It may seem as if you need nerves of steel and some Dramamine to invest in stocks these days, but volatility can also be your friend. Sharp sell-offs -- including the one we experienced last Thursday and the more pronounced COVID-19-fueled markdown in March -- can also create opportunities to buy new stocks or add to existing positions.
Livongo Health (NASDAQ:LVGO), Royal Caribbean (NYSE:RCL), Wayfair (NYSE:W), Dave & Buster's (NASDAQ:PLAY), and Roku (NASDAQ:ROKU) are some of stocks with strong catalysts to bounce back the next time Wall Street takes a punch to the gut. Let's go over why these are five investments to consider the next time there's a market correction.
Stock gains will come and go, but chronic conditions -- by definition -- don't take a break. Livongo Health is a next-gen platform helping to improve the outcomes for diabetes, an ailment with 34.2 million people in the U.S. (and counting). Livongo Health uses its data scientists and machine learning to provide active coaching to its membership base that has doubled to 328,000 members over the past year.
The glucose meters diabetes patients use to measure their blood sugar send information wirelessly to Livongo, and the high-tech platform comes back with active exercise and dieting suggestions based on the data it receives. The platform gets smarter with every pin prick, and the average member experiences dramatic improvement within just a couple of months.
Everybody wins. Members stay healthier and the insurance plans or self-insured companies offering Livongo's platform experience an average of $1,900 in reduced medical costs. With Livongo Health setting its sights on other areas including weight management, hypertension, and even behavioral health, the applied health signals niche that it pioneered has a lot of lives to improve in the coming years.
Cruise lines were some of the hardest-hit stocks in the mid-March sell-off, and that makes sense. Cruise ships were blasted as "floating Petri dishes" for the high rates of coronavirus cases on some vessels, and they're likely to be the last piece of the travel industry to bounce back.
It may take years for folks to embrace the cruising lifestyle with the same aplomb as before, but that only makes it more important to make sure that you invest in the class act in its field. Royal Caribbean isn't the largest player, and that's a good thing, since the first-time cruisers its larger rival attracts will be the last potential group of customers to walk up the gangway. Royal Caribbean has also historically had the highest margins among the three publicly traded players, putting it in the best position to continue leading the way as cruise lines start sailing again.
There have been a lot of big winners since the mid-March correction, but it's hard to top Wayfair. The online furniture retailer began this new trading week 751% above where it was when it bottomed out three months ago. That is not a typo. Wayfair is an eight-bagger since the COVID-19 correction in March.
Revenue growth has slowed in six of the past seven quarters, but there's nothing wrong with the 20% year-over-year top-line gain it posted in its latest report. Wayfair has proven itself as a winner during the pandemic with shoppers going online instead of heading out to local showrooms for big-ticket furniture purchases. It's a safe bet that the furniture in your own home has seen more wear and tear than usual these past few months, and Wayfair's online marketplace, free shipping, and augmented reality tools that visually place your potential purchase in your home are stickier than ever right now.
Dave & Buster's
The chain of big-box arcades complete with casual dining and sports bar components has a brighter future than you probably think. The stock took a big hit earlier this year when it had to close all 137 of its locations as a result of the COVID-19 outbreak, but it was able to shave costs and raise financing to silence the chatter that it would be the next major retail concept to go bankrupt in this climate.
Dave & Buster's isn't perfect. Comps were negative even before the pandemic shutdown. This stylish, grown-up Chuck E. Cheese is also going to be vulnerable in a recession. However, given the scalability to outlast its smaller-minded rivals and the fact that it's still just a little more than halfway through its North American expansion efforts -- it is targeting 250 stores before tackling international opportunities -- it's hard to bet against Dave & Buster's. This is a volatile stock that will fall hard in the next sell-off, only to tap the "continue" button to resume play at a more compelling entry point for gamers and investors alike.
The first four names on this list have all more than tripled since bottoming out three months ago. Roku's performance hasn't been as kind, but the 86% pop since its mid-March bottom is still a pretty beefy haul for opportunistic investors in the last major correction.
Roku makes the cut here because the online streaming platform is built to survive whatever will trigger the next market sell-off or correction. If it's a spike in coronavirus cases, Roku has established itself as a market darling of the streaming video revolution. If stocks topple because the economy is weak, Roku has emerged as a great way for consumers to save money by cutting the cord with their cable and satellite television providers. With its active users up 37% over the past year, and its engagement and active revenue per user on the rise, Roku has emerged as a smart all-weather play.