Investment firm Temasek Holdings recently released its 2023 Annual Review for the fiscal year ending 31 March 2023.
Although it faced a tough year, its Chief Investment Officer Rohit Sipahimalani believes that over the long term, the investments that Temasek has can beat its cost of capital of around 9% currently.
Historical investments made by Temasek have enjoyed double-digit returns on a compounded basis over a 10 to 15-year stretch.
This track record shows the importance of not just buying the right companies, but having the patience to hold them over years or even decades to realise their full potential.
Temasek’s portfolio gives us a glimpse of how it allocates money to solid businesses with healthy long-term prospects.
Here are four US growth stocks that should give you the bang for your buck.
Thermo-Fisher (NYSE: TMO)
Thermo-Fisher is involved in life sciences research and is a supplier of scientific instruments, reagents, and consumables.
For 2022, the company reported a 14.5% year on year increase in revenue to US$44.9 billion.
Because of rising expenses, net profit dipped by 10% year on year to US$7 billion.
Despite the lower profit, Thermo-Fisher still generated a positive free cash flow of US$6.9 billion.
For the first quarter of 2023 (1Q 2023), revenue dipped 9.4% year on year to US$10.7 billion while net profit plunged 41.8% year on year to US$1.3 billion.
The life science company still generated a positive free cash flow of US$271 million for the quarter.
Thermo-Fisher has also been increasing its quarterly dividends consistently since 2018.
Back then, the company paid out US$0.17 per quarter but this dividend has more than doubled to US$0.35 in the latest quarter.
Thermo-Fisher’s total addressable market stands at US$240 billion which is growing at between 4% to 6% per annum over the long term.
Roblox (NYSE: RBLX)
Roblox is an online gaming platform and a game creation system that allows millions of users to enjoy immersive digital experiences.
Creators help to build the Roblox community and users purchase premium currency Robux to use for a variety of services within this online world.
2022 saw revenue climb 16% year on year to US$2.2 billion while free cash flow remained negative at US$58.4 million.
The average daily average users (DAUs) and hours engaged both saw year-on-year increases.
For 1Q 2023, Roblox has continued this growth momentum with revenue jumping 22% year on year to US$655.3 million.
Free cash flow has also turned positive at US$81.9 million.
DAUs rose 22% year on year to 66.1 million while hours engaged improved by 23% year on year to 14.5 billion.
Last month, Roblox announced a new partner program that will offer incentives and immersive advertisement pricing to signed-on partners.
Brands that want to feature on Roblox can join this program to create an authentic presence and help add value to Roblox users.
Mastercard (NYSE: MA)
Mastercard is a payment processing company with around 3.2 billion issued debit and credit cards worldwide.
The company benefitted from border reopenings and the resumption of economic activity across the world in 2022.
Revenue rose 18% year on year to US$22.2 billion last year with net profit rising by 24% year on year to US$10.3 billion.
For 1Q 2023, revenue continued to increase, rising by 11% year on year to US$5.7 billion.
However, net profit slid by 10% year on year to US$2.4 billion because of higher expenses.
Despite the dip in profits, Mastercard’s free cash flow came in at US$1.57 billion, 5.3% higher than the US$1.49 billion generated in the prior year.
The gross dollar volume of transactions also saw a 15% year on year growth to US$2.1 trillion for the quarter.
The payments giant also paid out a quarterly dividend of US$0.57, up from US$0.49 a year ago.
Mastercard continues to collaborate with partners to grow its business.
In May, the company announced the expansion of its payment partnership with UniCredit SpA (BIT: UCG), a pan-European commercial bank.
The agreement now extends to 13 banks in 12 markets in Europe and covers 20 million cards, helping to broaden Mastercard’s reach and enhancing the payment experience for its customers.
PayPal (NASDAQ: PYPL)
PayPal is a financial technology company that operates a payment platform for online money transfers.
The company reported an encouraging start to 2023 with net revenue for 1Q 2023 rising 9% year on year to US$7 billion.
Total payment volume (TPV) also increased by 10% year on year to US$354.5 billion.
The business also generated a free cash flow of US$1 billion.
PayPal raised its EPS guidance for the remainder of the year because of effective cost-saving initiatives.
Transaction count has also gone up by 13% year on year to 5.8 billion in a sign that digitalisation should continue to help PayPal to grow its business further.
The company is refining its branded checkout service to improve engagement and deliver simplified solutions that will increase customer loyalty.
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Disclosure: Royston Yang owns shares of Mastercard and PayPal.
