Successful investing is all about the long haul. However, sometimes stocks will make a sudden move higher over a short period of time. Sometimes those returns reverse course and never recover as businesses benefit from a one-time event; but for great companies that continue to deliver strong growth, there's no need to worry about missing the boat.
Enter Twilio (TWLO -2.05%), MongoDB (MDB 1.92%), and Cronos Group (CRON -3.75%). All three of these names have at least doubled in the last 12 months, but there could be more growth -- numbered in years -- left in the tank. Here's why three of our Foolish contributors think so.
Powering the future of communication
Nicholas Rossolillo (Twilio): The expansion of the internet continues to change how people communicate. Things like email remain a mainstay of the digital age, but new ways of keeping in touch with each other and interacting with businesses continue to pop up. Behind many of these digital means of communication is a company called Twilio.
Twilio operates a library of cloud-based tools that allows software developers to incorporate virtual voice, text, video, and email capabilities into an application. The toolkit is offered on a pay-for-what's-used model, making revenue streams stable and predictable for Twilio and economical for businesses' IT departments. It's working wonders; during the first quarter, revenues were up a whopping 81% year-over-year as new customers signed up, and existing customers continued to spend even more with Twilio as the software suite proves its merit.
There is plenty more on the way, too, as management expects full-year revenues to grow at least 70% -- on top of the 63% rate posted last year. That massive growth is coming at a cost, though. Twilio operates in the red, at least from a traditional sense. Net losses added up to $36.5 million during the first quarter, and the company also recently sold some equity to give it some extra cash cushion. When adjusting for stock-based compensation and other one-time items, though, Twilio operates at a narrow profit. Every available dollar is going back into the business to foster more growth; worry over profits will come later on down the road.
The short story is this: Twilio is going gang-busters, and by all counts looks to continue that way for some time. The stock is up over 140% in the last 12 months and is still going strong. Investors who don't mind the wild ride that comes with that kind of business and have some time to let the company develop should think about getting in on the action.
This stock more than tripled, but it's just getting started
Anders Bylund (MongoDB): This stock didn't settle for doubling in a year. MongoDB more than doubled in 2019 alone, and the provider of next-generation database platforms actually more than tripled in 52 weeks with a 250% gain.
And the huge gains are just getting started.
I know, MongoDB isn't exactly a value investor's dream stock. The company isn't profitable in any traditional sense, looking back at negative trailing figures for earnings, EBITDA, and free cash flows. Early investors will have to live with this uncomfortable reality for a few more years, since MongoDB is likely to continue pouring every cent of available profits right back into the core idea at this time -- accelerating revenue growth and growing the installed user base as quickly as possible.
We've seen this story before. Amazon.com (NASDAQ: AMZN) was swimming in red ink for many years, too busy building the greatest possible e-commerce operation to focus on bottom-line profits. Netflix (NASDAQ: NFLX) did the same thing, as the streaming video veteran will still report negative cash flows in every quarter for the next four or five years. Suffer through slim or negative profits now, reap the bottom-line rewards later -- when the business has grown large enough to support a serious focus on profitability.
It's a bit of a risky idea, but the resulting shareholder returns can be absolutely stunning when it works. Amazon investors have enjoyed a 2,000% gain over the last decade, based on a $36.8 billion market cap in June, 2009. Netflix posted a 6,400% return over the same span, starting from a $2.2 billion market cap.
MongoDB falls right between those promising starting caps with a total market value of $8.3 billion today. This company is a leader in an explosive market niche that threatens to overthrow the database industry as we know it -- just as the target market itself should explode in order to support data collections from the Internet of Things and those devices' 5G wireless connections. That's exactly the type of data collection that MongoDB does best, and I see nothing but tremendous growth ahead for this company. It's the second coming of hyper-growth stories like Amazon and Netflix, only in a different industry.
Growing pot production could produce greater gains
Todd Campbell (Cronos Group): Shares in this marijuana-upstart have rocketed 138% higher since last October, but even greater returns could be on deck as Cronos Group's pot production jumps and it puts nearly $2 billion from Altria (NYSE: MO) to work.
In December, the potential to profit from legalizing Canada's USD$4.5 billion marijuana market, Altria exchanged about USD$1.8 billion for a 45% stake in Cronos Group, plus warrants that allow it to increase its ownership to 55% for another USD$1 billion.
The cash stockpile will go a long way in helping Cronos Group execute plans to significantly increase its marijuana production. Cronos Group sold 1,111 kilos of cannabis, up 122% year over year, and it pocketed $6.5 million (Canadian dollars) in revenue in the first quarter. An expansion to its existing facilities has management thinking production will clear 40,000 kilos per year soon, and combined with additional projects, Cronos Group's grow capacity is expected to eventually reach 117,150 kilos annually.
Since the company's expansion plans result in production that's significantly above its current 4,444 kilos annualized sales run rate, I suspect revenue growth will offer steady tailwinds to Cronos Group's share price, making it a top marijuana stock to buy now.