Let's face it, February can be a rough month. The holiday cheer has long faded away, and springtime still feels more like a distant dream than a coming reality. But there's a silver lining to February's gray clouds, and it's the fact that now is the perfect time for investors to consider buying the stocks mentioned below.
All of these companies have either established themselves with stellar businesses or are quickly building out their position in new markets -- and sometimes a little bit of both. So put away your natural-light therapy lamps for a moment and take a closer look at why Motley Fool contributors think ANGI Homeservices (NASDAQ:ANGI), CareTrust REIT (NASDAQ:CTRE), Anaplan (NYSE:PLAN), Medical Properties Trust (NYSE:MPW), and Netflix (NASDAQ:NFLX) are top stocks to buy this month.
An overlooked e-commerce marketplace
Jeremy Bowman (ANGI Homeservices): One of the best business models of the digital age has proven to be the online marketplace. This is the formula that has helped make Amazon one of the most valuable companies of all time, made eBay a cash machine since the dawn of the internet, and has driven the boom in Etsy's share price in recent years.
However, one stock that's struggled since it emerged from the combination of HomeAdvisor and Angie's List in 2017 is ANGI Homeservices. Like other marketplaces, ANGI connects buyers and sellers, in this case looking for cleaning, plumbing, and general contracting, among dozens of other service categories. For ANGI, this creates strong competitive advantages, through network effects that make the overall marketplace stronger with each new user, and switching costs that help keep service providers on the platform.
That model and the secular growth in online home services, which is expected to continue as more millennials buy homes, is one reason the company is targeting long-term revenue growth of 20% to 25%. However, now could be an excellent time to buy shares of ANGI as its fourth-quarter earnings report is on tap Feb. 5, and the stock is still trading at a discount from last summer after a temporary challenge caused shares to tumble.
In August, the stock plunged as the company slashed its profit guidance due to marketing error related to Google's algorithm. ANGI recovered some of those losses after its third-quarter earnings report, but the stock would still gain nearly 50% if it recouped those August losses. The February earnings report presents a good opportunity to do that as the company can put the recent marketing-related headwinds further behind it, and it will give guidance for 2020, a year that management said it would be "investing into success."
Meanwhile, the overall economy remains strong and interest rates are low, favoring a strong housing market. Its long-term growth remains appealing with its leading position in online home services and the demographic shift in home ownership toward millennials.
My top stock to profit from America's biggest demographic shift
Jason Hall (CareTrust REIT): At their peak, America's baby boomers were the most populous generation in the country's history. It wasn't until 2019 that millennials became the largest living U.S. population cohort.
Here's the thing: I'm not going to pitch you on some investment based on the growing role millennials will play in driving the economy. I think a significant -- and potentially overlooked -- opportunity is to invest in meeting the growing need to house and care for a rapidly growing senior population.
And the growth of America's senior population is simply enormous. From 2010 to 2030, the 65-plus cohort will double from 40 million to 80 million, while improved health outcomes and better medical care will more than double the 80-plus population over the same period.
CareTrust is positioned to be a big winner from this trend, developing and acquiring skilled nursing and senior housing properties to meet the needs of this growing population. It's already proven a huge winner since going public, more than doubling the number of properties it owns, and generating almost 300% in total returns.
More recently, the share price has fallen from the all-time high reached in 2019, pushing the dividend yield back above 4%. Considering the strength of its balance sheet -- it's one of the least-leveraged healthcare REITs out there -- the opportunity for many more years of growth, and the recession-resistant nature of its business, CareTrust is a buy-now stock in my book. But don't just take my word for it: CareTrust makes the cut as a top stock to buy in 2020.
Cloud-based planning, made simple
Todd Campbell (Anaplan): In the past, financial planning required time-consuming coordination between multiple departments, such as sales, finance, operations, and the supply chain. Because data necessary for better planning was often siloed within different data solutions, such as legacy software applications or one-off Excel spreadsheets, getting mission-critical data from disparate teams could takes weeks or longer, resulting in planning decisions that were already behind the curve. That's far from ideal -- especially since business trends are moving increasingly faster and profiting from them is becoming more complex.
