This was arguably the most volatile year on record for equities, but we have finally entered the homestretch. We saw a 34% drop in the benchmark S&P 500 in less than five weeks, and a ferocious rebound from a bear market low to new highs that took less than five months.
While this volatility ended the longest bull run in US history dating back to 1860, the aforementioned fierce rally also sparked a new bull market. While history suggests there will no doubt be hiccups along the way, bull markets tend to last for many years. This means that the perfect opportunity is within reach for long-term investors to raise excellent assets.
Investors should consider the following five companies as mandatory stocks for the new bull market.
We are seeing a changing of the guard in the financial sector and companies that focus on technology and innovation will thrive. Payment facilitator Square (NYSE: SQ) it appears to be the financial stock you will want to own in this new bull market.
For the past eight years, Square’s ecosystem of vendors has been its bread and butter operating segment. Square provides point-of-sale devices, loans, and other small business-focused analytics tools. Between 2012 and 2019, the amount of gross payment volume (GPV) flowing through Square’s network of sellers grew from $ 6.5 billion to $ 106.2 billion. As this business segment thrives on merchant commissions, it’s encouraging to see larger merchants (i.e. those with at least $ 125,000 in annualized GPV) playing more important roles in the seller ecosystem in recent years.
The most interesting aspect of Square’s growth is the Cash App’s potential. The number of monthly users on Cash App has more than quadrupled to 30 million since the end of 2017. This peer-to-peer payment platform collects commissions from merchants, as well as by users speeding up transfers or exchanging fiat currency for bitcoin. There is a very good chance that Cash App will quickly become the main gross profit driver for Square.
Palo Alto Networks
Yes, I will beat the table on cybersecurity titles until there is a hole in the table. While there are a couple of exceptionally high-growth and promising sectors to invest in during the new bull market, few or none offer the cash flow stability and predictability of cybersecurity stocks. That’s why I believe you will want to own it Palo Alto Networks (NYSE: PANW).
The fact is, the 2019 coronavirus disease (COVID-19) pandemic has completely altered the traditional office environment and accelerated existing trends, such as the rise of remote working. Cloud data protection has become more important than ever. The many solutions Palo Alto provides to its customers are now basic services, no matter how the economy is doing.
Palo Alto’s management team is also making short-term operational sacrifices to absorb long-term cloud security market share. The company has consistently moved away from physical firewalls and moved towards a subscription-centric operating model. Subscriptions offer much better margins than physical products and much less irregularity in the sales department from quarter to quarter. When combined with Palo Alto’s multiple bolt-on acquisitions, a steady double-digit growth rate seems feasible.
Another stock for the new bull market to own is Telemedicine Boss Teladoc Health (NYSE: TDOC).
While traditional healthcare stocks are doing well, the new bull market will be defined by companies focused on precision medicine (i.e., personalized, not generic treatment plans). Teladoc will be at the forefront of this innovative curve, with its virtual visits benefiting the entire health chain. Telemedicine visits are cheaper for insurers than office visits and are certainly more affordable for doctors and patients. After generating full-year sales of $ 20 million in 2013, Teladoc is on track to potentially reach $ 1 billion in 2020.
Teladoc is also in the process of acquiring the star of applied health signals Livongo Health (NASDAQ: LVGO) in a $ 18.5 billion cash and stock deal. Livongo’s AI-powered solutions help patients with chronic diseases lead healthier lives. The company nearly doubled its membership last year and continued to add members in an impressive clip in 2020. It has also been profitable on an adjusted basis for the past three quarters.
When the deal ends, Teladoc and Livongo will offer one of the strongest growth rates in the entire healthcare space.
Surgical Systems Developer Intuitive surgery (NASDAQ: ISRG) is another healthcare company that you will be happy to own in the new bull market.
It could be rightly said that Intuitive Surgical has a small competitive edge over its peers in positioning its intricate surgically assisted robotic systems. Over the past two decades, the company has installed 5,764 of its da Vinci systems in hospitals and surgical centers globally, with all of its competitors combined not even coming close to this brand. This practically insurmountable advantage has created what I believe is an indissoluble relationship with the medical community.
What’s particularly interesting about Intuitive Surgical is that the company’s operating model is built to improve over time. Da Vinci systems are expensive (up to $ 2.5 million), but they can also be quite expensive to build, so they don’t provide the company with the best margins. Instead, Intuitive Surgical generates the majority of its profits from the sale of tools and accessories with each procedure, as well as from the maintenance of these systems. The greater the number of systems installed worldwide, the greater the percentage of sales Intuitive Surgical derives from these higher margin segments.
With the company still scratching the surface in some soft tissue surgical indications, there appears to be a long trail of double-digit growth potential.
The new coronavirus has given us a glimpse of what life could be like in a post-pandemic world and will likely involve a lot of online consumption. Although many companies are focused on direct-to-consumer initiatives, a social media company is flourishing Pinterest (NYSE: PINS) that investors will want to own.
Pinterest’s reach is growing rapidly. With people stranded at home due to the pandemic during the second quarter, Pinterest’s monthly active user count rose to 416 million. That’s an increase of 116 million over the previous year period, with over 90% of these new users signing up outside of the U.S. The bad news is that the average revenue per user (ARPU) generated by overseas markets is currently quite low. On the bright side, Pinterest more than doubled its international ARPU in 2019 and can do so multiple times over this decade.
But as I noted, it’s the company’s e-commerce ties that are exciting. Pinterest users post about products, services, hobbies, and destinations that interest them. It makes perfect sense for the company to offer small businesses that cater to these interests a platform for selling their products. With the vast majority of pinners eventually buying items they first saw on Pinterest, there is a huge e-commerce opportunity awaiting the company in this bull market.