This has been a crazy year for stocks -- and we're only a third of the way through it! After continuing to push to new all-time highs through February, everything came undone in March with the fastest bear market in U.S. stock market history. Stocks have since quickly recovered more than half of those losses as we approach the end of April. Where we go next is anyone's guess, but this much is clear: The coronavirus has wreaked havoc on the global economy, and it's going to take some time to return to "normal."
Even in the midst of the turmoil, though, quality companies with established track records of growth remain a solid place to put money for the long haul if you've got some funds to invest. If you've got $10,000 available, here are 10 long-term growth stocks I purchased recently that are still worth investing in now ($1,000 into each if you have $10k).
- Alibaba (NYSE:BABA)
- Etsy (NASDAQ:ETSY)
- Facebook (NASDAQ:FB)
- Hasbro (NASDAQ:HAS)
- Mastercard (NYSE:MA)
- NVIDIA (NASDAQ:NVDA)
- Palo Alto Networks (NYSE:PANW)
- salesforce.com (NYSE:CRM)
- The Trade Desk (NASDAQ:TTD)
- Texas Roadhouse (NASDAQ:TXRH)
With shelter-in-place and work-from-home now commonplace, Amazon (NASDAQ:AMZN) has received top marks as an investment -- both for its e-commerce leadership and cloud computing segment. But Amazon isn't the only play in this department. Alibaba has been in the game for nearly as long and it knows a thing or two about navigating pandemics. Just a few years after Alibaba's founding, China had to deal with the SARS outbreak, and though it was a difficult time, the company said it saw an ensuing increase in digital purchasing that permanently stuck.
I think something similar will pan out now. During its last earnings call in February (near the tail end of China's lockdown on COVID-19), the company reported yet another strong year for growth in 2019, but only provided scant details on how business was disrupted in Q1. But with a sprawling ecosystem addressing nearly all needs of the Chinese consumer in the new digital age and a lead in the cloud computing battle in the East, many of the reasons to buy Amazon are the same reasons to buy Alibaba too. But shares go for far cheaper, currently trading for 19.1 times free cash flow (profit after operating and capital expenses are paid) versus 54.0 times free cash flow at Amazon. Alibaba gets my nod as the better buy.
Similar to above, Etsy has been a great long-term play on the world of e-commerce. But the company's focus on supporting artisans and hand-made goods could spell trouble. After all, small businesses have been among the hardest hit from the economic shutdown.
But small businesses can also be nimble and resilient in the face of crisis. Fellow e-commerce-support company Shopify (NYSE:SHOP) unofficially reported it has been seeing daily site traffic levels comparable to Black Friday shopping season. And Etsy could have similar news in store, with its extensive network of tradespeople adapting to the crisis and making the products in highest demand -- including face masks, personal protective equipment, and household items to help fill up the extra time spent at home.
Etsy trades for 41.9 times free cash flow. It's a premium price tag, but despite being a high-growth stock, Etsy operates at a healthy profit.
This one needs no introduction, and my reasons for buying are simple. Though Facebook's ad business will likely take a hit as businesses scale back on their budgets during the current crisis, the social media giant has little to worry about. The company generated $21.2 billion in free cash flow last year (a 30% profit margin), which means the stock is trading for 23.2 times free cash flow. That's also a premium valuation, but with zero debt and one of the largest war chests on the planet with $54.9 billion in cash, equivalents, and short-term investments, this is a communications staple to hold onto for the long haul.
This is another company that needs little introduction. From its own franchises like Monopoly to Transformers to the recently acquired Peppa Pig TV show, as well as third-party licensing of Disney's (NYSE:DIS) Star Wars and Marvel toys, Hasbro has an arsenal of entertainment on its hands. And there's a good chance that those products do well during the coronavirus lockdown. From making the transition to direct-to-consumer and digital sales to continued movie and TV adaptations of its toy brands, I like this entertainment company's prospects in the decade ahead. Shares trade for 18.3 times free cash flow, and a dividend currently yielding 3.6% doesn't hurt either.
