This year has certainly been one for record books, with investors experiencing a downturn in the record stock market and a record recovery, all within a few months. The stock purchases that screamed were available in late March did not last long, and investors who hesitated could feel they had lost the boat.
Fortunately, for investors with a keen eye, a stomach for a risk element and a fairly long investment timeline, there are still opportunities to increase your long-term returns by adding some high-rise stocks to the mix.
If you have $ 4,000 (or less) in cash available to invest that you do not need for immediate expenses or to replenish your emergency fund, setting it up to work on these four stocks can simply make you rich.
1. Teladoc and 2: Livongo: A healthy two-for-one sale
There is little doubt that Teladoc Health (NYSE: TDOC) and Livongo Health (NASDAQ: LVGO), with their links to connected instruments and telehealthin, have been on fire this year as a result of home-stay orders resulting from the coronavirus pandemic. Young and elderly patients have done their best to avoid trips to the doctor’s office for fear of contracting COVID-19.
The ability to serve patients remotely has served these companies well. For the second quarter, Teladoc reported revenue that increased 85% year-on-year and total patient visits that increased 203%. For the first six months of 2020, revenue rose 63% and visits increased 144%.
Livongo Health was similarly transformed, with second-quarter revenue rising 125% year-on-year, while patients enrolled in its flagship program – Livongo for Diabetes – climbed 113%. This occurred after 115% revenue growth and 100% patient growth in the first quarter.
Through the beginning of this month, these factors helped boost Teladoc shares to nearly 200% year-on-year, while Livongo grew more than 475%.
Investors seemed to completely dismiss these powerful results and potential for future benefits when the two providers announced in early August that they would merge, setting a “new standard in global healthcare delivery, access and experience”. Following last week’s announcement, Livongo and Teladoc shares have fallen 20% and 26%, respectively, so far.
The stock market reaction runs counter to logic. It is not as if growth simply dries up as a result of union. These are two high-growth companies that will be able to make deeper entries into the related healthcare market, with specialties that are fully complimentary.
Of course, there is always the possibility that conflicting management styles or corporate cultures may hinder successful integration, but to assume that this will happen is a step too far. I expect the combined company will continue to be extremely successful, and the investors they add now will be many happy they did.
3. DataDog: Take this puppy for a walk
The pillar towards cloud computing was already in full swing, but in the face of the pandemic, the shift accelerated to high gear, as remote work became the rule and not the exception. It also became more important than ever that cloud-based systems were ready to meet the increased demands of a dispersed workforce, with the ability to identify problems before they became critical issues, resulting in an unnecessary downtime .
Here’s what DataDog (NASDAQ: Ddog) brings to the table. The cloud-based analytics provider monitors servers, databases, tools and services, using artificial intelligence to detect anomalies, providing up-to-date information about problems as they occur, to keep them from become even bigger issues. Once the solution is resolved, DataDog provides useful analytics that can be used to help you avoid repeating the problem.
DataDog reported strong results for the second quarter, with revenue rising 68% year-on-year, slightly behind gains of 87% in the first quarter. Consumers bringing in annual revenue over $ 100,000 rose to 1,015, up nearly 71% year over year.
The company continues to collect industry tunes that testify to its stature. DataDog was known as 2020 Gartner Buyer selection from Peer Insights for IT Infrastructure Monitoring Tools, receiving 4.5 out of 5.0 stars from IT professionals using its products.
Management is guiding for 50% year-on-year profits in the third quarter, a slowdown from its recent torrid growth, which undoubtedly contributed to the rapid reception of markets by its recent results. Given DataDog’s historic practice of issuing conservative guidelines, just to easily overcome its prediction, this move is not entirely unexpected. However, bargain hunters can now take stock for a 20% discount at the highest recent levels.
4. DocuSign: (E) Sign up here for revenue growth
Another company that has taken a hit on the arm from the need for distance work and social distancing is DocuSign (NASDAQ: Docu). The electronic signature provider was already the undisputed leader, with about 70% of the electronic signature market, but the new reality that requires agreements to be signed remotely, gave the company a considerable advantage.
DocuSign reported first-quarter revenue that grew 39%, matching its growth rate from 2019. The company has keen knowledge of its future revenue, as nearly 95% of its revenue came from subscriptions , providing a solid recurring income base that is not normally subject to fluctuations. At the same time, DocuSign adjusted earnings rose to 71%.
The company has another revenue stream that is sure to grow in importance in the coming years. Early last year, DocuSign introduced the Cloud Agreement, a suite of products and integrations that help automate the entire contract lifecycle, creating a digital process for preparing, signing, operating and managing agreements.
Even as a leader, the electronic signature market is still in its early stages. Management estimates the potential market at $ 25 billion, and with revenue of just $ 974 million last year, DocuSign still has a massive opportunity – and that does not account for another $ 25 billion market opportunity for the Cloud Deal, giving the company a long runway ahead.
However, the recent high-flying rotation has sent DocuSign stock up more than 15%, with no specific news from the company leading the downturn. This means that prospective investors can take stock with a recent level discount, without any change in thesis.
Rosedo rose has its thorns
Each of the companies highlighted above has the potential to be a multi-bagger, many times returning its original investment, which is what you would expect from a high state of high risk. That said, eagle-eyed investors will also have discovered that in addition to their high-flying status, these stocks share another common feature – their expensive valuations.
Teladoc and Livongo Health are currently rated at 15 and 32 times forward sales, respectively, when a good price-to-sales ratio is generally considered to be between one and two. DataDog and DocuSign are equally costly, with forward ratings of 40 and 26, respectively. In either case, however, investors have so far been willing to pay for the impressive growth of the top line and the potential for future success.
Past performance is not a guarantee of future success, but given the results these growth stocks have achieved so far this year, if they continue on their current trajectory, they can simply become wealthy investors.