It is July, the height of summer. In ordinary times, July is the month for swimming pools, summer camps, and fireworks displays. But this July is anything but ordinary, and your summer plans have probably changed a lot due to the current situation.
With that in mind, we ask five Motley Fool contributors to share their best investor choices during this unusual July. They came back with NV5 Global (NASDAQ: NVEE), Loose technologies (NYSE: JOB), NextEra Energy (NYSE: NEE), Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B)and Apple (NASDAQ: AAPL). Here’s why they think these actions could put fireworks in their portfolio this month.
Image source: Getty Images.
A small fish in an ocean of opportunity.
Jason Hall (NV5 Global): Shares of this small infrastructure engineering company rose nearly 75% from the March lows in this writing. However, even with those big gains, it still represents an incredible bargain for growing investors.
What makes NV5 Global attractive? About $ 94 trillion it needs to be invested in global infrastructure by 2040 to meet the needs of society. The global middle class is adding around a billion new members per decade, mainly in developing countries, while infrastructure in developed countries urgently needs modernization. NV5 is positioned to be a participant on both sides of this momentum.
Since it went public less than a decade ago, NV5 has increased revenue by 716% and earnings per share by 155%, although revenue from generally accepted accounting principles (GAAP) has decreased in recent years largely due to expenses related to some acquisitions. Those same acquisition costs have played a role in the fall in the share price. Furthermore, there is concern that the administration has grown too quickly and too aggressively.
Founder and CEO Dickerson Wright has a proven track record of construction engineering firms, and the company is rigorous in squeezing out excessive back-office costs and making the most of the skills each acquisition brings. I hope that this results in the end result in the long run.
Buying NV5 right now is not about precision. It is difficult to say how spending on infrastructure and NV5 will be affected by COVID-19. But at recent prices, it’s too cheap to ignore, considering its huge growth prospects for the next decade.
This stock is not Slacker
Dan Caplinger (Loose technologies): The COVID-19 pandemic has created a great change in the way people work. With the health problems that keep millions of workers out of their offices, the ability to work remotely has become critical. Without the necessary tools to collaborate effectively, unemployment levels that are already soaring would be even higher. Slack Technologies has developed a platform tailored to the current situation; However, for some reason, their shares have not had the same level of interest as their peers. Zoom Video Communications They have gotten.
The first quarter of this year showed investors the growth potential for Slack. The company added 90,000 new customers during the three-month period, which was more than it had brought in the entire previous year. Although many of those customers use Slack’s free offers, paid customer counts also increased 28%, helping to increase revenue by 50% from the prior year quarter.
Slack is also being tested by fire. Users spend more time than ever on the platform, and customers already on board have redoubled their commitment to Slack. Net dollar retention reached 132%, demonstrating that the typical customer is spending far more than a year ago to take full advantage of the features Slack offers them.
Admittedly, Slack doesn’t have the workplace collaboration space alone. Many are concerned that Microsoft‘s (NASDAQ: MSFT) The team platform will remain a major competitor and will limit Slack’s growth. However, many users consider the Slack’s characteristics to be much superior. Furthermore, with a new partnership with Amazon.com (NASDAQ: AMZN), Slack has put a powerful ally in his corner. That could keep Microsoft at bay and allow Slack to reach its full potential.
Even once the pandemic ends, Slack CEO Stewart Butterfield thinks there has been a generational shift in the workplace that will never be the way it was. It took a long time to get a remote control friendly option that effectively replaces email. Now that it’s here, Slack intends to make it available to everyone. That’s good news for both the company’s users and its investors, especially as Slack continues to move forward and add new features to its collaboration toolbox in the workplace.
Two popular trends in one
John Bromels (NextEra Energy): I once spent five summers in a row in Florida, and I can tell you that July in Florida means one thing: air conditioning. With rising sun temperatures, Florida Power and Light and Gulf Power will be busy powering air conditioning for their 5.5 million combined customers. Fortunately, they are both owned by power giant NextEra Energy, the largest utility company in the US, and my pick to buy this month.
Even all of that air conditioning uses only about half the power generated by NextEra’s national 46 gigawatt power generation grid, which largely consists of renewable energy. The rest are sold to other utilities through reliable contracts. Speaking of reliability, NextEra’s dividend currently pays 2.3%, and has increased its payout every year for the past 25 years.
With so much uncertainty in the stock market right now, buying solid businesses that generate reliable cash flow can help your portfolio withstand the ups and downs of the market. In 2019, NextEra generated $ 8.2 billion in cash flow from its utility and power generation operations, and does not plan to stop there. Management projects an annualized increase of 6% to 8% in earnings per share and an annual dividend growth of 10% until 2022.
Are the companies at the bottom
Tyler Crowe (Berkshire Hathaway):
Most of the time, when it comes to investing in Berkshire Hathaway, the guiding principle is “invest in Warren Buffett. He knows what he’s doing.” What that advice tends to focus on is the company’s stock portfolio. However, outside of that portfolio, there is a powerful and diverse set of proprietary companies that make Berkshire incredibly attractive to me right now.
These companies range from defensive businesses like utilities and insurance; cyclical businesses with wide pits, such as railroads and industrial manufacturing; and businesses in the areas of construction, retail, real estate, and consumer products. These companies dump tons of cash. Over the past 12 months, Berkshire businesses generated $ 37.9 billion in operating cash flow (operating cash flow excludes gains and losses from the investment portfolio). Add in some capital gains, and Berkshire has generated $ 22 billion in free cash flow during that time period.
What makes these companies even more attractive right now is that they only comprise about a quarter of the company’s market capitalization. So underneath that giant heap of cash and stock investments is a set of businesses that generate cash and valued at just 2.8 times operating cash flow.
Yes, it can be a bit frustrating to see Buffett sitting in that giant heap of cash and U.S. Treasury bonds, and even more frustrating that there is no consideration of returning any of that to shareholders. That said, there are immense opportunities to grow the portfolio, and there is an incredible collection of companies that drive that portfolio.
Sometimes the simple investment is the smart one
Chris Neiger (Apple): Apple’s stock price has fallen roughly 50% in the past three months as investors have viewed tech stocks as a type of investment haven during the pandemic. But there are many reasons why Apple will continue to be a huge investment long after this surge in tech stocks has faded.
For example, the company’s portable device segment (which includes its home products and accessories) reached sales of $ 6.3 billion in the second quarter, thanks to its popular line of Apple Watch and Airpods watches. Apple’s future laptop is brighter than ever as the company continues to launch new iterations of popular devices, such as its AirPods Pro, and taking advantage of its already impressive 29% market share in the laptop tech space.
In addition to wearables, Apple has a great opportunity with its nascent service business thanks to its App Store, Apple Music, Apple News +, Apple TV + and Apple Arcade. Service revenue hit a record high of $ 13 billion in the last quarter, and some projections put the company’s annual service revenue at $ 100 billion by 2024.
Adding to all this is the fact that a 5G-enabled iPhone could spur new demand for the company’s smartphone and usher in what many call a super update cycle among current iPhone users. While the iPhone isn’t as important to Apple as it used to be, the lawsuit would not only give Apple devices additional revenue, but also the value of many years of service and wearable revenue.
Finally, Apple demonstrated that the company still has a very forward-looking approach to its devices and services when it announced at its WWDC20 conference that it is changing its Mac computers from Intel chips to its own Apple-designed silicon. The move may be subtle for most users, but investors should see it as another way for Apple to further consolidate control over its products, and probably make them better and more efficient, so that it can continue to outperform its competitors.
When you add all this together and add Apple’s penchant for massive share buybacks, this tech giant looks as strong as ever and well positioned for its next growing season.
