5 Monster Stocks to Hold for the Next 5 Years (and, Ideally, Beyond) -- Including Nvidia

Many, if not most, of us would love to have a portfolio full of "monster stocks" -- growth stocks that have posted outsized gains over many years. Fortunately, there are more than a few of them, and some are well worth considering for your long-term portfolio.

Here are five investments to learn more about and consider for your monster-seeking portfolio.

Image source: Getty Images.

1. Nvidia

Nvidia (NVDA 4.45%) has been an exceptional monster stock, averaging annual gains of 87% over the past five years and 75% over the past decade. Best of all, it still doesn't seem that overvalued relative to past years. Its recent forward-looking price-to-earnings (P/E) ratio of 32, for example, is well below the five-year average of 41 -- though both numbers are still on the high side.

Nvidia has long been known as a gaming-chip semiconductor company, but it's gotten a lot more involved in the artificial intelligence (AI) boom and is cranking out chips for data centers -- millions of chips.

2. Taiwan Semiconductor Manufacturing

If you're bullish on Nvidia, you might want to be bullish on Taiwan Semiconductor Manufacturing (TSM 3.49%), too. That's because most semiconductor companies don't actually make chips. They just design them. Relatively few companies actually manufacture chips, and Taiwan Semiconductor is the world's biggest contract semiconductor chipmaker, making Nvidia chips, among many others.

Taiwan Semiconductor has grown powerfully in recent years, averaging annual gains of 25.6% over the past decade. To put that in perspective, know that the S&P 500 has averaged annual returns close to 10% (ignoring inflation) over long periods, and over the last decade, it has averaged around 13%.

The stock doesn't appear to be a screaming bargain -- wildly overvalued, either -- at recent levels, so proceed accordingly. Maybe buy into it incrementally if you're so inclined, or just add it to your watch list. If you already own it, hanging on for many more years may pay off well.

3. Arista Networks

Arista Networks (ANET 3.05%) is a cloud networking specialist, and another monster stock. It has averaged annual gains of about 40% over the past decade and nearly doubled in value over the past year. That has left its stock a bit richly valued, so this is more of a hold than a buy for more cautious investors. (Its recent forward P/E was 45, well above the five-year average of 30.)

There's a lot to like about Arista, such as its prodigious free cash flow generation, robust profit margins, and gains in market share. That said, it does face some competition, from the likes of Cisco Systems. In its third quarter, Arista reported revenue up 20% year over year and announced a (now-executed) 4-for-1 stock split.

4. Axon Enterprise

Axon Enterprise (AXON 0.77%) has averaged annual gains of 36% over the past decade, leaving its shares seemingly overvalued, with a recent forward P/E of 95, well above the five-year average of 71. The specialist in law-enforcement technology (think TASERs and cloud-based body camera recordings) has been growing its business robustly, with my colleague John Quast noting that "by expanding into new verticals and product offerings, the company has strung together 11 consecutive quarters of greater than 25% growth, with Q3 revenue up 32% year over year to $544 million."

So this monster stock might be best held and not bought at recent levels, but you could do well to keep an eye on it via a stock watchlist, waiting and hoping for a pullback.

5. SPDR S&P 500 ETF

The SPDR S&P 500 ETF (SPY 1.25%) is not exactly a stock. It's an exchange-traded funds (ETF) -- a fund that trades like a stock. It's also a low-fee S&P 500 index fund. I'm including it because if you want to build wealth, it can be exciting to seek out great growth stocks, but they don't always perform as expected.

A less volatile approach is simply to invest in the stock market via the S&P 500 -- which represents about 80% of the U.S. stock market. It's no slouch, having posted lots of double-digit gains in recent years, and even if it only averages 6% or 8% you can still build wealth. Here's how annual $7,000 investments could grow:

Source: Calculations  by author.

In its own way, the S&P 500 has been a monster performer, too. So as you go about saving and investing for retirement -- or any other long-term goals -- invest in stocks or funds with which you're comfortable and hopeful about.