Drilling for Long-Term Success: 9 Stocks with Decades of Growth Potential

Investing requires patience, as the Rule of 72 estimates the time it takes to double an investment. To outperform for decades, focus on stocks with enough firepower, such as those in the energy sector. The article recommends 9 stocks with the potential to deliver long-term returns, including those with strong drilling capabilities and significant reserves.

Investing requires patience, as the Rule of 72 estimates the time it takes to double an investment. To outperform for decades, focus on stocks with enough firepower, such as those in the energy sector. The article recommends 9 stocks with the potential to deliver long-term returns, including those with strong drilling capabilities and significant reserves.

One of the key trends to look for in identifying the next multi-bagger is to find a company with increasing returns on capital employed (ROCE) in conjunction with a growing amount of capital employed. This shows that the company is a compounding machine, continually reinvesting its earnings back into the business to generate higher returns. However, not all companies tick these boxes. For example, 1&1 (ETR:1U1) has seen a decline in its ROCE over the last five years, falling from 13% to 7.0% [1].

In contrast, the energy sector is undergoing a significant transition that will likely take decades. TotalEnergies (NYSE: TTE) and Enbridge (NYSE: ENB) are two high-yield energy stocks that are preparing for this future. TotalEnergies, an integrated giant, is using its oil profits to fund its clean energy investments, while Enbridge is focused on providing both carbon-based and clean energy [2]. Enbridge's fee-based business has a clean energy twist, with a significant portion of its earnings coming from regulated natural gas utilities and clean energy projects [2].

While TotalEnergies and Enbridge are preparing for the future, they are also providing generous dividends. TotalEnergies has a lofty 6.3% dividend yield, while Enbridge offers a 6% dividend yield. These dividends are backed by the companies' diverse portfolios and consistent cash flows [2].

Investors should also consider the broader context of the energy sector. The energy transition has created a paradox for investors, as renewable energy ascends while traditional infrastructure operators like Enbridge remain critical to bridging the gap between legacy systems and emerging technologies. Enbridge's projected 2.4% year-over-year decline in earnings per share (EPS) to $0.41 in Q2 2025 is expected to be influenced by sector-wide challenges such as seasonal demand fluctuations and regulatory headwinds. However, the accompanying 9.9% revenue growth signals a decoupling of top-line performance from EPS [3].

In conclusion, investing in the energy sector requires a long-term perspective and a focus on companies that are well-positioned to navigate the transition. TotalEnergies and Enbridge are two such companies, offering high yields and a strategic focus on clean energy. However, investors should also consider the broader context of the energy sector and the potential challenges that lie ahead.

References:

[1] https://finance.yahoo.com/news/1-1s-etr-1u1-returns-061908594.html
[2] https://www.nasdaq.com/articles/here-are-my-top-2-high-yield-energy-stocks-buy-now-1
[3] https://www.ainvest.com/news/navigating-uncertainty-enbridge-earnings-decline-buying-opportunity-2507/