Mastercard's business model is beautiful in its simplicity. Every time a transaction gets processed on its network, it earns a fee. The financial services giant also has a small (but fast-growing) data and security services segment to complement that bread-and-butter business. But at the end of the day, this is a bet that digital transactions will continue to eat away at cash transactions which still dominate as the preferred method of payment around the globe.
While Mastercard downgraded its outlook for Q1 2020 and withdrew full-year guidance, it is still forecasting low- to mid-single-digit percentage growth in revenue and earnings. But this is another company with enviable profit margins and deep pockets. Adjusted net income margin was an astounding 47% in 2019. While the company did have $8.5 billion in debt, its cash and equivalents of $7.7 billion and its trailing 12-month free cash generation of $7.5 billion mean that the debt is an easily manageable sum. This is another portfolio staple for the next decade.
Best known for powering high-end video game graphics, NVIDIA has massive potential in the years ahead. The sheer amount of that potential is reflected in its lofty valuation. Even when adding in 2019 results from data center hardware maker Mellanox (NASDAQ:MLNX), which NVIDIA just got final approval to acquire after a year of waiting, the stock trades for 45 times 2019 adjusted net income.
But the new uses for graphics processing chips are nearly limitless. The integral role they play in powering autonomous vehicles is well documented, but NVIDIA's wares play an increasingly important role in data centers, artificial intelligence systems, edge computing and 5G networks, robotics and industrial equipment automation, and healthcare technology. Video games remain the key ingredient driving growth right now, but this is an open-ended semiconductor play that has lots of levers to pull.
7. Palo Alto Networks
This cybersecurity pure-play leader is arguably the most controversial stock on this list. As computing continues migrating to the cloud, security has needed to rapidly evolve along with it. That has given several upstarts room to muscle in on the incumbent cybersecurity industry. But Palo Alto has struck back with a string of high-profile acquisitions over the last two years, the latest being the $420 million takeover of CloudGenix.
But even after shelling out a couple of billion dollars, Palo Alto still had $3.13 billion in cash and equivalents on its books at the end of January 2020. That gives it the firepower to not only take CloudGenix, but also dole out a $1 billion accelerated share repurchase during the current quarter. With a price to free cash flow ratio of 20.3, I like this security technologist's chances to continue adapting to a cloud-first world.
Much like Palo Alto Networks, Salesforce is also an avid acquirer of smaller software outfits. Don't knock the strategy: Making dozens of bolt-on purchases jive with the rest of an existing business is no small task. But this cloud computing pioneer has done an exceptional job of doing so in a very profitable way. Though many of those acquired companies have been paid for with new stock (the company's share count has doubled over the last 15 years), free cash flow has grown by over 7,000% in that same time. Still growing revenue well over 20% a year and more important than ever to organizations trying to manage digital relationships with customers, this is another tech staple stock that I've been more than happy to scoop up on the coronavirus market plunge.
9. The Trade Desk
Another company that relies on advertising, The Trade Desk nonetheless might be able to offset a slump in ad spending during the coronavirus lockdown because of a surge in ad-supported TV streaming services. The company is also benefiting from a long-term trend toward programmatic ads -- ones targeted toward specific audiences using data. Management's previous call for revenue growth of at least 30% in 2020 is likely at risk, and profits are negligible (most cash generated from operations is getting reinvested back into the business to promote expansion). But this small cloud-based platform for advertisers still has a lot going for it now that internet-delivered entertainment is fast becoming the rule rather than the exception.
10. Texas Roadhouse
I'll round out my list with a restaurant chain. The dining out industry, like hospitality and travel, has taken the COVID-19 crisis on the chin, and Texas Roadhouse is no exception. Delivery and carryout have never been its focus, so sales are likely to get real ugly for at least a couple of quarters.
But that's not to say this steakhouse is in serious trouble. It has been able to expand its curbside pick-up service in the last month, and thanks to its locations favoring suburban America (versus urban areas where the pandemic has spread the fastest), all of its domestic locations remain in operation. The chain has also expanded conservatively in recent years, a sharp contrast from the industry norm. With no debt at the end of 2019, that gave it the ability to comfortably draw down its $190 million revolving line of credit, giving it $300 million in liquidity to weather the storm. With shares down 21% so far in 2020, now is an opportune time to stock up on a restaurant operator that is in tip-top financial shape.