Many workers aim to save $1 million for retirement, a sum they think will sustain them through much of their golden years. And while there are many ways to generate that kind of wealth, the stock market remains one of the most potent. With a substantial initial investment -- such as $250,000 -- ending up with $1 million in just 10 years requires a compound annual growth rate of 14.87%.
Let's look at three stocks that stand an excellent chance of generating these kinds of returns: Intuitive Surgical (ISRG -0.63%), Abbott Laboratories (ABT -0.56%), and Alphabet (GOOG -1.65%) (GOOGL -1.60%).
ISRG Total Return Level data by YCharts
1. Intuitive Surgical
Intuitive Surgical is a medical device company best-known for its da Vinci surgical system, which allows physicians to perform various minimally invasive procedures. The company makes much of its revenue by selling instruments and accessories that go along with its devices. The more procedures surgeons perform, the more money Intuitive Surgical makes.
Despite a drop during the pandemic, the volume of elective surgeries performed with the da Vinci system will rebound and continue to grow. So-called "elective surgeries" aren't necessarily optional. They are procedures that can be scheduled in advance, provided it is within a period during which the patient is unlikely to suffer severe and debilitating pain or worse.
The robotic-assisted surgery (RAS) market is still in its infancy, with only 3% of procedures performed robotically as of last year. That gives Intuitive Surgical plenty of room to grow. And while increasingly more companies are seeking to make a dent in this market, Intuitive Surgical has already built a lead and a solid competitive advantage.
As of 2020, the healthcare giant held a nearly 80% share of the RAS market. And given the highly prohibitive cost of the da Vinci system -- typically between $0.5 million and $2.5 million -- Intuitive Surgical benefits from high switching costs, a potent competitive advantage.
The company's shares just popped a little over 10% following a positive earnings report, but remain way below their highs. The company's solid position in a rapidly expanding industry should help Intuitive Surgical rebound still further and provide solid returns in the next 10 years and beyond.
2. Abbott Laboratories
Abbott Laboratories has a diversified business although its medical device segment is arguably its most important. The company markets dozens of products that are critical to the lives and well-being of thousands of patients worldwide. Consider Abbott's portfolio of devices that target various heart-related conditions.
There is, for instance, the company's Heartmate 3 heart pump, which proved able to extend the lives of patients with advanced heart failure by more than five years. There is also Abbott's Amplatzer Amulet, a minimally invasive option that allows physicians to perform left atrial appendage closures. A study showed that the Amplatzer Amulet is associated with lower risks of cardiovascular-related deaths.
There are many more devices in Abbott's portfolio, including in its diabetes care unit. The company's key product in this segment is the FreeStyle Libre, a continuous glucose monitoring (CGM) system. CGM technology allows diabetes patients to keep track of their blood glucose levels and helps these patients achieve better health outcomes.
Abbott is a leader in the CGM market, and given the ongoing increase in the prevalence of diabetes, this device seems to have a bright future. Abbott Laboratories benefits from patents that protect such innovations from competition, and over the past decades, it has developed a solid reputation as a leader in its field. That grants the company a solid competitive edge.
Although it has encountered headwinds lately, especially related to recalls of some of its baby formula products, short-term problems will likely do little to derail the company's long-term prospects.
3. Alphabet
Alphabet is the parent company of Google, the world's leading search engine. It held an 83.8% share of this market as of July. It will be difficult for competitors to dethrone Google for at least two reasons. First, it has already built an incredibly valuable brand name. It has achieved the rare feat of becoming a verb -- Google it.
Second, Alphabet benefits from a network effect -- the value of its search engine increases as more people use it. The tech company collects data that allows it to fine-tune its search engine to deliver better search results, which, in turn, attracts more people to the platform. And the more people use it, the more data Alphabet collects to continue improving its engine.
A strong brand name and the network effect are two potent competitive advantages that should allow Alphabet to remain the leader in this space for a long time. But the company's other business ventures make it even more valuable.
It is a leader in streaming thanks to YouTube, and it is also making a push in the cloud computing industry. As of the second quarter of 2022, Alphabet held a 10% share of the cloud computing market, ranking third. This is an industry that is growing rapidly. Given Alphabet's strong position and the fact that it generates plenty of cash, it has the means to pour funds into this lucrative area and remain a leader.
Alphabet is a solid stock for those looking to beat the market for the next 10 years and beyond.
