In the face of this pandemic, our homes have become much more than just a place to relax, eat, and sleep. With a little help from technology, our house now serves as a workplace, a school, a gym, and even a doctor's office. Our lives will never be quite the same, and it's likely that three companies will be a part of our new normal: Zoom Video Communications (ZM 0.05%), Teladoc Health (TDOC -0.07%), and Home Depot (HD -1.77%).
Let's dive into why investors would want this trio of top stocks in their portfolios for the next decade.
Zoom: When "in person" isn't possible
The usage of Zoom's video communication platform has skyrocketed 20-fold over the last several months. Schools, workplaces, families, and even the cast of Saturday Night Live have turned to the platform as a way to connect as we comply with stay-at-home orders. Some of this demand for video chatting will dry up as social distancing practices are loosened, but its superior technology has forever busted the assumption that we have to meet in person in order to connect with each other.
The platform has run into some challenges scaling to meet demand, but has already made moves to put these problems in its rearview mirror. Zoom is a high-quality company, notching up heady growth of 78% year over year last quarter (which covers a period before the coronavirus heavily impacted the U.S.), has a solid balance sheet of $855 million in cash and no debt, and is profitable. Furthermore, its impressive Glassdoor ratings show that 96% of employees would recommend the company to a friend and 98% approve of the job CEO Eric Yuan is doing.
Zoom has solidified a place in our lives, and that's not likely to change over the next decade.
Time rewards the patient investor. Image source: Getty images.
Teladoc: Prepared for a pandemic
Teladoc's software enables patients to see medical professionals virtually, which has been instrumental recently. Consider the benefits of a patient with COVID-19 being able to visit a medical professional virtually. First, the sick and probably tired patient doesn't have to travel. Health care workers, other patients, and office staff aren't exposed to the infected patient, and hard-to-come-by personal protective equipment can be saved. But that's not the only use case that has been on the rise. Many other visits such as consultations, follow-ups, therapy, or even emergency care can be facilitated efficiently on the platform.
Teladoc's network of 50,000 clinicians, in more than 450 sub-specialties, in 40-plus languages, has grown at a rapid pace. It achieved 55% compound annual growth from 2015 through 2019 and had projected 27% 2020 top-line growth even before the surge in volume from the pandemic. In 2019, virtual visits grew to 4.1 million, up 57% from the previous year. The company will blow by that number this year. In a preliminary earnings release, management stated that visits have more than doubled in recent weeks.
With its end-to-end network of care options and incredible tailwinds, this stock won't disappoint investors over the next ten years.
Home Depot: Getting more out of your house
Many families are now using their homes in unexpected ways. Some have taken on additional family members, many are homeschooling their kids, and numerous adults are working from their houses for the first time. This is putting a strain on our living space that may not end up being a temporary situation. Home Depot is suited to help out those who want to expand, remodel, or just add more storage space to their homes. But with a looming recession, many of these big projects may have to wait.
The pandemic has closed non-essential businesses, spurred widespread unemployment, and resulted in a pullback in discretionary spending. As a result, sales will probably decline for an extended period of time. As a precaution, the retailer is securing $5 billion in low-interest debt to add cash to its balance sheet for flexibility and capital reinvestments to survive this challenging time. It has survived financial downturns in the past and will ultimately recover from this one and thrive.
As things get relatively back to normal, it's likely we will want more from our home. When that happens, Home Depot will be there.
Looking ahead to 2030
Each of these businesses is excellent in its own right. While Zoom and Teladoc have seen unprecedented share price growth year to date, Home Depot has struggled a bit.
ZM data by YCharts. Share prices are year to date through April 21, 2020.
But a four-month window is a short-term window to judge a stock's performance. These three top stocks have been market-beaters over the long term and should continue that trend into the future. Shareholders who buy today will likely be celebrating in 2030.
