This has been a year that investors will be talking about for decades. The coronavirus 2019 pandemic (COVID-19) has, in a few months, raised social standards, sent US unemployment levels to levels not seen since the 1930s, and recorded the highest volatility measurements. t we have ever seen for stocks.
In the first quarter was the benchmark S&P 500 lost more than a third of its value in less than five weeks. This was followed by one of the strongest bounce-back meetings in decades. But the thing is, bear market bounces have a history of heating up speed bumps. Although it is impossible to predict when a stock market will occur as a correction, historical data would suggest that one is coming relatively soon.
However, a stock market crash does not have to be a bad thing for investors. If you have a long enough time horizon, corrections of all sizes are only an opportunity to buy in great companies with discount. If a stock market is indeed going on, I will look for the next three stocks to buy, or add to these.
Image Source: Getty Images.
One company I already own, but would love to own a lot more of, is social media giant Pinterest (NYSE: PINS). Although I was lucky enough to buy on Pinterest on several occasions during the coronavirus crash in March, I was not added to my position in the following months. Since its inception in March, Pinterest shares have delivered gains of more than 250%.
Getting things in space on social media is not as easy as it may sound, but Pinterest shoots on all cylinders. As of June, the monthly active number of users (MAU) had grown to 416 million, which is 39% more MAUs than in the previous year. Pinterest has proven to be popular with international users, accounting for 106 million of the 116 million MAUs the company has added over the past year.
Here’s the interesting thing about international users: Although the average turnover per user (ARPU) in overseas markets tends to be only 5% of the US ARPU, there is the potential to increase foreign ARPU in the past decade doubling as the main character of the platform grows.
Pinterest also comes in its own as an e-commerce player. Since 416 million people use Pinterest as a platform to share products and ideas that interest them, it only makes sense for Pinterest to connect these users with small businesses that can carry products they want to buy. Pinterest has partnered with Shopify create an e-commerce experience that enables these small businesses to change interests in stock buying.
I truly believe that Pinterest has the potential to reach $ 100 billion in market cap by the end of this decade.
Image Source: Getty Images.
Ping identity
Another stock that has drifted from the lows of March that I would like to add to my portfolio when trading on the stock market is cybersecurity company Ping identity (NYSE: PING).
The beauty of all cybersecurity files is that they have become pure recession files. While new assignments and add-on solutions may increase during periods of economic contract, the fact is that hackers and robots do not take time simply because the US as a global economy hits the skids. No matter how big a company is, own networks and clouds should always be protected. This provides a level of cash flow security that you just do not see in many tech stocks.
As the name already suggests, Ping Identity specializes in securing networks and clouds by providing identity verification. This usually takes the form of two-factor authentication, but the company also anticipates a preference for future login options that may include passwordless authentication. First and foremost, artificial intelligence and machine learning are what Ping’s solutions are all about. The identity verification solutions are constantly learning and adapting to identify suspected human and robotic threats.
To build on the cash flow security I mentioned, 93% of Ping’s revenue in the first quarter came from subscription and support services. The thing about subscription services in the space of cybersecurity is that there are often not many noise nuisances, and margins are usually robust. In Ping’s case, its gross margin for Q1 subscription agreed at 87%, with annual return revenue (ARR) of 21%. That’s six consecutive quarters with at least 21% ARR annual growth of ARR, dating to Q4 2018.
Ping Identity is a company that I fully expect to grow by 15% to 20% this year.
Image Source: Getty Images.
Alphabet
Finally, I have always used the excuse of the bulls running wild as a reason not to buy Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), which is the parent company of online advertising behemoth Google and streaming website YouTube. If a stock market hits, I will seek to pull the trigger definitively.
Like most advertisers (Pinterest included), Alphabet faces monumental challenges in the short term of the coronavirus pandemic. During the year, revenue fell 2% year-on-year, including currency movements, in the second quarter. This marked the first reporting of revenue years ago on the Alphabet since it went public. But I would not let this frighten investors to put their money to work in this dominant advertising, streaming and cloud service provider.
According to GlobalStats, Google controlled 92.2% of all online searches, as of July 2020. For context, Google’s share of global searches during the year remained consistently between 91.9% and 93%. The advertising business may not thrive at the moment, but Google is the clear choice for companies looking for a target audience.
Beyond advertising, Google Cloud is becoming an increasingly important part of the company’s future. Cloud revenue exceeded $ 3 billion in the second quarter (an improvement of 43% from Q2 2019), implying an annual run rate of $ 12 billion. Since margins for cloud services are significantly more attractive than spending on advertising, Alphabet’s cash flow and profitability should tick higher as Google Cloud grows to a larger percentage of total sales.
Among the FAANG files, the best value might just be Alphabet.
