The stock market has recovered about two-thirds of the value it lost in the historic, coronavirus-induced plunge it took in late February and early March, leaving many investors with a case of whiplash and wondering how they missed the buying opportunities that were created as the major indexes plummeted more than 30% in less than five weeks.
It's important to remember that one of the most tried-and-true ways to accumulate wealth is investing in high-quality companies with strong growth prospects, and holding them through thick and thin. This even holds true for investors whose caution kept them on the sidelines amid a once-in-a-generation bargain-shopping opportunity.
Assuming you have an adequate emergency fund and $10,000 (or less) in disposable cash you don't expect to need for at least the next three to five years, here are five companies that could make you a small fortune over the coming decade.
1. PayPal: A digital payments powerhouse
One long-term trend that has been accelerated by the pandemic is the shift toward the use of digital payment systems, and no company is better positioned in that space than PayPal (PYPL -0.79%). While overall transaction volume experienced a precipitous downturn late in the first quarter, the payment processor saw a significant rebound over the past two months, driving "unprecedented demand for our products and services" according to CEO Dan Schulman.
Touchless payments and person-to-person fund transfers via Venmo are leading the charge, and Schulman argues that "April was probably the strongest month for PayPal since we became a public company." The trend continued into May, as the fintech leader experienced the largest single day of transactions in its history, exceeding 2019's Black Friday and Cyber Monday.
The company now boasts more than 325 million total active accounts after record increases in both new customer accounts and transactions in the first quarter.
2. Datadog: Empowering the cloud-computing revolution
Vast numbers of U.S. businesses suffered setbacks in the first quarter, but software-as-a-service provider Datadog (DDOG -2.42%) actually saw demand accelerate. The company's tools monitor customers' cloud-based systems, notifying them of critical issues that might result in downtime while also providing analytics that could help them prevent these problems in the future.
For many companies in our pandemic-reshaped world, remote work is here to stay, which will require a lot of them to bolster their cloud capabilities. That explains why Datadog experienced a surge in account additions, and its robust growth continued even after the end of the first quarter. Datadog's Q1 revenue grew 87% year over year, accelerating a bit from 85% in Q4, and the company turned profitable for the first time. Total customers grew 40%, and enterprise customers contributing annual recurring revenue of more than $100,000 grew 89%.
With metrics like those, investors should take this dog for a walk.
3. Shopify: Democratizing e-commerce
Retailers that had been getting by without online stores were in for a rude awakening when the pandemic forced the vast majority of brick-and-mortar stores in the U.S. (and many other countries) to shut their doors.
Those merchants were left scrambling to establish their digital presences, and for a large swath of them, Shopify (SHOP 0.67%) was there to answer the call. The company's bread-and-butter is providing easy templates that businesses large and small can use to create online stores quickly. It also offers those clients a host of tools to help them navigate the e-commerce landscape -- everything from payments processing and inventory control to shipping.
The e-commerce economy was already growing at a fairly impressive clip, but the pace was accelerated by the pandemic. In a post on Twitter in mid-April, Shopify Chief Technology Officer Jean-Michel Lemieux said the company was helping "thousands of businesses to move online" and that its platform was experiencing "Black Friday level traffic every day!" That translated into strong first-quarter results, with revenue up 47% year over year, while adjusted net income more than tripled.
Investors looking to benefit from the paradigm shift to e-commerce should be shopping for shares of Shopify.
4. NVIDIA: This chipmaker's not playing games
Shares of graphics processing unit (GPU) powerhouse NVIDIA (NVDA -0.36%) were already setting fresh all-time highs prior to the pandemic, and just a couple of months after they joined the rest of the market's plunge, they are doing so again. The company's industry-leading GPUs help computers generate the realistic images in video games, but it's the opportunities in artificial intelligence (AI) and data centers that have investors most excited. The parallel processing capabilities of its GPUs have made them the workhorses powering a host of new, high-tech applications.
As the pandemic unfolded, GPUs flew off the virtual shelves, driving NVIDIA's revenue up 39% in the first quarter while net income soared 133%. Revenues in the gaming segment jumped 27% while the data center segment -- which includes cloud computing and artificial intelligence applications -- had a record-setting quarter, with its top line soaring 80% year over year.
The move to cloud computing is still ongoing, and AI is still in its infancy. Buying NVIDIA stock is definitely the way to play the game.
5. Livongo Health: A better chronic care alternative
At least 60% of U.S. adults are dealing with at least one chronic condition, and for those patients, behavioral changes and proper disease management can result not only in a better quality of life, but also an improved long-term outlook. That's where Livongo Health (LVGO) comes in.
The company developed a platform dubbed Applied Health Signals that uses artificial intelligence to gather and analyze data from member patients, then uses that information to provide them with feedback, coaching, and actionable insights, helping people to better manage their health. While this approach initially targeted diabetes patients, it has since been expanded to include weight management, hypertension, and behavioral health, with more applications on the drawing board.
The company's strategy is not only working, but also lucrative. First-quarter revenue was up 115% year over year, and while Livongo is still unprofitable, it reduced its losses by nearly two-thirds and edged closer to profitability. Clients grew 76% year over year, and 44% from Q4, while the number of members managing diabetes on the platform doubled. The estimated dollar value of agreements signed with new clients in the quarter also surged by 85% year over year.
Adding Livongo Health to a portfolio could provide a better quality of returns.