Stocks to buy

3 Stocks to Buy Before They Become the Next Trillion-Dollar Companies: June Edition

There are currently six U.S. companies with a market capitalization of at least $1 trillion. Even with the impacts of inflation, one trillion dollars is still a huge sum. It’s quite a feat when any company joins the list of trillion-dollar stocks.

Surprisingly enough, the first ever trillion dollar market cap company was PetroChina, which briefly hit this point in 2007. In 2018, Apple (NASDAQ:AAPL) topped $1 trillion in market cap, and it was quickly followed by a number of other leading American technology companies.

There can still be explosive upside for a company even after hitting $1 trillion. Today, both Apple and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) have already reached the $3 trillion market cap threshold and Nvidia (NASDAQ:NVDA) is right around there as well.

That said, investors can earn larger gains buying into companies while they are still a bit smaller and have more potential upside. These are three more leading companies that have good odds of becoming part of the next batch of trillion-dollar stocks.

Berkshire Hathaway (BRK-A) (BRK-B)

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At a nearly $900 billion market cap today, it should be just a matter of time until Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) reaches a trillion.

Warren Buffett’s insurance firm and diversified holding company has many different ways to win. Berkshire operates many of its own businesses such as a railroad, electricity generation, paints, mobile homes, restaurants and more. In addition, Berkshire has a large investment portfolio including its roughly $135 billion stake in Apple.

As long as the economy keeps growing, Berkshire should be able to earn more money from its variety of operating businesses. And the value of its passive stakes in companies like Apple should rise over time.

In addition, Berkshire Hathaway is sitting on a large cash position. With high interest rates, this is delivering surprisingly strong interest income for the company, while giving it optionality to invest in any opportunistic deals that may happen to turn up. Buffett has already built Berkshire Hathaway into one of America’s leading firms, and soon his stock will graduate into having trillion-dollar status as well.

Taiwan Semiconductor Manufacturing Company (TSM)

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Taiwan Semiconductor Manufacturing Company (NYSE:TSM) has been one of the biggest winners from the artificial intelligence boom. That’s because TSM supplies a huge chunk of the global semiconductor foundry market, meaning that its products go into most of the leading AI-enabled semiconductor units available today.

This paves the way for Taiwan Semiconductor to potentially overtake Apple in market capitalization in the years to come. This comes amid a massive boom for TSM products; its revenues are up from $36 billion in 2019 to $70 billion in 2023. Analysts see this jumping above $100 billion in fiscal year 2025.

Taiwan Semiconductor isn’t just a top-line revenue growth story, either. The company is highly profitable. Even with the stock up more than 60% over the past year, TSM shares are still selling at 26 times forward earnings.

That’s hardly excessive given the rapid growth rate, strong industry tailwinds and favorable earnings outlook going forward.

Visa (V)

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Visa (NYSE:V) is back on top of its game. V stock has been a huge long-term winner, with shares rising more than 1,500% since its 2008 IPO.

However, Visa shares stalled out during the pandemic. The company earns its fattest profit margins on cross-border transactions which involve foreign exchange fees. The temporary shutdown of the global travel sector hit credit card profits hard.

In addition, investors feared that new fintech companies and cryptocurrency platforms could disrupt credit and debit cards. Certainly, in 2021, there was plenty of funding for alternative payments companies and Visa could have faced more competitive pressure.

But these concerns largely failed to materialize. Rival payments stocks have plunged in recent years as fintech companies struggled to maintain their prior momentum. Meanwhile, the global economy has recovered, with international travel being a particular bright spot. Specifically, CEO Ryan McInerney recently noted that cross-border travel spending is growing at a 17% year-over-year clip right now.

Visa’s market cap is still under $600 billion today, so it will probably still be a couple of years until Visa enters the trillion-dollar stock club. But given the firm’s excellent business model and rapid growth rate, Visa will continue delivering the goods for its shareholders for many years to come.

On the date of publication, Ian Bezek held a long position in V stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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