Congratulations, investors, you've made it through seven months of 2020... even if it feels like it's taken five years to get here.
There's little question that the coronavirus disease 2019 (COVID-19) pandemic has wreaked havoc on the U.S. economy and tested the resolve of investors like never before. We've borne witness to the fastest bear-market decline in history, as well as the strongest single-quarter rally in 22 years. Frankly, no one knows what to expect next, save for ongoing volatility.
Thankfully, bouts of volatility have historically been good news for long-term investors. That's because periods of fear and panic that lead to volatility allow investors to purchase great companies at a perceived discount.
Although the stock market has rebounded significantly from its March 23 lows, there are still bargains to be found. If you're looking to add a handful of high-octane long-term growth stories to your portfolio, consider the follow three top stocks, all of which are primed to make you richer this month, and beyond.
Green Thumb Industries
For the past 16 months, marijuana stocks haven't been a fun place to park your money. Growing pains for the industry, including supply issues throughout much of Canada and high tax rates in select U.S. states, have weighed down pot stock valuations.
But there have been a couple of bright spots, and few have shone brighter than U.S. multistate operator Green Thumb Industries (GTBIF -0.57%).
Green Thumb is a vertically integrated cannabis company, which is a fancy way of saying that it controls the seed-to-sale process of its marijuana. Currently, it has 48 operational dispensaries in the U.S., with licenses to open as many as 96 in a dozen states.
But understand that it's not the sheer number of open stores that matters so much as where they're open. For Green Thumb, it's been particularly aggressive at opening new locations in Illinois and in the Las Vegas area of Nevada. Illinois became the first state to legalize adult-use weed consumption and sale entirely through the legislative process, while Nevada's tourist-heavy economy should lead the country in cannabis spending per-capita by mid-decade. Both states are on track to top $1.1 billion in annual weed sales by 2024, according to the "State of the Legal Cannabis Market" report from Arcview Market Research and BDS Analytics.
Another factor that makes Green Thumb special, aside from the core markets it's targeting, is its product mix. Approximately two-thirds of the company's sales are derived from derivatives, such as vapes and edibles. This is important because derivatives yield considerably better margins than dried cannabis flower.
Investors will also note that Green Thumb is on the cusp of profitability, which is not something most North American pot stocks can say. With access to nondilutive forms of financing and a transparent expansion plan, Green Thumb has the makings of a clear-cut cannabis winner.
Another top stock that should have investors smiling ear to ear is cybersecurity company Ping Identity (PING). If the name doesn't ring a bell, don't fret, as the company went public less than a year ago.
Ping aims to handle identity verification for its enterprise clients, and is capable of doing so for in-office and remote-work environments. What's allowed Ping to really stand out thus far is the dynamic nature of its identity solutions. The usage of artificial intelligence and machine learning allows its identity solutions to evolve in an effort to keep unwanted people and robots from accessing sensitive data.
How well is this working? Over the past four quarters, year-over-year sales growth has been no less than 15%, with year-over-year annual recurring revenue (ARR) growth no lower than 21% within the past six quarters. This ARR figure is particularly important, because Ping's business model is built on recurring subscriptions. These subscriptions usually have a high retention rate, and they were responsible for delivering a robust 87% gross margin during the first quarter.
Investors in Ping Identity would also be wise not to discount the company's near-term and long-term growth drivers. In the near-term, Ping is a clear-cut beneficiary of the work-from-home push. Businesses have little control of their data outside of their own walls, which is where identity solution provides are being called on to ensure data security. You could rightly say that virtually all aspects of cybersecurity have become a basic-need service.
Over the longer-term, Ping has the ability to pivot its solutions to protect a growing number of connected devices (e.g., the Internet of Things), and will almost certainly continue to reinvest in artificial intelligence-based security solutions to add to its portfolio of services.
In other words, a steady double-digit growth isn't just achievable -- it's the expectation going forward.
A final top stock that investors will be glad they scooped up on the cheap is storage solutions specialist Western Digital (WDC 1.86%).
A quick glance at Western Digital's three-year stock chart is liable to have folks cringing, with production issues and the COVID-19 pandemic leading to unprecedented levels of uncertainty and disruption in the storage space. It also doesn't help that storage devices are generally a commoditized and cyclical industry. Thus, as the economy ebbs, so does Western Digital.
And yet, there are far more reasons to be excited about the company's future than there are to be worried about it.
In the near-term, Western Digital should be a beneficiary from the rollout of new gaming consoles. Each successive generation of gaming consoles has required beefed-up storage solutions that a company like Western Digital is happy to supply. With folks stuck at home because of COVID-19, my expectation is that gaming console sales should be especially strong for the next couple of quarters.
More important is the fact that Western Digital's storage solutions are necessary for the build-out of enterprise data centers. We were already witnessing a move to remote work environments well before COVID-19 hit the United States. All this pandemic has done is accelerated this trend, which'll place even more emphasis on storage needs within corporate data centers. There's a very real possibility that Western Digital's data center products and services segment could grow by a double-digit percentage for years to come.
Although Western Digital did shelve its dividend earlier this year, the move is expected to save the company close to $600 million a year. When coupled with other cost-cutting initiatives, it should be able to make significant progress on reducing its debt and reinvesting in higher-growth initiatives, like data center solutions.
At roughly 7 times Wall Street's forecast earnings per share for 2021, Western Digital is begging to be bought by investors.