The past five weeks have been nothing short of a roller-coaster ride for Wall Street and Main Street. Through this past Thursday, March 26, the benchmark S&P 500 had recorded its seven-biggest single-day point gains in history, as well as 10 of its 13-largest single-sessions point losses of all-time, just since Feb. 24, 2020. The broad-based index also plunged into bear market territory far faster than any previous bear market in history.
The culprit behind this crash is the uncertainty caused by the spread of the coronavirus disease 2019 (COVID-19). With mitigation measures getting stricter within the U.S. and in other developed countries, it's without question that there will be palpable damage done to the economy in the short run.
But this is also one of those "light at the end of the tunnel" moments. That's because each and every previous correction or bear market has been eventually wiped away by a bull-market rally. Although we don't know how long a correction will last or how steep the decline will be, history shows investors that buying high-quality businesses on any significant dip in the market is a smart idea that can help you create long-term wealth.
With this in mind, below you'll find four top stocks that you should consider buying in the wake of the coronavirus crash that'll help your secure your financial future.
Generally speaking, the healthcare sector is well-protected from economic downturns given that people can't control when they get sick or what ailment(s) they develop. But within the vast sea of healthcare stocks, I can't think of a better long-term investment opportunity than surgical-assisted robotics developer Intuitive Surgical (ISRG 0.09%).
The single-most attractive aspect of Intuitive Surgical is the company's razor-and-blame business model. In this instance, the razor is the company's da Vinci surgical system, which goes for anywhere from $0.5 million to $2.5 million per machine and offers relatively low margins given how complicated it is to manufacture. Meanwhile, the blades -- and where Intuitive Surgical makes most of its money -- comes from the sale of instruments with each procedure, as well as regular servicing. As the company's installed global base of da Vinci systems grows, the percentage of revenue derived from these higher-margin "blades" will increase, leading to more bang for its buck.
Intuitive Surgical is also just scratching the surface on what surgical-assisted robotic systems are capable of. Though its system holds significant market share in gynecology and urology surgeries, the da Vinci system has a long runway to gain market share in thoracic, colorectal, and general soft tissue surgeries. A high single-digit or low double-digit growth rate for the foreseeable future is a reasonable expectation.
When most folks think of Amazon, they become enamored with its huge retail sales potential and the almost cult-like loyalty of its more than 150 million global Prime users. While e-commerce and Prime are highly successful in keeping users within its ecosystem, it's really not Amazon's long-term growth driver -- that goes to Amazon Web Services (AWS).
AWS is Amazon's cloud-service operations, and it just so happens to be growing considerably faster than the company's retail operations. More importantly, the margins at AWS are light year's better than e-commerce, meaning as cloud revenue grows into a larger percentage of total sales, Amazon will see its cash flow surge higher.
Though not thought of as a value stock in the traditional sense of the word, Amazon is currently being valued at less than 10 times Wall Street's consensus cash flow for 2023. For context, this is a company that has historically been valued at 23 to 37 times its cash flow. If Amazon simply sticks within this historic valuation range, it becomes a $5,000 stock.
Another stock that can help investors secure their financial future following the coronavirus crash is social media giant Facebook (META -0.58%). Despite recent concerns of slowing growth, Facebook remains the premier social media name to own for a long time to come.
For one, there simply isn't another way for advertisers to reach as many eyeballs with any other platform. Facebook ended 2019 with a whopping 2.5 billion monthly active users, including 1.66 billion people who logged on daily. This provides the ability for advertisers to target specific audiences or regions with their message, and just happens to give Facebook an insane amount of ad-pricing power.
To build on the above, Facebook is also home to four the seven most-visited social media websites: Facebook, Facebook Messenger, WhatsApp, and Instagram. Though Facebook and Instagram are being monetized with ads, the company hasn't even scratched the surface yet on how WhatsApp's well over 1 billion users can be monetized over the long run. You might think Facebook's growth has slowed, but there are many waves of growth spurts yet to come.
Similar to Amazon, Facebook looks to be exceptionally cheap relative to its cash flow potential. Having spent the past five years being valued at an average of 26 times its annual cash flow, Facebook is currently valued at only 11 times Wall Street's cash flow consensus for 2021.
Last, but certainly not least, there's payment-processing giant Visa (V 0.16%). While it'll certainly see some near-term weakness in consumer and enterprise spending, there are far too many competitive advantages here to ignore.
To start with, Visa holds the lion's share of U.S. credit card network purchase volume. In fact, between the height of the Great Recession and 2018, Visa picked up an additional 10 percentage points, bringing its credit card network purchase volume market share in the U.S. to 53% from 43%. This worked out to nearly $2 trillion crossing its network in 2018. Since the U.S. is dependent on consumption, this places Visa in great shape to prosper over the long term.
Secondly, note that Visa isn't a lender. Although some processing companies also choose to lend and are able to double-dip by collecting interest and payment-facilitation fees, Visa purely sticks to the processing side of the equation. This is important because it means Visa is immune to the direct impact of a rise in credit delinquencies.
Thirdly, Visa has a vast opportunity to expand its reach internationally. An estimated 85% of global transactions are still being conducted in cash, meaning Visa has the ability to become a leading non-cash payment facilitator in underbanked regions of the world, such as the Middle East, Africa, and Southeast Asia.
Since the global economy is expanding far more often than contracting, this cyclical play should help make long-term investors rich.