3 investors share their stock shopping lists
It’s been a turbulent start to 2022. Between the threat of higher interest rates, slowing economic growth and an invasion of Eastern Europe, many growth stocks have been under absolute pressure in recent months.
Deals are still possible after the sell-off, though, so for those with a long-term mindset, it’s time to work with the money. With that in mind, three Fool.com employees have made (or plan to make) some purchases. It feels terrible to buy when the news is terrible, but it’s good practice to do so anyway, document the reasons, and then look back after the crises have subsided a little. Here are the shopping lists.
I bought two stocks that have crashed and a stable Eddie
Nicholas Rossolillo (Shopify, Doximity, and Applied Materials): Over the course of a year, I almost always have cash left over in my investment accounts. The amount of cash varies (usually no more than 10% of my account value), but it’s always ready to be used at a convenient time. With growth stocks plummeting even as the companies themselves continue to expand at a healthy pace, March seemed like the right time to put all that cash on a spending spree.
I have allocated existing positions in my portfolio, but Shopify ( SHOPPING -3.61% ) and Applied Materials (AMAT -1.10% ) were two of the top buys. Shopify, in particular, has been a great investment over the years, and I still see a very long haul as it helps small businesses regain some power in the retail world with its extensive e-commerce offerings. Stocks aren’t cheap considering Shopify will invest a little more aggressively in the years to come to grow its fulfillment network, but I believe Shopify merchants will appreciate the flexibility of inventory management and the ability to offer customers fast delivery times as a result, like project. I have thus further expanded my existing position.
Applied Materials, on the other hand, is a more mature business. Sure, it expects double-digit percentage growth this year as well — the momentum should carry over into 2023 as a global chip shortage drives chipmakers to ramp up production capacity. But Applied Materials and a small handful of competitors dominate the development and sale of machines needed to make chips. As a result, they’re typically a slower but steadier way of playing in the semiconductor industry, and they bring in plenty of excess cash that’s returned to shareholders via a dividend and share buybacks. Applied Materials was trading at less than 15 times forward one-year earnings and was too cheap to ignore, so I bought more.
For my third stock, I had my eye on a new game in the field of telemedicine: doximity ( DOCUMENTS -3.50% ). I already own a few other telemedicine and healthcare tech stocks, and they were hammered when their early pandemic boom went bust.
But I’m still optimistic that companies trying to make patient care more efficient have a bright future. Doximity operates a kind of social network for medical professionals (sometimes compared to LinkedIn) that allows healthcare providers to video call or message patients, send and sign documents, and manage their schedules. it grows fast and generate an incredible amount of free cash flow. It’s a powerful combination, so I’ve opened a position and will be buying more over time as Doximity’s impressive story continues.
Speak softly and carry a big check
Anders Bylund (Netflix, Autodesk and Polkadot): I don’t trade often. My last stock trade was in December and I haven’t bought any cryptocurrencies in the last two months. I’m a patient guy with a very long time horizon for my investments, so I don’t worry too much about daily price action, perfect timing of the market, or falling for the hottest picks. My natural inclination for stoic composure is also reinforced by the Fool’s uncompromising disclosure rules, which often keep me from making the trades I have in mind.
Well, it’s time to do something in this inviting market. All major market indices are down more than 5% in 2022 and many of my favorite stocks and cryptocurrencies are currently in sell-off.
These disclosure rules don’t let me take immediate action against the tickers I’m about to mention just to make sure my humble words don’t make a lucrative difference to their market prices. That being said, I intend to invest in these three names next week when today’s trading limits expire:
- Netflix (NFLX -0.49% ) is already my largest holding, but also my best investment idea for new money at these ridiculously low prices. Market makers have overreacted to a short-lived slowdown in subscriber numbers, and Netflix hasn’t been this affordable in years. I need to top up my position while the discount is valid.
- Design software expert Autodesk (ADSK -0.43% ) has suffered a 26% price cut and a 40% slump in 2022 from all-time highs in November. The stock doesn’t look cheap on traditional valuation metrics, trading at 10 times trailing sales and 30 times free cash flow. However, this is a steal considering the company’s unique market position at the intersection of several long-term megatrends. I can’t keep my hands off this growth stock with a 40-year operating history.
- After all, I keep calling Speckle ( POINT 0.10% ) the best crypto investment in the long run, but my own position is paltry. It’s time to take this unique blockchain platform seriously and expand my Polkadot exposure from a speculative bet to a worthwhile investment. DOT coin is down 29% this year and 60% from November’s 52-week highs, and I expect multibagger returns over the long term.
A top fintech platform has been wrongly penalized
Billy Duberstein (Lending Club): The market seems to have priced in some sort of recession very quickly due to Federal Reserve rate hikes, which has driven certain lenders and fintech stocks such as FinTech. B. has punished Lending Club (LC -2.35% ). Notably, LendingClub is down about 67% from its 52-week highs in November — despite its reasonably strong earnings results over the past few quarters.
The hatred seems to have gone a bit too far and doesn’t take into account the new facets of LendingClub’s business model. The market has historically viewed LendingClub as a risky, unproven fintech platform that provides US consumers with unsecured personal loans for bulk purchases or to refinance credit card balances. LendingClub had traditionally sold all loans to third party investors such as banking partners, wealth managers or individual investors; One concern is that alongside underwriting concerns, these investors could flee in a recession.
There are two key reasons why these issues will be overemphasized in 2022. First, LendingClub has been in the game since 2006, before the Great Recession, and is an innovative user of data analytics and technology, including non-traditional metrics to complement traditional credit scores. By the end of last year, pre-pandemic loan defaults were 50% lower than other fintechs, and default rates were also lower than the industry as a whole. Additionally, LendingClub has moved away from its roots as a higher-yielding lender and has really focused on high-quality clients with more conservative underwriting in recent years.
Secondly, LendingClub is truly a new company since it acquired Radius Bank in early 2021 and is now equipped with a banking license. LendingClub’s cost structure has come down and it keeps more of its loans on its own balance sheet — between 15% and 25%, under its new model. Loans held on the balance sheet are more profitable for LendingClub, and the “eat-yourself-cook-yourself” attitude has also spurred high demand from third-party providers. The independence from third-party funds is a great advantage and takes away a great deal of risk in the previous business model.
After this year’s sell-off, LendingClub is trading at just 12 times this year’s earnings estimates. That’s the sort of valuation usually reserved for much larger, mature banks without much growth. But LendingClub is forecasting revenue growth of 34% to 47% and earnings growth of 600% to 700% this year; While some of this is a setback from the pandemic, LendingClub appears to have a lot more growth ahead of it as it accelerates new customer acquisition for its bank and expands into new products like auto loan refinance.
In fact, analysts expect LendingClub to grow earnings by another 73% in 2023, and the stock is trading at less than 7 times those forecasts.
While inflation is certainly hurting consumers today, the labor market is strong and household balance sheets are still in good shape. I don’t think a bad recession where billings skyrocket is likely. Recession fears and a flattening yield curve have caused LendingClub to sell way too far, and as a result, I’ve been buying more shares recently.
This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investing thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.