%. Brookfield Renewable has increased its distribution at a compound annual rate of 6% since 2012.
Even better, the demand for renewable energy will almost certainly continue to grow rapidly for many years. That isn't just because of the push to reduce carbon emissions, by the way. Solar and onshore wind are more cost-effective energy sources than fossil fuels.
Brookfield Renewable is preparing to meet this surging demand. The company has around 32 gigawatts of operational capacity today. Its development pipeline capacity stands at 134 gigawatts.
Two important caveats
I genuinely believe that $250,000 invested evenly across these three stocks could grow to $1 million over the next decade. However, there are two important caveats to keep in mind.
First, potential issues could arise that derail Vertex, TransMedics, and/or Brookfield Renewable. There's no guarantee that any of these stocks will be able to generate 4x returns over a 10-year period.
Second, putting all of your eggs in only three baskets isn't advisable. It's prudent to construct a highly diversified portfolio to lower your overall investment risks. As much as I like Vertex, TransMedics, and Brookfield Renewable, I wouldn't bet the entire farm on just three stocks -- no matter how great they might be.
Keith Speights has positions in Brookfield Renewable, Brookfield Renewable Partners, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Brookfield Renewable, TransMedics Group, and Vertex Pharmaceuticals. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