To break down barriers and increase the speed of planning, Anaplan markets a connected-planning solution that unifies data into one simple system that's instantly accessible to everyone and responsive to changing inputs. Its ability to help managers make better decisions more quickly is resonating with enterprises that are increasingly deploying Anaplan throughout their business.
In the third quarter, total revenue was $89.4 million, up 44% year over year. Anaplan's dollar-based net expansion rate (year-over-year same-customer spending) has exceeded 120% for over three consecutive years, including a 123% rate in Q3. Importantly, Anaplan is landing more big customers. The number of enterprises spending more than $1 million per year with Anaplan jumped 57% year over year in the quarter, and 324 of its 1,300 customers are now paying Anaplan over $250,000 per year, up from 228 customers the previous year.
Anaplan isn't profitable yet, but it may only be a matter of time before the it's in the black. Its operating margin improved to negative 9.9% in Q3 from negative 29.5% the year before, and its gross margin jumped 3.4 percentage points to 76%. Since the Forbes Global 2000 is the company's target market, there's plenty of business still left to win, and given how many of its existing customers are spending more every year on Anaplan's solution, I think there's good reason to be optimistic.
Healthy returns from hospital real estate
Matt DiLallo (Medical Properties Trust): Medical Properties Trust is a real estate investment trust (REIT) focused on owning hospital campuses. The company leases these properties to operators that pay it rent.
The main draw of Medical Properties is its dividend, which currently yields 4.6%. It's on as solid a foundation as investors will find in the REIT world. For starters, the company only pays out about 63% of its cash flow to support that payout, which is low for a REIT as most pay out more than 70%. Medical Properties has a top-notch balance sheet, with a low leverage ratio for a REIT. Because of that, it has plenty of flexibility to acquire new properties.
That's exactly what it has been doing over the past year. The company signed deals to acquire $6.4 billion worth of properties last year, which will boost its cash flow per share by 22%. Even after all those deals, it's still in tip-top financial shape and, as of its latest update, had around another $2.5 billion of acquisitions in the works. The company will likely continue acquiring properties this year.
Medical Properties' briskly growing portfolio of cash-generating hospital buildings has richly rewarded its investors over the last year. Not only has it paid them a high-yielding dividend, but its stock has also soared nearly 28%, pushing the total return up to a market-beating 35%. With more growth in the hopper and an attractive valuation compared to other REITs even after its recent run, Medical Properties Trust appears poised to continue generating healthy returns. That makes it a great stock to buy this month, especially for investors seeking some income.
Don't miss out Netflix's video streaming momentum
Chris Neiger (Netflix): Netflix may be the dominant streaming video company, but investors shouldn't make the mistake of thinking the company is finished growing. Netflix ended 2019 with 167 million subscribers, up 28 million from the year before. That's impressive growth for a company of Netflix's size, and it's a good reminder that the video streaming market is nowhere near saturated.
Netflix's 2019 subscriber growth was driven by new customers signing up for the company's streaming service outside of the U.S. The company ended the year with 106 million paying international subscribers, an increase of 25 million from the previous year.
A growing subscriber base is important, but of course, investors want to see the company making more money from all of those gains as well -- and that's exactly what Netflix is doing. The video streaming giant's sales for 2019 jumped 28%, thanks to higher subscription prices and international growth. Additionally, investors should also be pleased to see that Netflix has continually increased its operating margin over the past several years. At the end of 2019, Netflix's operating margin reached 13%, up from 10% in 2018.
And if you're worried that new video streaming competitors will take the wind out of Netflix's sails, don't be. Here's what the company's management said in its fourth-quarter press release: "Many media companies and tech giants are launching streaming services, reinforcing the major trend of the transition from linear to streaming entertainment. This is happening all over the world and is still in its early stages, leaving ample room for many services to grow as linear TV wanes."
In short, as video streaming grows, it'll cut into traditional TV offerings and won't hurt established video streaming players like Netflix.
With Netflix still firing on all cylinders and plenty of room left for the company to continue growing its international subscriber base and increasing its operating margin, investors should strongly consider snatching up Netflix's stock right now. Even with increasing video streaming competition, Netflix still dominates this market, and its continued growth proves that newcomers aren't hurting the company's business.