3 Monster Stocks to Hold for the Next 3 Years

As we approach 2025, it is a great time to evaluate some standout stocks that are worth holding for the next few years. Here are three top picks that span across the energy, consumer products, and technology sectors, each of which I currently own. My focus when analyzing investments at an investment fund was largely on these same sectors.

These three stocks not only exhibit strong growth potential but are also available at appealing valuations. Because they belong to different industries, they can enhance the diversity of any investment portfolio. I believe all three of these stocks are excellent long-term holds.

Energy Transfer

Energy Transfer (ET) is a major player in the U.S. with one of the largest integrated midstream systems. Their operations include transporting, storing, processing, and upgrading various hydrocarbons, such as natural gas and crude oil. Due to the vastness and variety of its system, Energy Transfer is well-positioned to capitalize on numerous energy arbitrage opportunities, such as moving natural gas to regions where prices are higher or upgrading NGLs (natural gas liquids) when profit margins are favorable.

The company's assets are strategically located to benefit from rising energy demands tied to artificial intelligence (AI). Energy Transfer has access to inexpensive natural gas from the Permian Basin, which is largely an oil basin with minimal natural gas takeaway capacity. This scenario often results in very low natural gas prices in the area; in fact, prices fell below zero at times in 2024.

Energy Transfer has been receiving many inquiries about potential natural gas projects from power generation firms and tech centers. Recently, the company announced a significant $2.7 billion natural gas takeaway initiative from the Permian, which aims to support the growth of power plants and data centers in Texas.

With numerous growth opportunities on the horizon, Energy Transfer is trading at a low valuation compared to its peers, reflected by an enterprise value-to-EBITDA (EV/EBITDA) multiple of only 8.4 times. Historically, Master Limited Partnerships (MLPs) had an average multiple of 13.7 times from 2011 to 2016. Given this combination of growth potential, attractive valuation, and a favorable regulatory landscape in energy, Energy Transfer stands out as one of my preferred stocks for the next few years, boasting a 6.6% forward yield and projected distribution growth of 3% to 5%.

E.l.f Beauty

E.l.f Beauty (ELF) has emerged as a leading growth story in the consumer products sector. What sets it apart is not only its impressive growth but also its affordability compared to other growth stocks.

The company effectively utilizes influencer marketing to boost its popularity, particularly among younger customers, while also replicating successful products from more expensive prestige brands. As a result, E.l.f has secured considerable shelf space and market share in the mass cosmetics category over recent years.

Its products have also gained traction in international markets, becoming the leading mass cosmetic brand in numerous global retailers. However, opportunities for expansion remain substantial.

The biggest growth prospect lies in E.l.f's venture into adjacent product categories. The company has two rapidly growing skincare lines, including its namesake brand and Naturium, a moderately priced option. This opens up long-term growth avenues for the brand. Additionally, the fragrance and hair care markets represent further opportunities for future expansion.

Recently, E.l.f reported a remarkable 40% increase in sales, yet the stock is trading at a forward price-to-earnings ratio (P/E) of just 28.5 and a price/earnings-to-growth (PEG) ratio of 0.5. PEG ratios below 1 are often viewed as indicating that a growth stock is undervalued, suggesting that E.l.f's stock is a significant bargain.

Alphabet

In the technology space, Alphabet (GOOGL) is a favorite of mine. As the dominant force in the search market with Google, Alphabet also operates one of the largest video streaming platforms, YouTube. The company’s robust adtech business enhances its ability to profit from its various platforms, including Google, YouTube, Gmail, and Maps.

One of Alphabet's significant growth opportunities lies in monetizing the AI landscape. Historically, only about 20% of Google’s search results have been monetized through ads. However, with new AI-driven ad formats, Alphabet aims to tap into the remaining 80% of queries that currently go unmonetized.

Furthermore, Alphabet boasts the third-largest cloud computing service in Google Cloud, which has been experiencing rapid growth, with a remarkable 35% revenue increase last quarter. This high-fixed-cost business recently reached a tipping point where it can leverage costs more effectively, contributing to significant profitability, with operating income soaring from $266 million a year ago to $1.95 billion.

Alphabet is also investing in innovative segments like quantum computing, where it has made recent breakthroughs, and autonomous driving, led by Waymo, which offers paid driverless taxi services—an industry first.

All of these diverse business ventures are accessible at a forward P/E of just 18.5, making Alphabet an attractive choice among tech stocks.

In conclusion, as we look ahead, these three stocks—Energy Transfer, E.l.f Beauty, and Alphabet—represent strong investment options across different sectors. They offer a combination of growth potential, compelling valuations, and unique market positions that make them suitable for long-term investment.

stocks, growth, investment