Microsoft (NASDAQ:MSFT) remains the stock market’s most valuable company, worth $3.15 trillion. That’s a mind-boggling number. But how long will it hold onto the top spot of trillion-dollar stocks?
Both Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) fight for the second sport with both worth about $3 trillion. Apple is No. 2 as of this writing, but that was flip-flopping last week as the chipmaker surged to surpass the consumer tech giant briefly.
Only six companies out of the thousands that trade on the market are worth $1 trillion or more. Several are within shouting distance of the threshold. Below are three stocks that could be the next trillion-dollar stocks to buy.
Mastercard (MA)
At a market valuation of $418 million, Mastercard (NYSE:MA) is less than halfway to the goal. Yet, it is well within the realm of possibility for the credit card processor to reach a $1 trillion valuation.
Over the past decade, Mastercard stock has appreciated at a 17.5% compounded annual rate. That suggests that if it continues at that pace, Mastercard could cross the finish line within five years. And we’re not talking about some tech stocks (all six existing trillion-dollar stocks are technology stocks). This is a mature, rather mundane business of processing payment transactions, which underscores the health and strength of Mastercard.
A bet on Mastercard becoming a trillion-dollar stock by 2035 is a bet on the long-term growth in U.S. consumer spending and an ever-expanding U.S. economy. Both seem like even-money bets.
Not that it will be a straight shot. A recession could slow its growth. Total household non-housing debt stands at a record $4.87 trillion. Overall, Mastercard stock seems an easy pick for hitting a trillion-dollar valuation.
UnitedHealth Group (UNH)
Health insurer UnitedHealth Group (NYSE:UNH) is an even likelier candidate for achieving a $1 trillion valuation than Mastercard. The 10-year stock return for UNH stock is higher than that of the payments processor, at over 500%. That means it could cross the threshold sooner than Mastercard. Its growth could accelerate.
The healthcare industry has been under enormous pressure due to the pandemic, inflation and labor shortages. Industry analysts at McKinsey say the tide is turning, especially in the managed care population. Patients who qualify for both Medicaid and Medicare represents “one of the most substantial opportunities for payers.”
UnitedHealth is seeing robust growth in Medicare Advantage revenue, which grew almost 3% in the first quarter to $7.7 billion from the year-ago period. It was up sequentially from the fourth quarter as well. Medicaid revenue, however, was down sharply year-over-year. The insurer also saw a slight improvement in Medicare supplemental revenue compared to last year.
UnitedHealth Group’s revenue rose $8 billion in the quarter to almost $100 billion. Although it reported a net loss of $1.53 per share, that was wholly due to selling its Brazilian sale and the impact of a cyberattack it suffered. Look for UnitedHealth’s performance to improve as these one-time costs move into the rearview mirror and it expands into new lines of business.
JPMorgan Chase (JPM)
At over $574 billion, JPMorgan Chase (NYSE:JPM) is already more than halfway there. The stock of the financial industry giant is up over 17% in 2024 and 42% higher over the last 12 months. At these growth rates, it could achieve trillion-dollar status in no time.
However, its 10-year growth rate is substantially lower than that of either Mastercard or UnitedHealth, so investors should not expect that pace to continue. Still, there seems little doubt the country’s biggest bank will reach that valuation.
It is already benefiting from the Federal Reserve’s higher-for-longer interest rate policies. Higher rates boost JPMorgan’s net interest income (NII), which surged 19% last year to $24.2 billion as the Fed raised rates an unprecedented 11 times between 2022 and 2023. NII was up another 11% in the first quarter of 2024.
Fed bank presidents, however, recently expressed doubts about any rate cuts coming soon. They want sustained progress on inflation, not just a one-quarter improvement. The May jobs report showed that 272,000 new jobs were created, well ahead of expectations of 180,000 new jobs. That puts the prospects for a rate cut even more in doubt.
Last year, Morgan Stanley analyst Betsy Graseck called JPMorgan an “underappreciated rate play” and said she saw the bank becoming a trillion-dollar stock. Her timeline, though, was 12 years down the road, maybe eight if it cut costs or increased the rate of revenue growth. JPM might not cross the threshold faster than some other companies, but it seems clear the bank will eventually be worth $1 trillion.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.