It may be a new year, but the stock market continues to do much of what it did last year – namely, head higher. Through this past Wednesday, Jan. 29, the benchmark S&P 500 was up 1.3% on a year-to-date basis, adding to its impressive gains of 29% in 2019 (not including dividends).
Such robust gains in the market might entice some investors to head to the sidelines. After all, the historic average annual return of stock market, including dividends, is only about 7% per year. But stepping to the sidelines now could cause you to miss out on a number of incredible deals.
Below, you'll find three top stocks that should not only make you richer in February, but could also remain core holdings for years (or decades) to come.
Easily one of the most exciting opportunities in the healthcare space is Livongo Health (LVGO). With its stock down about 1% since the year began, the opportunity to buy into this data-driven healthcare solutions provider hasn't passed retail investors by.
What specifically attracts me to Livongo Health is its core market of customers, as well as the way it differentiates itself from similar players.
Livongo's core market is to help patients with diabetes and prediabetes better manage their health. As of 2015, there were more than 30 million people in the U.S. living with diabetes, and another 84 million who were considered prediabetic and on their way to being diagnosed with diabetes without lifestyle changes. Considering that 1.5 million adults alone were diagnosed with diabetes in 2015, it's pretty easy to imagine this potential pool of patients growing, not shrinking, over time.
What Livongo brings to the table is its unique ecosystem of interconnected products that provides patients with hints and reminders that will incite behavioral changes. With diabetics often being their own worst enemy, Livongo combats this to help patients improve their testing regimens, insulin injection habits, and eating habits.
How's it working, you ask? Over the past year, the company's member count more than doubled to nearly 208,000, with sales rocketing higher by 148% in the most recent quarter. Given that Livongo is still in the process of building its customer base, it's not profitable yet. However, it is worth noting that the company's net loss since going public in July has been narrower than expected in both quarters. Investors in Livongo should expect exceptional growth and innovation for the foreseeable future.
Despite having risen by 20% since the year began, social sharing website Pinterest (PINS 2.49%) looks to be just getting started.
For one, social media users seem to agree that Pinterest is gaining in popularity. According to a recent eMarketer report, Pinterest has now passed Snap's Snapchat to become the third-largest social media platform in the United States. This comes after Pinterest reported 87 million domestic monthly active users (MAUs) at end of September.
Although domestic users generate far more revenue for the company (right now) than international users, Pinterest is really a story about international sales growth. Management has made a concerted effort to push into foreign markets, and it's certainly begun paying off in terms of MAUs and advertisers angling for those eyeballs. International MAUs increased grew by 38% in the fiscal third quarter to 235 million (that's 73% of Pinterest's user base), with average revenue per user (ARPU) more than doubling to $0.13.
I'm aware that probably doesn't sound like much, but there's plenty of room for improvement, especially with Facebook generating $6.09 in ARPU outside of North America during the third quarter. Yes, Facebook has eight times as many MAUs, but Pinterest's MAUs are heading in the right direction, which should lead to improving ad-pricing power.
Best of all, 2020 should be the year that Pinterest pivots from losses to recurring profitability. Though this move could be a bit bumpy, especially with the company leaning on international growth, Wall Street is forecasting a more-than-doubling in sales (from 2019) and $0.56 in full-year per-share profits by 2022. That makes Pinterest quite the bargain.
Sure, everyone knows about Amazon.com (AMZN 2.07%). But they also know about Apple, and that didn't stop the tech giant from more than doubling its valuation over the past 13 months. Investors looking for top stocks that will make them richer could do a lot worse than Amazon this month (and beyond).
Amazon has a lot of ways to generate sales and keep consumers within its ecosystem. Most people are probably familiar with its e-commerce site and its Prime membership, which gives buyers access to faster shipping, as well as offers members exclusive streaming content. With minimal overhead, Amazon has been able to use its size to undercut traditional brick-and-mortar stores on price, ultimately earning a larger percentage of retail revenue in the United States. According to eMarketer in June 2019, Amazon was forecast to be responsible for 38% of all U.S. e-commerce sales.
But what you may not realize is that Amazon's leading sales segment isn't its most important. Rather, Amazon Web Services (AWS), the company's cloud services division, is by far its key operating segment. AWS offers considerably higher margins, and it's growing much faster than traditional e-commerce. In other words, as AWS becomes a higher percentage of total sales, Amazon will see its cash flow generation and margins rise at a faster pace.
Another thing investors should realize here is that Amazon isn't nearly as pricey as some would suggest. Despite being valued at nearly 70 times next year's earnings, the company is only valued at 20 times Wall Street's 2020 cash flow forecast, and just over 11 times the Street's 2022 cash flow projection. Over the past five years, Amazon has been valued at closer to 30 times its cash flow. By all accounts, Amazon is cheaper than it's ever been, and AWS's growth is only further solidifying that thesis.