The 2019 Coronavirus pandemic (COVID-19) has made this year one of the wildest on the stock market. Within five months, we’ve seen the fastest decline in the bear market in history, the strongest quarterly rally in 22 years, and the technology-intensive Nasdaq composite Log more than two dozen all-time highs. Suffice it to say that it was volatile.
Generally speaking, volatility can be a great thing for investors. This is because long-term investors can buy into great companies with a discount.
Increased periods of volatility, however, also have the talent to get short-term and inexperienced investors out of the woodworking industry. The online investment platform Robinhood, which is known to attract millennial and / or inexperienced investors, is the current figurehead for this short-term thinking.
Robinhood investors have accumulated in recent months hertz after filing for bankruptcy under Chapter 11, Eastman Kodak after granting a government loan of $ 765 million and Nikola, although the manufacturer of electric vehicles has not achieved a cent in sales. Robinhood’s ranking (i.e., a list of the platform’s most widely held stocks) is a minefield of generally terrible companies or stocks that are hot for a very short period of time.
The thing is, Robinhood has absolutely the potential to be a platform that gets young investors on their way to financial freedom. To achieve this, robinhood investors need to think long term and focus on buying higher quality companies.
It is also important for young investors to understand that start-up capital is not a restriction. When robinhood investors work with $ 1,000 investment capital, they have more than enough to buy groundbreaking stocks in the long run. Here are three perfect examples for Robinhood members to consider buying.
First, forget about chasing bankrupt companies and penny stocks if you have the opportunity to buy a financial technology powerhouse like that square (NYSE: SQ).
Most people probably know Square best for its seller ecosystem, which provides POS equipment to small and medium-sized retailers. This seller ecosystem has allowed Square to charge dealer fees for years.
What is really interesting, however, is that this point-of-sale platform is no longer just for small businesses. In the March quarter, 52% of the Gross Payments Volume (GPV) that crossed the Square network came from larger companies, which Square defined by definition means an annualized GPV of at least $ 125,000. Entering larger companies should result in higher merchant fees and less of a decrease in payment processing when the next economic contraction occurs.
However, it is Square’s Cash app that will be the main driver of sales growth and profitability throughout the decade. The Cash App is a peer-to-peer payment platform that can be used to transfer money from and to a conventional bank account and can be linked to the cash card for more traditional shopping activities. It became particularly popular during the pandemic because people are no longer using cash.
In addition, Robinhood’s younger investors will appreciate the fact that the Cash app enables the exchange of Bitcoin and direct investments. Exchanging fiat currency for bitcoin is actually one of the most profitable features for cash app.
Wall Street expects Square to more than quadruple its sales between 2019 and 2023, making it a fintech stock that Robinhood investors want to own.
A second high-growth stock whose potential is not volatile is the manufacturer of medical devices DexCom (NASDAQ: DXCM). And don’t be put off by the nearly $ 440 stock price – there’s still a lot of upside.
DexCom is a manufacturer of continuous glucose monitoring systems (CGM) for patients with diabetes. Instead of regularly pricking fingers to test their blood sugar levels, a CGM provides consistent readings that can be used in two ways. Either the real-time data can be displayed on a DexCom radio, smartphone or smart watch to which the patient can respond (if necessary), or it can be sent wirelessly to an insulin pump that delivers insulin doses as needed.
In addition to being easy to use, DexCom CGMs promote patient comfort and treatment personalization. The company’s Clarity software enables diabetics to summarize their blood glucose levels in easy-to-read digital reports that can be sent to a family doctor or specialist. This can be especially helpful during a pandemic when diabetics don’t have to leave home to send important data to their doctor.
Investors should also understand what a tremendous market opportunity CGMs are in the United States. According to the Centers for Disease Control and Prevention, 34.2 million people in the United States have diabetes (75% of them know it), and another 88 million have symptoms of prediabetes. DexCom’s potential patient pool is huge and growing every year.
Although DexCom is not a fundamentally cheap stock, it is expected that the company will achieve annual growth of over 20% over many years.
A third stock robinhood investors should buy is the social media giant Facebook (NASDAQ: FB). It may not be the sexiest choice considering that there are other high-growth social media platforms that people could invest in, but their consistency is second to none.
Last week, Facebook reported its second quarter operating results, which ended on June 30. Even with COVID-19 as a serious headwind – keep in mind that most U.S. and industrialized countries were blocked for much of April and part of May – Facebook’s monthly number of active users increased by about 100 million compared to the first quarter to 2.7 billion, with monthly active family members exceeding 3 billion and reaching 3.14 billion. The monthly active family members grew by 14% compared to the previous year.
The point is, no social media platform offers access to more eyeballs than Facebook. Although there are other websites with faster active user growth, advertisers are looking for targeted campaigns on Facebook. This gives Facebook a ridiculous amount of advertising pricing power.
Another exciting aspect of Facebook is that the company is still in the relatively early stages of its growth. While this may sound like a scratch on a statement for a company that could generate $ 78 billion in revenue in 2020, you should know that Facebook still hasn’t monetized Facebook Messenger or WhatsApp. As soon as Facebook starts monetizing these very popular platforms, sales and cash flow should increase significantly.
Finally, don’t neglect Facebook’s non-advertising revenue potential. In the second quarter, “other” revenue increased 40% year over year to $ 366 million. This “other” category includes the sale of Oculus virtual reality headsets and Portal, the company’s intelligent video calling device. These innovations, along with Facebook Pay, could be sneaky growth drivers this decade.