Top 5 Stocks I Like From Bloomberg's 50 Company Stocks to Watch in 2021 List
Bloomberg Businessweek recently released a chunky report on 50 company stocks to watch in 2021.
The report highlights companies that Bloomberg Intelligence analysts think are worthy of watching this year.
The analysts considered factors such as “company size and growth opportunities, management changes, scheduled releases of noteworthy products and services, and, of course, the impact of the Covid-19 pandemic and other sweeping economic forces” when coming up with the 50-stock list.
From that long list of stocks, here are five companies that I like. Who knows, they could be worth researching further for your own stock portfolio as well.
TL;DR: US Growth Stocks To Consider Investing In
Here are the five companies discussed and what they do:
- CrowdStrike provides cloud-based cybersecurity solutions through an artificial intelligence-driven platform
- Intercontinental Exchange operates regulated exchanges, clearinghouses and listings venues
- PayPal offers numerous products to allow consumers and merchants to seamlessly transact in the digital world
- Teladoc is the first telehealth platform in the US, providing round-the-clock online consultations
- Twilio is a cloud-based communications specialist that allows companies to embed communications features within their existing platforms
Stock #1: CrowdStrike
CrowdStrike Holdings (NASDAQ: CRWD), which was founded in 2011, provides cloud-based cybersecurity solutions through its proprietary Falcon platform.
CrowdStrike’s Falcon is an artificial intelligence-driven platform that protects applications running on various endpoints (such as laptops, desktops, and servers).
The company believes it is “defining a new category called the Security Cloud”, just like how other software-as-a-service companies like Salesforce.com (NYSE: CRM) have defined entirely new categories.
Many large corporations rely on CrowdStrike to protect their businesses.
As of 31 January 2020, the cybersecurity company had 5,431 subscription customers, including 49 of the Fortune 100, 40 of the top 100 global companies, and 11 of the top 20 banks.
Every additional customer and every new data from existing customers make CrowdStrike’s applications more intelligent. This allows existing customers to benefit even further and also attracts new customers since the platform is more valuable now.
CrowdStrike’s customers create a powerful network effect, giving the company its economic moat.
Customers like what they are getting from CrowdStrike, as seen from its strong dollar-based net retention rate (DBNRR), which compares the company’s annual recurring revenue from a set of customers a year ago against the same group today.
As of 31 January 2020, CrowdStrike’s DBNRR was 124%.
Anything above 100% is great as that means the company’s customers, as a group, are not only sticking with CrowdStrike but are also spending more money.
As discussed in 8 Growth Sectors to Consider Investing in for 2021 and Beyond, there’s plenty of growth still ahead for CrowdStrike as it sees its total addressable market (TAM) to be US$38.7 billion in 2023; the company’s last twelve months revenue was below US$1 billion.
At CrowdStrike’s share price of US$223.40, it has a price-to-sales (P/S) ratio of around 64x. However, given its huge TAM, it could be worth paying up for the cybersecurity company.
Risks include short-term share price volatility due to its high valuation and cybersecurity breaches affecting CrowdStrike’s reputation.
Stock #2: Intercontinental Exchange
Intercontinental Exchange Inc (NYSE: ICE) is a Fortune 500 company that operates regulated exchanges (including the iconic New York Stock Exchange), clearinghouses and listings venues.
It also provides data services for commodity, financial, fixed income and equity markets.
In 2020, Intercontinental Exchange reported its 15th consecutive year of record net revenue and another year of double-digit earnings per share growth.
For the year, net revenue grew 16% year-on-year to US$6.04 billion while net profit improved by 8% to US$2.09 billion.
Meanwhile, Intercontinental Exchange’s free cash flow for 2020 grew 4% year-on-year to US$2.40 billion.
Free cash flow is money that a company can use to reinvest into its own business, acquire other businesses, pay dividends to its shareholders, buy back its own shares, or pay off its debt.
Intercontinental Exchange has a long-term goal to return 100% of its free cash flow to shareholders through dividends and share buybacks, after considering mergers and acquisitions.
In 2020, the firm has returned close to US$2 billion to shareholders in the form of dividends and share repurchases.
With the company’s ability to continue producing copious amounts of free cash flow, it is highly likely to continue providing shareholder value for many years to come.
At Intercontinental Exchange’s share price of US$113.74, it has a price-to-earnings (P/E) ratio of 30x.
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Stock #3: PayPal
PayPal (NASDAQ: PYPL) is one of the world’s most trusted brands. According to a study, 54% of those surveyed are more willing to buy a product or service when a business accepts PayPal.
PayPal offers many products to allow consumers and merchants to seamlessly transact in both the offline and online world.
From 2015 to 2020, PayPal’s total payment volume (TPV) rose over three times from US$288 billion to US$936 billion. TPV is the value of payments (after payment reversals) that are successfully completed on its platform.
With that, revenue grew and free cash flow grew strongly as well.
PayPal has room for further growth. Its 2020 revenue of US$21.5 billion is minuscule compared to its TAM of US$110 trillion.
At PayPal’s share price of US$273.63, it has a P/E ratio of 77x and a price-to-free-cash-flow ratio of 65x.
Stock #4: Teladoc
Teladoc Health Inc (NYSE: TDOC), which was started in 2002, prides itself on being the first and largest telehealth platform in the US.
It provides round-the-clock video-conferencing consultations for over 450 medical sub-specialities, from non-urgent cases like flu to complicated medical conditions like cancer.
In 2020, Teledoc completed around 10.6 million telehealth visits, which grew 156% year-on-year, accelerated by the pandemic. Revenue for the year surged 98% year-over-year to US$1.09 billion.
Prior to that, Teledoc’s top-line grew from US$123 million in 2016 to US$553 million in 2019, up 65% on a compound annual growth rate (CAGR) basis.
According to research outfit Grand View Research, the global telehealth industry is expected to grow at a CAGR of 22.4% from 2021 to 2028, reaching US$298.9 billion by then. Teladoc is likely to capture most of the growth with its first-mover advantage.
At Teladoc’s share price of US$223.39, it has a P/E ratio of 77x and a P/S ratio of 18x.
Stock #5: Twilio
Twilio Inc (NYSE: TWLO) is a cloud-based communications specialist that allows companies to embed communications features within their existing platforms.
One of its many brand-name customers is Airbnb (NASDAQ: ABNB). With the help of Twilio, Airbnb simplifies communication between hosts and guests using automated SMS messages.
Twilio has a usage-based revenue model, so the company wins as its customers increase their usage of Twilio’s product, extend their usage of a product to new applications or adopt a new product.
Over the past couple of years, Twilio’s revenue has grown steadily at a CAGR of 60%, from below US$200 million in 2015 to almost US$2 billion in 2020.
Another trait to like about Twilio is its high dollar-based net expansion rate (DBNE), which the company defines as the total revenue from all active customer accounts in a year compared to the previous year.
Twilio’s DBNE stood at 137% in 2020, up from 135% in 2019. As seen earlier, anything above 100% is excellent.
One risk to note with the company is that even though it had over 221,000 active customer accounts, as of end-2020, its 10 largest accounts generated 14% of total revenue, with WhatsApp accounting for 6% of total revenue.
If any of Twilio’s large customers do not continue using its products, its business could be affected.
At Twilio’s share price of US$415.78, it has a P/S ratio of 35x.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.